Federal Register, Volume 75 Issue 228 (Monday, November 29, 2010)

[Federal Register Volume 75, Number 228 (Monday, November 29, 2010)]
[Rules and Regulations]
[Pages 73170-73860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27969]

[[Page 73169]]

-----------------------------------------------------------------------

Part II

Department of Health and Human Services

-----------------------------------------------------------------------

Center for Medicare & Medicaid Services

-----------------------------------------------------------------------

42 CFR Parts 405, 409, 410 et al.

Medicare Program; Payment Policies Under the Physician Fee Schedule and
Other Revisions to Part B for CY 2011; Final Rule

Federal Register / Vol. 75, No. 228 / Monday, November 29, 2010 /
Rules and Regulations

[[Page 73170]]

-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410, 411, 413, 414, 415, and 424

[CMS-1503-FC]
RIN 0938-AP79

Medicare Program; Payment Policies Under the Physician Fee
Schedule and Other Revisions to Part B for CY 2011

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

ACTION: Final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: This final rule with comment period addresses changes to the
physician fee schedule and other Medicare Part B payment policies to
ensure that our payment systems are updated to reflect changes in
medical practice and the relative value of services. It finalizes the
calendar year (CY) 2010 interim relative value units (RVUs) and issues
interim RVUs for new and revised procedure codes for CY 2011. It also
addresses, implements, or discusses certain provisions of both the
Affordable Care Act (ACA) and the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA). In addition, this final rule with
comment period discusses payments under the Ambulance Fee Schedule
(AFS), the Ambulatory Surgical Center (ASC) payment system, and the
Clinical Laboratory Fee Schedule (CLFS), payments to end-stage renal
disease (ESRD) facilities, and payments for Part B drugs. Finally, this
final rule with comment period also includes a discussion regarding the
Chiropractic Services Demonstration program, the Competitive Bidding
Program for durable medical equipment, prosthetics, orthotics, and
supplies (CBP DMEPOS), and provider and supplier enrollment issues
associated with air ambulances.

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

ADDRESSES: In commenting, please refer to file code CMS-1503-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions for
``submitting a comment.''
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1503-FC, P.O. Box 8013,
Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1503-FC, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses: a. For delivery in Washington,
DC--Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.

FOR FURTHER INFORMATION CONTACT:

Sara Vitolo, (410) 786-5714, for issues related to malpractice RVUs.
Erin Smith, (410) 786-0763, for issues related to end-stage renal
disease-related services for home dialysis.
Michael Moore, (410) 786-6830, for issues related to geographic
practice cost indices.
Ken Marsalek, (410) 786-4502, for issues related to the physician
practice information survey, the multiple procedure payment reduction,
and payment for the technical component of pathology services.
Regina Walker-Wren, (410) 786-9160, for issues related to outpatient
mental health add-on provision and increased payment for certified
nurse-midwife services.
Elizabeth Truong, (410) 786-6005, or Sara Vitolo, (410) 786-5714, for
issues related to potentially misvalued services.
Elizabeth Truong, (410) 786-6005, for issues related to the sustainable
growth rate or anesthesia or physician fee schedule conversion factors.
Dorothy Shannon, (410) 786-3396, for issues related to outpatient
therapy services.
Pamela West, (410) 786-2302, for issues related to payment for diabetes
self-management training programs and kidney disease education
services.
Ryan Howe, (410) 786-3355, for issues related to direct practice
expense inputs and telehealth services.
Sara Vitolo, (410) 786-5714, for issues related to pulmonary
rehabilitation services, application of skin substitutes, canalith
repositioning, intranasal/oral immunization, and the refinement panel.
Roberta Epps, (410) 786-4503, for issues related to portable x-ray and
bone density tests.
Chava Sheffield, (410) 786-2298, for issues related to equipment
utilization rate assumption for advanced imaging services.
Chava Sheffield, (410) 786-2298, or Larry Chan, (410) 786-6864, for
issues related the physician fee schedule practice expense methodology.
Stephanie Frilling, (410) 786-4507, or Erin Smith, (410) 786-0763, for
issues related to the incentive payment programs for primary care and
general surgery services, and payment for the annual wellness visit and
preventive services.
Cheryl Gilbreath, (410) 786-5919, for issues related to payment for
covered outpatient drugs and biologicals.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance
services.
Glenn McGuirk, (410) 786-5723, for clinical laboratory issues.
Randall Ricktor, (410) 786-4632, for Federally Qualified Health Center
Issues.
Pauline Lapin, (410) 786-6883, for issues related to the chiropractic
services demonstration BN issue.
Troy Barsky, (410) 786-8873, or Kristin Bohl, (410) 786-8680, for
issues related to physician self-referral.

[[Page 73171]]

Troy Barsky, (410) 786-8873, or Fred Grabau (410) 786-0206, for issues
related to timely filing rules.
Henry Richter, (410) 786-4562, or Lisa Hubbard, (410) 786-5472, for
issues related to renal dialysis provisions and payments for end-stage
renal disease facilities.
Diane Stern, (410) 786-1133, for issues related to the physician
quality reporting initiative and incentives for e-prescribing.
Sheila Roman, (410) 786-6004, or Pamela Cheetham, 410-786-2259, for
issues related to the Physician Resource Use Feedback Program and
value-based purchasing.
Joel Kaiser, (410) 786-4499, for issues related to the DME provisions.
Sandra Bastinelli, (410) 786-3630, for issues related to provider and
supplier enrollment issues.
Rebecca Cole, (410) 786-4497, for issues related to physician payment
not identified above.

SUPPLEMENTARY INFORMATION: Comment Subject Areas: We will consider
comments on the following subject areas discussed in this final rule
with comment period that are received by the date and time indicated in
the DATES section of this final rule with comment period:
(1) The interim final work, practice expense, and malpractice RVUs
(including the direct practice expense (PE) inputs and the equipment
utilization rate assumption, and the applicability of a multiple
procedure payment reduction (MPPR)), for new and revised CY 2011 HCPCS
codes. These codes and their CY 2011 interim final RVUs are listed in
Addendum C to this final rule with comment period.
(2) The physician self-referral designated health services codes
listed in Tables 98 and 99.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.

Table of Contents

To assist readers in referencing sections contained in this
preamble, we are providing a table of contents. Some of the issues
discussed in this preamble affect the payment policies, but do not
require changes to the regulations in the Code of Federal Regulations
(CFR). Information on the regulations impact appears throughout the
preamble and, therefore, is not discussed exclusively in section XI. of
this final rule with comment period.
I. Background
A. Development of the Relative Value System
1. Work RVUs
2. Practice Expense Relative Value Units (PE RVUs)
3. Resource-Based Malpractice (MP) RVUs
4. Refinements to the RVUs
5. Adjustments to RVUs Are Budget Neutral
B. Components of the Fee Schedule Payment Amounts
C. Most Recent Changes to Fee Schedule
D. Public Comments Received in Response to the CY 2011 PFS
Proposed Rule
II. Provisions of the Final Rule for the Physician Fee Schedule
A. Resource-Based Practice Expense (PE) Relative Value Units
(RVUs)
1. Overview
2. Practice Expense Methodology
a. Direct Practice Expense
b. Indirect Practice Expense per Hour Data
c. Allocation of PE to Services
(i) Direct costs
(ii) Indirect costs
d. Facility and Nonfacility Costs
e. Services with Technical Components (TCs) and Professional
Components (PCs)
f. Alternative Data Sources and Public Comments on Final Rule
for 2010
g. PE RVU Methodology
(1) Setup File
(2) Calculate the Direct Cost PE RVUs
(3) Create the Indirect Cost PE RVUs
(4) Calculate the Final PE RVUs
(5) Setup File Information
(6) Equipment Cost per Minute
3. PE Revisions for CY 2011
a. Equipment Utilization Rate
b. HCPCS Code-Specific PE Issues
(1) Biohazard Bags
(2) PE Inputs for Professional Component (PC) Only and Technical
Component (TC) Only Codes Summing to Global Only Codes
(3) Equipment Time Inputs for Certain Diagnostic Tests
(4) Cobalt-57 Flood Source
(5) Venom Immunotherapy
(6) Equipment Redundancy
(7) Equipment Duplication
(8) Establishing Overall Direct PE Supply Price Inputs Based on
Unit Prices and Quantities
c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE
Inputs
(1) Electrogastrography and Esophageal Function Test
(2) 64-Slice CT Scanner and Software
(3) Breath Hydrogen Test
(4) Radiographic Fluoroscopic Room
(5) Cystometrogram
d. Referral of Existing CPT Codes for AMA RUC Review
e. Updating Equipment and Supply Price Inputs for Existing Codes
f. Other Issues
B. Malpractice Relative Value Units (RVUs)
1. Background
2. Malpractice RVUs for New and Revised Services Effective
Before the Next 5-Year Review
3. Revised Malpractice RVUs for Selected Disc Arthroplasty
Services
C. Potentially Misvalued Services Under the Physician Fee
Schedule
1. Valuing Services Under the PFS
2. Identifying, Reviewing, and Validating the RVUs of
Potentially Misvalued Services Under the PFS
a. Background
b. Progress in Identifying and Reviewing Potentially Misvalued
Codes
c. Validating RVUs of Potentially Misvalued Codes
3. CY 2011 Identification and Review of Potentially Misvalued
Services
a. Codes on the Multispecialty Points of Comparison List
b. Codes with Low Work RVUs Commonly Billed in Multiple Units
Per Single Encounter
c. Codes with High Volume and Low Work RVUs
d. Codes with Site-of-Service-Anomalies
e. Codes with ``23-hour'' Stays
4. Expanding the Multiple Procedure Payment Reduction (MPPR)
Policy to Additional Nonsurgical Services
a. Background
b. CY 2011 Expansion of the Imaging Technical Component MPPR
Policy to Additional Combinations of Imaging Services
c. CY 2011 Expansion of the MPPR Policy to Therapy Services
5. High Cost Supplies
a. Background
b. Future Updates to the Prices of High-Cost Supplies
D. Geographic Practice Cost Indices (GPCIs)
1. Background
2. GPCI Update
a. Physician Work GPCIs
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
(A) General Methodology for the CY 2011 GPCIs
(B) Phase-In of PE GPCIs
(C) Data Analysis
(D) Determining the PE GPCI Cost Share Weights
(E) PE GPCI Floor for Frontier States
(2) Summary of CY 2011 PE GPCIs
c. Malpractice GPCIs
d. Public Comments and CMS Responses on the Proposed 6th GPCI
Update
e. Summary of Final CY 2011 GPCIs

[[Page 73172]]

3. Payment Localities
E. PFS Update for CY 2010: Rebasing and Revising of the Medicare
Economic Index (MEI)
1. Background
2. Use of More Current Data
3. Rebasing and Revising Expense Categories in the MEI
a. Developing the Weights for Use in the MEI
b. Physician's Own Time
c. Physician's Practice Expenses
(1) Nonphysician Employee Compensation
(2) Office Expenses
(3) Professional Liability Insurance (PLI) Expense
(4) Medical Equipment Expenses
(5) Medical Supplies Expenses
(6) Other Professional Expenses
4. Selection of Price Proxies for Use in the MEI
a. Cost (Expense) Categories in the MEI
(1) Physician's Own Time (Physician Compensation)
(2) Nonphysician Employee Compensation
(3) Utilities
(4) Chemicals
(5) Paper
(6) Rubber and Plastics
(7) Telephone
(8) Postage
(9) All Other Services
(10) All Other Products
(11) Fixed Capital
(12) Moveable Capital
(13) Professional Liability Insurance (PLI)
(14) Medical Equipment
(15) Medical Materials and Supplies
(16) Other Professional Expenses
(b) Productivity Adjustment to the MEI
5. Results of Rebasing
6. Medicare Economic Index Technical Advisory Panel
7. Summaries of Comments and the Associated Responses
a. Timing of Rebasing and Revising the MEI
b. PPIS Data
c. Office Expenses
d. Purpose of the MEI
e. Technical Panel
f. Other
8. Adjustments to the RVU Shares To Match the Proposed Rebased
MEI Weights
F. Allowed Expenditures for Physicians' Services and the
Sustainable Growth Rate
1. Medicare Sustainable Growth Rate
2. Physicians' Services
3. Preliminary Estimate of the SGR for 2011
4. Revised Sustainable Growth Rate for 2010
5. Final Sustainable Growth Rate for 2009
6. Calculation of 2011, 2010, and 2009 Sustainable Growth Rates
a. Detail on the CY 2011 SGR
(1) Factor 1 Changes in Fees for Physicians' Services (Before
Applying Legislative Adjustments) for CY 2011
(2) Factor 2 The Percentage Change in the Average Number of Part
B Enrollees From CY 2010 to CY 2011
(3) Factor 3 Estimated Real Gross Domestic Product Per Capita
Growth in 2011
(4) Factor 4 Percentage Change in Expenditures for Physicians'
Services Resulting From Changes in Statute or Regulations in CY 2011
Compared With CY 2010
b. Detail on the CY 2010 SGR
(1) Factor 1 Changes in Fees for Physicians' Services (Before
Applying Legislative Adjustments) for 2010
(2) Factor 2 The Percentage Change in the Average Number of Part
B Enrollees from CY 2009 to CY 2010
(3) Factor 3 Estimated Real Gross Domestic Product Per Capita
Growth in CY 2010
(4) Factor 4 Percentage Change in Expenditures for Physicians'
Services Resulting From Changes in Statute or Regulations in CY 2010
Compared With CY 2009
c. Detail on the CY 2009 SGR
(1) Factor 1 Changes in Fees for Physicians' Services (Before
Applying Legislative Adjustments) for 2009
(2) Factor 2 The Percentage Change in the Average Number of Part
B Enrollees from CY 2008 to CY 2009
(3) Factor 3 Estimated Real Gross Domestic Product Per Capita
Growth in CY 2009
(4) Factor 4 Percentage Change in Expenditures for Physicians'
Services Resulting From Changes in Statute or Regulations in CY 2009
Compared With CY 2008
G. The Update Adjustment Factor (UAF)
1. Calculation under Current Law
H. Physician and Anesthesia Fee Schedule Conversion Factors for
CY 2011
1. Physician Fee Schedule Update and Conversion Factor
a. CY 2011 PFS Update
b. CY 2011 PFS Conversion Factor
2. Anesthesia Conversion Factor
III. Code-Specific Issues for the PFS
A. Therapy Services
1. Outpatient Therapy Caps for CY 2011
2. Alternatives to Therapy Caps
a. Background
b. Current Activities
c. Potential Short-Term Approaches to Therapy Caps
B. Diabetes Self-Management Training (DSMT) Services (HCPCS
Codes G0108 and G0109)
1. Background
2. Payment for DSMT Services
C. End-Stage Renal Disease Related Services for Home Dialysis
(CPT code 90963, 90964, 90965, and 90966)
1. End-Stage Renal Disease Home Dialysis Monthly Capitation
Payment Services (CPT codes 90963, 90964, 90965, and 90966)
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951
through 90970)
D. Portable X-Ray Set-Up (HCPCS code Q0092)
E. Pulmonary Rehabilitation Services (HCPCS Code G0424)
F. Application of Tissue Cultured Skin Substitutes to Lower
Extremities (HCPCS Codes G0440 and G0441)
G. Canalith Repositioning (CPT code 95992)
H. Intranasal/Oral Immunization Codes (CPT codes 90467, 90468,
90473, and 90474)
I. Refinement Panel Process
J. Remote Cardiac Monitoring Services (CPT codes 93012, 93229,
93268, and 93271)
IV. Medicare Telehealth Services for the Physician Fee Schedule
A. Billing and Payment for Telehealth Services
1. History
2. Current Telehealth Billing and Payment Policies
B. Requests for Adding Services to the List of Medicare
Telehealth Services
C. Submitted Requests for Addition to the List of Telehealth
Services for CY 2011
1. Individual KDE Services
2. Individual DSMT Services
3. Group KDE, MNT, DSMT, and HBAI Services
4. Initial, Subsequent, and Discharge Day Management Hospital
Care Services
5. Initial, Subsequent, Discharge Day Management, and Other
Nursing Facility Care Services
6. Neuropsychological Testing Services
7. Speech-Language Pathology Services
8. Home Wound Care Services
9. Other Issues
D. Summary of CY 2011 Telehealth Policies
E. Telehealth Originating Site Facility Fee Payment Amount
Update
V. Addressing Interim Final Relative Value Units from CY 2010 and
Establishing Interim Relative Value Units for CY 2011
A. Background
B. Addressing Interim Final RVUs from CY 2010
1. CY 2010 Interim Final Work RVUs Referred to the Refinement
Panel
2. CY 2010 Interim Final RVUs for which Public Comments Were
Received
a. Insertion of Breast Prosthesis (CPT code 19340)
b. Computed Tomographic Colonography (CPT code 74261)
c. Myocardial Perfusion Imaging (CPT codes 78451, 78452, 78453,
and 78454)
d. Nerve Conduction Test (CPT code 95905)
e. Kidney Disease Education Services (HCPCS codes G0420 and
G0421)
f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011
through 21016, 21552, 21554 through 21558, 21930 through 21933,
21395, 21936, 22900 through 22905, 23071, 23073, 23075 through
23078, 23200, 23210, 23220, 24071, 24073, 24075 through 24077,
24079, 24150 through 24153, 25071, 25073, 25075 through 25078,
25170, 26111, 26113, 26115 through 26118, 26250, 26255, 26260,
26262, 27043, 27045, 27047 through 27049, 27059, 27075 through
27078, 27327 through 27329, 27337, 27339, 27364, 27365, 27615,
27616, 27618, 27619, 27632, 27634, 27619, 27645 through 27647,
28039, 28041, 28043, 28045 through 28047, 28171, 28173, and 28175)
g. Cryoablation of Prostate (CPT code 55873)
h. Urodynamics Studies (CPT Codes 51728 and 51729)
i. Coronary Computed Tomographic Angiography (CPT codes 75571,
75572, 75573, and 75574)

[[Page 73173]]

j. Adjacent Tissue Transfer or Rearrangement (CPT codes 14301
and 14302)
k. Insertion of a Temporary Prostatic Urethral Stent (CPT code
53855)
l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and
77787)
m. Injection of Facet Joint (CPT codes 64490, 64491, 64492,
64493, 64494, and 64495)
n. Knee Arthroscopy (CPT code 29870)
3. Status of Interim Final Work RVUs for Potentially Misvalued
Site-of-Service Anomaly Codes from CY 2009 and CY 2010
4. Other New, Revised, or Potentially Misvalued Codes with CY
2010 Interim Final RVUs Not Specifically Discussed in the CY 2011
Final Rule with Comment Period
C. Establishment of Interim Final RVUs for CY 2011
1. Establishment of Interim Final Work RVUs for CY 2011
a. Background
b. CY 2011 Interim Final Work RVUs for New and Revised Codes
(i) CY 2011 New and Revised Codes that Do Not Represent Major
New Comprehensive Services
(1) Excision and Debridement (CPT codes 11010, 11011, 11012,
11042, 11043, 11044, 11045, 11046, 11047, and 97598)
(2) Arthrodesis Including Discectomy (CPT code 22551)
(3) Strapping Lower Extremity (CPT codes 29540 and 29550)
(4) Paraesophageal Hernia Procedures (CPT codes 43333 and 43335)
(5) Vaginal Radiation Afterloading Apparatus for Clinical
Brachytherapy (CPT codes 57155 and 57156)
(6) Vagus Nerve Stimulator (CPT codes 61885, 64568, 64569, and
64570)
(7) Ultrasound of Extremity (CPT codes 76881 and 76882)
(8) Evaluation of Fine Needle Aspirate (CPT code 88172)
(9) Immunization Administration (CPT code 90460 and 90461)
(10) Diabetic Retinopathy Imaging (CPT code 92228)
(11) Speech-Language Pathology Services (CPT codes 92508 and
92606)
(12) Sleep Testing (CPT codes 95806 and 95807)
(13) Subsequent Hospital Observation Care
(ii) Comprehensive Codes for a Bundle of Existing Component
Services
(iii) Work Budget Neutrality for Clinical Categories of CPT
Codes
c. CY 2011 Interim Final Work RVUs for Potentially Misvalued
Codes
(1) Excision and Debridement (CPT codes 11043 and 11044)
(2) Strapping Lower Extremity (CPT code 29540)
(3) Control Nasal Hemorrhage (CPT code 30901)
(4) Cystourethroscopy (CPT codes 52281 and 52332)
(5) Vaginal Radiation Afterloading Apparatus for Clinical
Brachytherapy (CPT code 51755)
(6) Obstetrical Care Codes (CPT codes 59440, 59410, 59510,
59515, 59610, 59614, 59618, and 59622)
(7) Vagus Nerve Stimulator (CPT code 61885)
(8) Transforaminal Epidural Injection (CPT code 64483)
(9) CT Thorax (CPT code 71250)
(10) CT Spine (CPT code 72125)
(11) CT Upper and CT Lower Extremity (CPT code 73200 and 73700)
(12) Radiation Treatment Management (CPT code 77427)
2. Establishment of Interim Final Direct PE Inputs for CY 2011
a. Background
b. CY 2011 Interim Final Direct PE Inputs for New, Revised, and
Potentially Misvalued Codes
(1) General Equipment Time
(2) Equipment Time and Clinical Labor for Conscious Sedation
(3) Equipment Time for Add-On Codes
(4) Changes in Standard Uses of Certain Supplies
(5) New Supply and Equipment Items
(6) Endovascular Revascularization Stents
(7) Nasal/Sinus Endoscopy Supply and Equipment Items
3. Establishment of Interim Final Malpractice RVUs for CY 2011
VI. Provisions of the Affordable Care Act
A. Section 3002: Improvements to the Physician Quality Reporting
System
B. Section 3003: Improvements to the Physician Feedback Program
and Section 3007: Value-based payment modifier under the physician
fee schedule
1. Background
2. Effect of the ACA of 2010 on the Program
3. Phase II Proposed Changes
4. Implementation of Sections 3003 and 3007 of ACA
5. Comments Sought on Specific Statistical Issues Related to ACA
Sections 3003 and 3007
a. Risk Adjustment
b. Attribution
c. Benchmarking and Peer Groups
d. Cost and Quality Measures and Compositing Methods
C. Section 3102: Extension of the Work Geographic Index Floor
and Revisions to the Practice Expense Geographic Adjustment under
the Medicare Physician Fee Schedule, and Protections for Frontier
States as amended by Section 10324
D. Section 3103: Extension of Exceptions Process for Medicare
Therapy Caps
E. Section 3104: Extension of Payment for Technical Component of
Certain Physician Pathology Services
F. Section 3105 and 10311: Extension of Ambulance Add-Ons
1. Amendment to Section 1834(l)(13) of the Act
2. Amendment to Section 146(b)(1) of MIPAA
3. Amendment to Section 1834(l)(12) of the Act
G. Section 3107: Extension of Physician Fee Schedule Mental
Health Add-On
H. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
I. Section 3111: Payment for Bone Density Tests
J. Section 3114: Improved Access for Certified Nurse-Midwife
Services
K. Section 3122: Extension of Medicare Reasonable Costs Payments
for Certain Clinical Diagnostic Laboratory Tests Furnished to
Hospital Patients in Certain Rural Areas
L. Section 3134: Misvalued Codes Under the Physician Fee
Schedule
M. Section 3135: Modification of Equipment Utilization Factor
for Advanced Imaging Services
1. Adjustment in Practice Expense to Reflect Higher Presumed
Utilization
2. Adjustment in Technical Component ``Discount'' on Single-
Session Imaging to Consecutive Body Parts
N. Section 3136: Revision for Payment for Power-Driven
Wheelchairs
1. Payment Rules for Power Wheelchairs
2. Revision of Payment Amounts for Power Wheelchairs
3. Elimination of Lump Sum Payment for Standard Power
Wheelchairs
O. Section 3139: Payment for Biosimilar Biological Products
P. Section 3401: Revision of Certain Market Basket Updates and
Incorporation of Productivity Improvements into Market Basket
Updates That Do Not Already Incorporate Such Improvements
1. ESRD Market Basket Discussion
2. Productivity Adjustment regarding Ambulatory Surgical Center,
Ambulance, Clinical Laboratory and DMEPOS Fee Schedules
a. Ambulatory Surgery Centers (ASCs)
b. Ambulance Fee Schedule (AFS)
c. Clinical Lab Fee Schedule
d. DMEPOS Fee Schedule
Q. Section 4103: Medicare Coverage of Annual Wellness Visit
Providing a Personalized Prevention Plan
1. Background and Statutory Authority
a. Medicare Coverage of Preventive Physical Examinations and
Routine Checkups
b. Requirements for Coverage of an Annual Wellness Visit
2. Regulatory Revisions--Summary of Proposed Rule and Comments
a. Revisions to Sec. 411.15, Particular Services Excluded from
Coverage
b. Revisions to Part 410, Subpart B--Medical and Other Health
Services
(1) Definitions
(2) Requirements of the First Annual Wellness Visit Providing
Personalized Prevention Plan Services
(3) Requirements of Subsequent Annual Wellness Visits Providing
Personalized Prevention Plan Services
3. Payment for the Annual Wellness Visit Providing Personalized
Prevention Plan Services (PPPS)
R. Section 4104: Removal of Barriers to Preventive Services in
Medicare
1. Definition of ``Preventive Services''
2. Deductible and Coinsurance for Preventive Services
3. Extension of Waiver of Deductible to Services Furnished in
Connection With or in Relation to a Colorectal Cancer Screening Test
that Becomes Diagnostic or Therapeutic

[[Page 73174]]

S. Section 5501: Expanding Access to Primary Care Services and
General Surgery Services
1. Section 5501(a): Incentive Payment Program for Primary Care
Services
a. Background
b. Primary Care Incentive Payment Program (PCIP)
(1) Primary Specialty Designation
(2) Primary Care Percentage Calculation
(3) Period of Claims Data for Primary Care Percentage
Calculation
(4) PCIP Payment
(5) Summary of Final PCIP Policies
2. Section 5501(b): Incentive Payment Program for Major Surgical
Procedures Furnished in Health Professional Shortage Areas
a. Background
b. HPSA Surgical Incentive Payment Program (HSIP)
3. Sections 5501(a) and (b) of the Affordable Care Act and
Payment for Critical Access Hospital Professional Services Under the
Optional Method
T. Section 6003: Disclosure Requirements for In-Office Ancillary
Services Exception to the Prohibition on Physician Self-Referral for
Certain Imaging Services
1. Background
2. Disclosure Requirement
a. Services the Trigger the Disclosure Requirement
b. General Disclosure Requirements
c. List of Alternate Suppliers
d. Documentation of Disclosure
e. Effective Date
f. Other comments
U. Section 6404: Maximum Period for Submission of Medicare
Claims Reduced to Not More than 12 Months
1. Background
2. Provisions of ACA
V. Section 6410 of the Affordable Care Act and Section 154 of
MIPPA: Adjustments to the Metropolitan Statistical Areas (MSA) for
Medicare Durable Medical Equipment, Prosthetics, Orthotics, and
Supplies Competitive Acquisition Program
1. Background
2. Subdividing Large MSAs under Round 2
3. Exclusions of Certain Areas after Round 2 and Prior to 2015
4. Expansion of Round 2
W. Section 10501(i)(3): Collection of HCPCS data for Development
and Implementation of a Prospective Payment System for the Medicare
Federally Qualified Health Center Program
VII. Other Provisions of the Final Rule
A. Part B Drug Payment: Average Sales Price (ASP) Issues
1. ``Carry Over'' ASP
2. Partial Quarter ASP Data
3. Determining the Payment Amount for Drugs and Biologicals
Which Include Intentional Overfill
4. WAMP/AMP
5. AMP Threshold and Price Substitutions
6. Out of Scope Comments
B. Ambulance Fee Schedule: Policy for Reporting Units when
Billing for Ambulance Fractional Mileage
1. History of Medicare Ambulance Services
a. Statutory Coverage of Ambulance Services
b. Medicare Regulations for Ambulance Services
2. Mileage Reporting--Summary of the Provisions of the CY 2011
Proposed Rule
a. Background and Current Process for Reporting Ambulance
Mileage
b. Concerns Regarding the Potential for Inaccuracies in
Reporting Units and Associated Considerations
c. Billing of Fractional Units for Mileage
3. Analysis of and Responses to Public Comments
a. Basis for Reconsideration of the Ambulance Mileage Reporting
Requirements
b. Appropriateness of Fractional Mileage Reporting Policy
(1) Financial Impact of Fractional Mileage Policy
c. Administrative Impact
(2) Technical and Other Considerations
(A) Ability to Measure Fractional Miles
(B) Ambulance Provider versus Supplier Billing
(C) Billing Software
(D) Enforcement and Compliance
(E) Air Ambulance
(F) Miscellaneous Comments
4. Applicability of the Fractional Billing Policy to Other
Services
5. Final Fractional Mileage Billing Policy
C. Clinical Laboratory Fee Schedule: Signature on Requisition
D. Discussion of Budget Neutrality for the Chiropractic Services
Demonstration
E. Provisions Related to Payment for Renal Dialysis Services
Furnished by End-Stage Renal Disease (ESRD) Facilities
(1) Update to the Drug Add-on Adjustment to the Composite Rate
(2) Estimating Per Patient Growth
(3) Update to the Drug Add-on Adjustment
(4) Update to the Geographic Adjustments to the Composite Rate
(5) Updates to Core-Based Statistical Area (CBSA) Definitions
(6) Updated Wage Index Values
(7) Wage index Values for Areas With No Hospital Data
(8) Reduction to the ESRD Wage Index Floor
(9) Budget Neutrality Adjustment
(10) ESRD Wage Index Tables
F. Issues Related to the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA)
1. Section 131: Physician Payment, Efficiency, and Quality
Improvements--Physician Quality Reporting System
a. Program Background and Statutory Authority
b. Incentive Payments for the 2011 Physician Quality Reporting
System
c. 2011 Reporting Periods for Individual Eligible Professionals
d. 2011 Physician Quality Reporting System Reporting Mechanisms
for Individual Eligible Professionals
(1) Final Requirements for Individual Eligible Professionals Who
Choose the Claims-based Reporting Mechanism
(2) Final Requirements for Individual Eligible Professionals Who
Choose the Registry-based Reporting Mechanism
(3) Final Requirements for Individual Eligible Professionals Who
Choose the EHR based Reporting Mechanism
(4) Final Qualification Requirements for Registries
(5) Final Qualification Requirements for EHR Vendors and Their
Products
e. Criteria for Satisfactory Reporting of Individual Quality
Measures for Individual Eligible Professionals
f. Criteria for Satisfactory Reporting Measures Groups for
Individual Eligible Professionals
g. Reporting Option for Satisfactory Reporting on Quality
Measures by Group Practices
(1) Background and Authority
(2) Definition of ``Group Practice''
(3) Process for Physician Group Practices to Participate as
Group Practices and Criteria for Satisfactory Reporting
A. Group Practice Reporting Option for Physician Group Practices
with 200 or More NPIs GPRO I
B. Group Practice Reporting Option for Group Practices of 2-199
NPIs--GPRO-II
h. Statutory Requirements and Other Considerations for 2011
Physician Quality Reporting System Measures
(1) Statutory Requirements for 2011 Physician Quality Reporting
System Measures
(2) Other Considerations for 2011 Physician Quality Reporting
System Measures
(3) Summary of Comments and Responses
i. The Final 2011 Physician Quality Reporting System Quality
Measures for Individual Eligible Professionals
(1) 2011 Individual Quality Measures Selected From the 2010
Physician Quality Reporting System Quality Measures Set Available
for Claims based Reporting and Registry-based Reporting
(2) 2011 Individual Quality Measures Selected From the 2010
Physician Quality Reporting System Quality Measures Set Available
for Registry-based Reporting Only
(3) New Individual Quality Measures for 2011
(4) 2011 Measures Available for EHR-based Reporting
(5) Measures Proposed for Inclusion in 2011 Measures Groups
j. 2011 Physician Quality Reporting System Quality Measures for
Group Practices Selected to Participate in the Group Practice
Reporting Option (GPRO I)
k. Public Reporting of Physician Quality Reporting System Data
l. Other Relevant ACA Provisions
(1) Section 3002 (b)--Incentive Payment Adjustment for Quality
Reporting
(2) Section 3002(c)--Maintenance of Certification Programs and
Section 10327 Improvements to the Physician Quality Reporting System
(3) Section 3002(d)--Integration of Physician Quality Reporting
and EHR Reporting
(4) Section 3002(e)--Feedback
(5) Section 3002(f)--Appeals
2. Section 132: Incentives for Electronic Prescribing (eRx)- The
Electronic Prescribing Incentive Program

[[Page 73175]]

a. Program Background and Statutory Authority
b. The 2011 eRx Incentive
(1) The 2011 Reporting Period for the eRx Incentive Program
(2) Criteria for Determination of Successful Electronic
Prescriber for Eligible Professionals
(A) Reporting the Electronic Prescribing Measure
(B) The Reporting Denominator for the Electronic Prescribing
Measure
(C) Qualified Electronic Prescribing System--Required
Functionalities and Part D eRx Standards
(D) The Reporting Numerator for the Electronic Prescribing
Measure
(E) Criteria for Successful Reporting of the Electronic
Prescribing Measure
(3) Determination of the 2011 Incentive Payment Amount for
Individual Eligible Professionals Who Are Successful Electronic
Prescribers
(4) Reporting Option for Satisfactory Reporting of the
Electronic Prescribing Measure by Group Practices
(A) Definition of ``Group Practice''
(B) Process for Group Practices to Participate as Group
Practices and Criteria for Successful Reporting of the Electronic
Prescribing Measure by Group Practices
c. The 2012 eRx Payment Adjustment
(1) The eRx Payment Adjustment Reporting Period
(2) Criteria for Determining Applicability of the 2012 eRx
Payment Adjustment to Individual Eligible Professionals
(3) Criteria for Determining Applicability of the 2012 eRx
Payment Adjustment to Group Practices
(4) Significant Hardship Exemption
d. The 2013 eRx Payment Adjustment
e. Public Reporting of Names of Successful Electronic
Prescribers
G. DMEPOS Provisions
1. Medicare Durable Medical Equipment, Prosthetics, Orthotics,
and Supplies (DMEPOS) Competitive Bidding Program (CBP)
a. Legislative and Regulatory History of DMEPOS CBP
b. Implementation of a National Mail Order DMEPOS Competitive
Bidding Program (CBP) for Diabetic Testing Supplies
(1) Future Competitions for Diabetic Testing Supplies
(2) Definition of Mail Order Item
(3) Special Rule in Case of Competition for Diabetic Testing
Strips
(4) Anti-switching Rule in Case of Competition for Diabetic Test
Strips
c. Off-the-Shelf (OTS) Orthotics Exemption
d. Grandfathering Rules Resulting in Additional Payments to
Contract Suppliers under the DMEPOS Competitive Bidding Program
(CBP)
e. Appeals Process
(1) Purpose and Definitions: (Sec. 414.402)
(2) Applicability
(3) Contract Termination
(4) Notice of Termination
(5) Corrective Action Plan
(6) Right to Request a Hearing by the CBIC Hearing Officer (HO)
(7) Scheduling of the Hearing
(8) Burden of Proof
(9) Role of the Hearing Officer (HO)
(10) CMS's Final Determination
(11) Effective Date of the Contract Termination
(12) Effect of Contract Termination
2. Changes to Payment Rules for Oxygen and Oxygen Equipment
a. Background
b. Furnishing Oxygen Equipment after the 36-Month Rental Period
(CAP)
c. Furnishing Oxygen Equipment during the 36-Month Rental Period
(CAP)
H. Provider and Supplier Enrollment Issue: Air Ambulance
Provision
I. Technical Corrections
1. Physical Therapy, Occupational Therapy and Speech-language
Pathology
2. Scope of Benefits
J. Physician Self-Referral Prohibition: Annual Update to the
List of CPT/HCPCS Codes
1. General
2. Annual Update to the Code List
a. Background
b. Response to Comments
c. Revisions Effective for 2011
VIII. Waiver of Proposed Rulemaking and Delay in Effective Date
IX. Collection of Information Requirements
A. ICRs Regarding Diagnostic X-ray Tests, Diagnostic Laboratory
Tests, and Other Diagnostic Tests: Conditions (Sec. 410.32)
B. ICRs Regarding General Exceptions to the Referral Prohibition
Related to Both Ownership/Investment and Compensation (Sec.
411.355)
C. ICRs Regarding Appeals Process for Termination of Competitive
Bidding Contract (Sec. 414.423)
D. ICRs Regarding Additional Provider and Supplier Requirements
for Enrolling and Maintaining Active Enrollment status in the
Medicare Program (Sec. 424.516)
E. Additional Information Collection Requirements
1. Part B Drug Payment
2. Physician Quality Reporting Initiative (PQRI)
3. Electronic Prescribing (eRx) Incentive Program
X. Response to Comments
XI. Regulatory Impact Analysis
A. RVU Impacts
1. Resource Based Work, PE, and Malpractice RVUs
2. CY 2011 PFS Impact Discussion
a. Changes in RVUs
b. Combined Impact
B. Geographic Practice Cost Indices (GPCIs)
C. Rebasing and Revising of the MEI
D. The Affordable Care Act Provisions
1. Section 3002: Improvements to the Physician Quality Reporting
System
2. Sections 3003 and 3007: Improvements to the Physician
Feedback Program and Value-Based Payment Under the Physician Fee
Schedule
2. Section 3103: Extension of Exceptions Process for Medicare
Therapy Caps
3. Section 3102: Extension of the Work Geographic Index Floor
and Revisions to the Practice Expense Geographic Adjustment under
the Medicare Physician Fee Schedule, and Protections for Frontier
States as amended by Section 10324
4. Section 3103: Extension of Exceptions Process for Medicare
Therapy Caps
5. Section 3104: Extension of Payment for Technical Component of
Certain Physician Pathology Services
6. Sections 3105 and 10311: Extension of Ambulance Add-Ons
7. Section 3107: Extension of Physician Fee Schedule Mental
Health Add-On
8. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
9. Section 3111: Payment for Bone Density Tests
10. Section 3114: Improved Access for Certified Nurse-Midwife
Services
11. Section 3122: Extension of Medicare Reasonable Costs
Payments for Certain Clinical Diagnostic Laboratory Tests Furnished
to Hospital Patients in Certain Rural Areas
12. Section 3134: Misvalued Codes Under the PFS
13. Section 3135: Modification of Equipment Utilization Factor
For Advanced Imaging Services
14. Section 3136: Revisions in Payments for Power Wheelchairs
15. Section 3139: Payment for Biosimilar Biological Products
16. Section 3401: Revisions of Certain Market Basket Updates and
Incorporation of Productivity Adjustments
17. Section 4103: Medicare Coverage of Annual Wellness Visit
Providing a Personalized Prevention Plan
18. Section 4104: Removal of Barriers to Preventive Services in
Medicare
19. Section 5501: Expanding Access to Primary Care Services and
General Surgery Services
20. Section 6003: Disclosure Requirements for In-office
Ancillary Services Exception to the Prohibition of Physician Self-
referral for Certain Imaging Services
21. Section 6404: Maximum Period for Submission of Medicare
Claims Reduced to Not More Than 12 Months
22. Section 6410 of Patient Accountability and Affordable Care
Act and Section 154 of MIPPA: Adjustments to the Metropolitan
Statistical Areas (MSA) for Medicare Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies Competitive Acquisition Program
23. Section 10501(i)(3): Collection of HCPCS Data for the
Development and Implementation of a Prospective Payment System for
the Medicare FQHC Program
E. Other Provisions of the Proposed Regulation
1. Part B Drug Payment: ASP Issues
2. Ambulance Fee Schedule: Proposed Policy for Reporting Units
when Billing for Ambulance Fractional Mileage
3. Chiropractic Services Demonstration
4. Renal Dialysis Services Furnished by ESRD Facilities
5. Section 131(b) of the MIPPA: Physician Payment, Efficiency,
and Quality Improvements--Physician Quality Reporting System
6. Section 132 of the MIPPA: Incentives for Electronic
Prescribing (eRx)--The eRx Incentive Program

[[Page 73176]]

7. Durable Medical Equipment-Related Issues
a. Off-the-Shelf (OTS) Orthotics Exemption
b. Changes to Payment for Oxygen Equipment
c. Diabetic Testing Supplies
d. Metropolitan Statistical Areas
8. Air Ambulance
F. Alternatives Considered
G. Impact on Beneficiaries
H. Accounting Statement

Regulations Text

Addendum A--Explanation and Use of Addendum B
Addendum B--Relative Value Units and Related Information Used In
Determining Medicare Payments for CY 2011
Addendum C--Codes With Interim RVUS
Addendum D--Final 2011 Geographic Adjustment Factors (GAFS)
Addendum E--Final 2011****Geographic Practice Cost Indicies (GPCIS)
By State and Medicare Locality
Addendum F--CY 2011 Diagnostic Imaging Services Subject To The
Multiple Procedure Payment Reduction
Addendum G--CPT/HCPCS Imaging Codes Defined By Section 5102(B) of
the DRA
Addendum H--CY 2011 ``Always Therapy'' Services* Subject to the
Multiple Procedure Payment Reduction
Addendum I--[Reserved]
Addendum J--List of CPT1/HCPCS Codes Used to Define Certain
Designated Health Service Categories \2\ Under Section 1877 of the
Social Security Act Effective January 1, 2011
Addendum K--CY 2011 ESRD Wage Index For Urban Areas Based On CBSA
Labor Market Areas
Addendum L-- CY 2011 Wage Index For Rural Areas Based On CBSA Labor
Market Areas

Acronyms

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

AA Anesthesiologist assistant
AACVPR American Association of Cardiovascular and Pulmonary
Rehabilitation
AANA American Association of Nurse Anesthetists
ABMS American Board of Medical Specialties
ABN Advanced Beneficiary Notice
ACA ``Affordable Care Act''
ACC American College of Cardiology
ACGME Accreditation Council on Graduate Medical Education
ACLS Advanced cardiac life support
ACP American College of Physicians
ACR American College of Radiology
ACS American Community Survey
AED Automated external defibrillator
AFROC Association of Freestanding Radiation Oncology Centers
AFS Ambulance Fee Schedule
AHA American Heart Association
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ [HHS] Agency for Healthcare Research and Quality
AMA American Medical Association
AMA-DE American Medical Association Drug Evaluations
AACE American Association of Clinical Endocrinologists
AADE American Association of Diabetes Educators
AMP Average manufacturer price
AO Accreditation organization
AOA American Osteopathic Association
APA American Psychological Association
APC Administrative Procedures Act
APTA American Physical Therapy Association
ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)
ASC Ambulatory surgical center
ASP Average sales price
ASRT American Society of Radiologic Technologists
ASTRO American Society for Therapeutic Radiology and Oncology
ATA American Telemedicine Association
AWP Average wholesale price
AWV Annual Wellness Visit
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program]
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BPM Benefit Policy Manual
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection
Act of 2000 (Pub. L. 106-554)
BLS Bureau of Labor Statistics
BN Budget neutrality
BPM Benefit Policy Manual
CABG Coronary artery bypass graft
CAD Coronary artery disease
CAH Critical access hospital
CAHEA Committee on Allied Health Education and Accreditation
CAP Competitive acquisition program
CARE Continuity Assessment Record and Evaluation
CBIC Competitive Bidding Implementation Contractor
CBP Competitive Bidding Program
CBSA Core-Based Statistical Area
CDC Centers for Disease Control and Prevention
CEM Cardiac Event Monitoring
CF Conversion factor
CFC Conditions for Coverage
CFR Code of Federal Regulations
CKD Chronic kidney disease
CLFS Clinical laboratory fee schedule
CMA California Medical Association
CMD Contractor Medical Director
CMHC Community mental health center
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
CNS Clinical nurse specialist
CoP Condition of participation
COPD Chronic obstructive pulmonary disease
CORF Comprehensive Outpatient Rehabilitation Facility
COS Cost of service
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban consumers
CPR Cardiopulmonary resuscitation
CPT [Physicians] Current Procedural Terminology (4th Edition, 2002,
copyrighted by the American Medical Association)
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CRP Canalith repositioning
CRT Certified respiratory therapist
CSW Clinical social worker
CT Computed Tomography
CTA Computed Tomography Angography
CSC Computer Sciences Corporation
CWF Common Working File
CY Calendar year
DEA Drug Enforcement Agency
DOTPA Development of Outpatient Therapy Alternatives
DHS Designated health services
DHHS Department of Health and Human Services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and
supplies
DOQ Doctors Office Quality
DOS Date of service
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DSMT Diabetes self-management training
EGC Electrocardiogram
E/M Evaluation and management
EDI Electronic data interchange
EEG Electroencephalogram
EHR Electronic health record
EKG Electrocardiogram
EMG Electromyogram
EMTALA Emergency Medical Treatment and Active Labor Act
EOG Electro-oculogram
EPO Erythopoeitin
eRx Electronic Prescribing
ESO Endoscopy Supplies
ESRD End-stage renal disease
FAA Federal Aviation Administration
FAX Facsimile
FDA Food and Drug Administration (HHS)
FFS Fee-for-service
FOTO Focus On Therapeutic Outcomes
FQHC Federally Qualified Health Center
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GEM Generating Medicare [Physician Quality Performance Measurement
Results]
GFR Glomerular filtration rate
GPRO Group Practice Reporting Option
GPO Group purchasing organization
GPCI Geographic practice cost index
GPS Geographic Positioning System
GSA General Services Administration
HAC Hospital-acquired conditions
HBAI Health and behavior assessment and intervention
HCC Hierarchal Condition Category
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HEMS Helicopter Emergency Medical Services
HDRT High dose radiation therapy

[[Page 73177]]

HH PPS Home Health Prospective Payment System
HHA Home health agency
HHRG Home health resource group
HHS [Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HIT Health information technology
HITECH Health Information Technology for Economic and Clinical
Health Act (Title IV of Division B of the Recovery Act, together
with Title XIII of Division A of the Recovery Act)
HITSP Healthcare Information Technology Standards Panel
HIV Human immunodeficiency virus
HOPD Hospital outpatient department
HPSA Health Professional Shortage Area
HRA Health Risk Assessment
HRSA Health Resources Services Administration (HHS)
HSIP HPSA Surgical Incentive Program
HUD Housing and Urban Development
IACS Individuals Access to CMS Systems
ICD International Classification of Diseases
ICF Intermediate care facilities
ICF International Classification of Functioning, Disability and
Health
ICR Intensive cardiac rehabilitation
ICR Information collection requirement
IDTF Independent diagnostic testing facility
IGI IHS Global Insight, Inc.
IFC Interim final rule with comment period
IMRT Intensity-Modulated Radiation Therapy
IOM Internet Only Manual
IPCI indirect practice cost index
IPPE Initial preventive physical examination
IPPS Inpatient prospective payment system
IRS Internal Revenue Service
ISO Insurance services office
IVD Ischemic Vascular Disease
IVIG Intravenous immune globulin
IWPUT Intra-service work per unit of time
TJC Joint Commission
JRCERT Joint Review Committee on Education in Radiologic Technology
KDE Kidney disease education
LCD Local coverage determination
MA Medicare Advantage
MA-PD Medicare Advantage-Prescription Drug Plans
MAC Medicare Administrative Contractor
MAV Measure Applicability Validation
MCMP Medicare Care Management Performance
MCP Monthly Capitation Payment
MDRD Modification of Diet in Renal Disease
MedCAC Medicare Evidence Development and Coverage Advisory
Committee (formerly the Medicare Coverage Advisory Committee (MCAC))
MedPAC Medicare Payment Advisory Commission
MGMA Medical Group Management Association
MEI Medicare Economic Index
MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that
is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA)
(Pub. L. 109-432)
MIPPA Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275)
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L.
110-173)
MNT Medical nutrition therapy
MOC Maintenance of certification
MP Malpractice
MPC Mulitspecialty Points of Comparison
MPPR Multiple procedure payment reduction
MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)
MRA Magnetic Resonance Angiography
MRI Magnetic Resonance Imaging
MSA Metropolitan Statistical Area
MSP Medicare Secondary Payer
MUE Medically Unlikely Edit
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NCQA National Committee for Quality Assurance
NCQDIS National Coalition of Quality Diagnostic Imaging Services
NDC National drug code
NF Nursing facility
NISTA National Institute of Standards and Technology Act
NP Nurse practitioner
NPI National Provider Identifier
NPP Nonphysician practitioner
NQF National Quality Forum
NBRC National Board for Respiratory Care
NRC Nuclear Regulatory Commission
NTSB National Transportation Safety Board
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
OCR Optical Character Recognition
ODF Open door forum
OES Occupational Employment Statistics
OGPE Oxygen generating portable equipment
OIG Office of Inspector General
OMB Office of Management and Budget
ONC [HHS] Office of the National Coordinator for Health IT
OPPS Outpatient prospective payment system
OSCAR Online Survey and Certification and Reporting
PA Physician assistant
PACE Program of All-inclusive Care for the Elderly
PAT Performance assessment tool
PC Professional component
PCI Percutaneous coronary intervention
PCIP Primary Care Incentive Payment Program
PDP Prescription drug plan
PE Practice expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PECOS Provider Enrollment Chain and Ownership System
PERC Practice Expense Review Committee
PFS Physician Fee Schedule
PGP [Medicare] Physician Group Practice
PHI Protected health information
PHP Partial hospitalization program
PIM [Medicare] Program Integrity Manual
PLI Professional liability insurance
POA Present on admission
POC Plan of care
PPI Producer price index
PPIS Physician Practice Information Survey
PPPS Personalized Prevention Plan Services
PPS Prospective payment system
PPTA Plasma Protein Therapeutics Association
PQRI Physician Quality Reporting Initiative
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PT Physical therapy
PTCA Percutaneous transluminal coronary angioplasty
PTA Physical therapy assistant
PVBP Physician and Other Health Professional Value-Based Purchasing
Workgroup
QDCs (Physician Quality Reporting System) Quality Data Codes
RA Radiology assistant
RAC Medicare Recovery Audit Contractor
RBMA Radiology Business Management Association
RFA Regulatory Flexibility Act
RHC Rural health clinic
RHQDAPU Reporting Hospital Quality Data Annual Payment Update
Program
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RPA Radiology practitioner assistant
RRT Registered respiratory therapist
RUC [AMAs Specialty Society] Relative (Value) Update Committee
RVRBS Resource-Based Relative Value Scale
RVU Relative value unit
SBA Small Business Administration
SCHIP State Children's Health Insurance Programs
SDW Special Disability Workload
SGR Sustainable growth rate
STATS Short Term Alternatives for Therapy Services
SLP Speech-language pathology
SMS [AMAs] Socioeconomic Monitoring System
SNF Skilled nursing facility
SOR System of record
SRS Stereotactic radiosurgery
SSA Social Security Administration
SSI Social Security Income
STARS Services Tracking and Reporting System
STATS Short Term Alternative Therapy Services
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
TTO Transtracheal oxygen
UAF Update Adjustment Factor
UPMC University of Pittsburgh Medical Center
URAC Utilization Review Accreditation Committee
USDE United States Department of Education
USP-DI United States Pharmacopoeia-Drug Information
VA Veterans Administration
VBP Value-based purchasing
WAC Wholesale Acquisition Cost

[[Page 73178]]

WAMP Widely available market price
WHO World Health Organization

CPT (Current Procedural Terminology) Copyright Notice

Throughout this final rule with comment period, we use CPT codes
and descriptions to refer to a variety of services. We note that CPT
codes and descriptions are copyright 2010 American Medical Association.
All Rights Reserved. CPT is a registered trademark of the American
Medical Association (AMA). Applicable FARS/DFARS apply.

I. Background

Since January 1, 1992, Medicare has paid for physicians' services
under section 1848 of the Social Security Act (the Act), ``Payment for
Physicians' Services.'' The Act requires that payments under the
physician fee schedule (PFS) are based on national uniform relative
value units (RVUs) based on the relative resources used in furnishing a
service. Section 1848(c) of the Act requires that national RVUs be
established for physician work, practice expense (PE), and malpractice
expense. Before the establishment of the resource-based relative value
system, Medicare payment for physicians' services was based on
reasonable charges. We note that throughout this final rule with
comment period, unless otherwise noted, the term ``practitioner'' is
used to describe both physicians and eligible nonphysician
practitioners (such as physician assistants, nurse practitioners,
clinical nurse specialists, certified nurse-midwives, psychologists, or
social workers) that are permitted to furnish and bill Medicare under
the PFS for the services under discussion.

A. Development of the Relative Value System

1. Work RVUs
The concepts and methodology underlying the PFS were enacted as
part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L.
101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published
on November 25, 1991 (56 FR 59502), set forth the fee schedule for
payment for physicians' services beginning January 1, 1992. Initially,
only the physician work RVUs were resource-based, and the PE and
malpractice RVUs were based on average allowable charges.
The physician work RVUs established for the implementation of the
fee schedule in January 1992 were developed with extensive input from
the physician community. A research team at the Harvard School of
Public Health developed the original physician work RVUs for most codes
in a cooperative agreement with the Department of Health and Human
Services (DHHS). In constructing the code-specific vignettes for the
original physician work RVUs, Harvard worked with panels of experts,
both inside and outside the Federal government, and obtained input from
numerous physician specialty groups.
Section 1848(b)(2)(B) of the Act specifies that the RVUs for
anesthesia services are based on RVUs from a uniform relative value
guide, with appropriate adjustment of the conversion factor (CF), in a
manner to assure that fee schedule amounts for anesthesia services are
consistent with those for other services of comparable value. We
established a separate CF for anesthesia services, and we continue to
utilize time units as a factor in determining payment for these
services. As a result, there is a separate payment methodology for
anesthesia services.
We establish physician work RVUs for new and revised codes based on
our review of recommendations received from the American Medical
Association's (AMA) Specialty Society Relative Value Update Committee
(RUC).
2. Practice Expense Relative Value Units (PE RVUs)
Section 121 of the Social Security Act Amendments of 1994 (Pub. L.
103-432), enacted on October 31, 1994, amended section
1848(c)(2)(C)(ii) of the Act and required us to develop resource-based
PE RVUs for each physicians' service beginning in 1998. We were to
consider general categories of expenses (such as office rent and wages
of personnel, but excluding malpractice expenses) comprising PEs.
Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L.
105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay
implementation of the resource-based PE RVU system until January 1,
1999. In addition, section 4505(b) of the BBA provided for a 4-year
transition period from charge-based PE RVUs to resource-based RVUs.
We established the resource-based PE RVUs for each physicians'
service in a final rule, published November 2, 1998 (63 FR 58814),
effective for services furnished in 1999. Based on the requirement to
transition to a resource-based system for PE over a 4-year period,
resource-based PE RVUs did not become fully effective until 2002.
This resource-based system was based on two significant sources of
actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the
AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were
collected from panels of physicians, practice administrators, and
nonphysicians (for example, registered nurses (RNs)) nominated by
physician specialty societies and other groups. The CPEP panels
identified the direct inputs required for each physicians' service in
both the office setting and out-of-office setting. We have since
refined and revised these inputs based on recommendations from the RUC.
The AMA's SMS data provided aggregate specialty-specific information on
hours worked and PEs.
Separate PE RVUs are established for procedures that can be
performed in both a nonfacility setting, such as a physician's office,
and a facility setting, such as a hospital outpatient department
(HOPD). The difference between the facility and nonfacility RVUs
reflects the fact that a facility typically receives separate payment
from Medicare for its costs of providing the service, apart from
payment under the PFS. The nonfacility RVUs reflect all of the direct
and indirect PEs of providing a particular service.
Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113) directed the Secretary of Health and Human Services
(the Secretary) to establish a process under which we accept and use,
to the maximum extent practicable and consistent with sound data
practices, data collected or developed by entities and organizations to
supplement the data we normally collect in determining the PE
component. On May 3, 2000, we published the interim final rule (65 FR
25664) that set forth the criteria for the submission of these
supplemental PE survey data. The criteria were modified in response to
comments received, and published in the Federal Register (65 FR 65376)
as part of a November 1, 2000 final rule. The PFS final rules published
in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended
the period during which we would accept these supplemental data through
March 1, 2005.
In the calendar year (CY) 2007 PFS final rule with comment period
(71 FR 69624), we revised the methodology for calculating direct PE
RVUs from the top-down to the bottom-up methodology beginning in CY
2007 and provided for a 4-year transition for the new PE RVUs under
this new methodology. This transition ended in CY 2010 and direct PE
RVUs are calculated in CY 2011 using this methodology, unless otherwise
noted.
In the CY 2010 PFS final rule with comment period, we updated the
PE/hour (HR) data that are used in the

[[Page 73179]]

calculation of PE RVUs for most specialties (74 FR 61749). For this
update, we used the Physician Practice Information Survey (PPIS)
conducted by the AMA. The PPIS is a multispecialty, nationally
representative, PE survey of both physicians and nonphysician
practitioners (NPPs) using a survey instrument and methods highly
consistent with those of the SMS and the supplemental surveys used
prior to CY 2010. We note that in CY 2010, for oncology, clinical
laboratories, and independent diagnostic testing facilities (IDTFs), we
continued to use the supplemental survey data to determine PE/HR values
(74 FR 61752).
3. Resource-Based Malpractice (MP) RVUs
Section 4505(f) of the BBA amended section 1848(c) of the Act
requiring us to implement resource-based malpractice (MP) RVUs for
services furnished on or after CY 2000. The resource-based MP RVUs were
implemented in the PFS final rule published November 2, 1999 (64 FR
59380). The MP RVUs were based on malpractice insurance premium data
collected from commercial and physician-owned insurers from all the
States, the District of Columbia, and Puerto Rico.
4. Refinements to the RVUs
Section 1848(c)(2)(B)(i) of the Act requires that we review all
RVUs no less often than every 5 years. The first Five-Year Review of
the physician work RVUs was published on November 22, 1996 (61 FR
59489) and was effective in 1997. The second Five-Year Review was
published in the CY 2002 PFS final rule with comment period (66 FR
55246) and was effective in 2002. The third Five-Year Review of
physician work RVUs was published in the CY 2007 PFS final rule with
comment period (71 FR 69624) and was effective on January 1, 2007.
(Note: Additional codes relating to the third Five-Year Review of
physician work RVUs were addressed in the CY 2008 PFS final rule with
comment period (72 FR 66360).) The fourth Five-Year Review of physician
work RVUs was initiated in the CY 2010 PFS final rule with comment
period where we solicited candidate codes from the public for this
review (74 FR 61941). Changes due to the fourth Five-Year Review of
physician work RVUs will be effective January 1, 2012.
In 1999, the AMA RUC established the Practice Expense Advisory
Committee (PEAC) for the purpose of refining the direct PE inputs.
Through March 2004, the PEAC provided recommendations to CMS for over
7,600 codes (all but a few hundred of the codes currently listed in the
AMAs Current Procedural Terminology (CPT) codes). As part of the CY
2007 PFS final rule with comment period (71 FR 69624), we implemented a
new bottom-up methodology for determining resource-based PE RVUs and
transitioned the new methodology over a 4-year period. A comprehensive
review of PE was undertaken prior to the 4-year transition period for
the new PE methodology from the top-down to the bottom-up methodology,
and this transition was completed in CY 2010. In CY 2010, we also
incorporated the new PPIS data to update the specialty-specific PE/HR
data used to develop PE RVUs. Therefore, the next Five-Year Review of
PE RVUs will be addressed in CY 2014.
In the CY 2005 PFS final rule with comment period (69 FR 66236), we
implemented the first Five-Year Review of the MP RVUs (69 FR 66263).
Minor modifications to the methodology were addressed in the CY 2006
PFS final rule with comment period (70 FR 70153). The second Five-Year
Review and update of resource-based malpractice RVUs was published in
the CY 2010 PFS final rule with comment period (74 FR 61758) and was
effective in CY 2010.
5. Adjustments to RVUs Are Budget Neutral
Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs for a year may not cause total PFS payments to differ by more
than $20 million from what they would have been if the adjustments were
not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act,
if revisions to the RVUs cause expenditures to change by more than $20
million, we make adjustments to ensure that expenditures do not
increase or decrease by more than $20 million.
For CY 2010, we adopted a number of new payment policies for which
we estimated the potential for a redistributive effect under the PFS,
including the use of the new PPIS data to develop the specialty-
specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the
elimination of the reporting of all CPT consultation codes in order to
allow for correct and consistent coding and appropriate payment for
evaluation and management services under the PFS (74 FR 61767 through
61775). In the CY 2011 PFS proposed rule (75 FR 40047), we acknowledged
that clinical experience with these new PFS policies has been growing
over the first 6 months of CY 2010 and noted that as we seek to improve
future PFS payment accuracy for services, we were interested in public
comments on the perspectives of physicians and nonphysician
practitioners caring for Medicare beneficiaries under the current PFS
coding and payment methodologies for physicians' services.
Comment: Many commenters expressed various concerns regarding new
Medicare coding and payment methodologies adopted for CY 2010 and
continuing in CY 2011. Some commenters indicated that the effects of
using PPIS data to develop the specialty-specific practice expense per
hour (PE/HR) significantly reduced the payment for certain services and
procedures. Commenters were concerned that the reductions in practice
costs reflected in the PPIS data were inaccurate and that CMS reliance
on the PPIS data caused undue hardship to certain specialties. Some
commenters requested that CMS utilize new PE survey data for specific
specialties.
A number of commenters were also particularly concerned with the
decision by CMS to no longer recognize the CPT consultation codes for
Part B payment of evaluation and management (E/M) services beginning in
CY 2010. Many commenters recommended resuming payment for consultation
codes under the PFS to recognize the unique physician work and practice
expenses when consultation services are furnished at the request of
other practitioners. Several commenters argued that consultation
services were especially important to ensuring high-quality,
coordinated care for complex patients and to prevent unnecessary,
expensive tests. Based on findings from a survey of affected
specialties, these commenters expressed concern that CMS policy
decision to no longer recognize the CPT consultation codes for PFS
payment purposes resulted in: (1) A reduction in the number of new
Medicare patients seen by specialists; (2) a reduction in overall
specialist time spent with individual Medicare patients; (3) a
reduction in the number of consultations provided to hospital
inpatients; (4) diminished continuity and coordination of care; and (5)
the elimination of physicians' office staff and postponement of
physicians purchasing new equipment because of practice cost concerns.
Finally, other commenters requested that, in the absence of recognition
of the CPT consultation codes for PFS payment, CMS should revise the
current prolonged services and new patient definitions in order to
allow for higher payments for services that, prior to CY 2010, would
have been billed using the CPT consultation codes. Specifically,

[[Page 73180]]

the commenters believe that CMS should adopt the current CPT policy of
identifying patients seen by physicians in a different subspecialty
within a group practice as ``new'' patients, rather than continuing to
use the same physician specialty as the decision point. In addition,
some commenters encouraged CMS to adopt the CPT inpatient setting
guidelines for determining whether a service meets the prolonged
service criteria, which allow physicians to include time spent on a
patients floor or unit performing tasked related to the patients care,
rather than just face-to-face time as specified under current CMS
policy.
Response: We appreciate the concerns of the commenters regarding
current PFS coding and payment methodologies. We welcome the
perspective of physicians and nonphysician practitioners caring for
Medicare beneficiaries. We understand that in some cases, recent policy
changes under the PFS reduced payments for certain professional
services, albeit with the goal of providing payment for services that
appropriately reflects their relative value in the context of PFS
payment for all other services. It is in the nature of any budget
neutral payment system for changes, such as the use of PPIS data and
the elimination of PFS payment for the CPT consultation codes, to have
a somewhat differential impact on various groups of physicians and/or
nonphysician practitioners. Furthermore, we note that all physicians
benefited from the budget neutral increase in the payment levels for
the other evaluation and management (E/M) CPT codes that resulted from
the consultation code policy change.
For CY 2010, we adopted the PPIS data for developing the PE RVUs as
the most recent data on physicians office practice expenses that used a
consistent survey instrument across all specialty and healthcare
professional groups. The PPIS was a nationally representative survey
providing the most up-to-date and comprehensive data available from 51
specialties, using a survey instrument that was carefully designed,
tested, and implemented. As discussed in the CY 2010 PFS final rule
with comment period (75 FR 61751), because we recognized that some
specialties would likely experience significant payment reductions with
the use of the PPIS data, we adopted a 4-year transition from the
previous PE RVUs to the PE RVUs developed using the new PPIS data in
order to allow physicians and others time to adjust to the payment
changes. We note that CY 2010 was the first year of the transition,
with payment based upon 75 percent of the previous PE RVUs and 25
percent of the PE RVUs using the new PPIS data. This blend will move to
50/50 in CY 2011, and we intend to continue to closely monitor Medicare
PFS utilization data to detect any emerging issues that may be of
concern during this transition period, such as access problems for
Medicare beneficiaries. To date, we have identified no specific
problems that would warrant our proposal of a change with respect to
the final CY 2010 policy regarding development of the PE RVUs based on
the PPIS data. Going forward, as discussed further in section II.A.2.f.
of this final rule with comment period, we remain interested in the
thoughts of stakeholders regarding the MedPAC comment that ``CMS should
consider alternatives to collecting specialty-specific cost data or
options to decrease the reliance on such data.'' We encourage
interested parties to contact us at any time if they have information
to share or discuss in this regard.
In response to extensive public comment on the CY 2010 PFS proposal
to eliminate payment for the CPT consultation codes, we explained our
rationale in detail in the CY 2010 PFS final rule with comment period
(75 FR 61767 through 61775). Prior to the CY 2010 PFS rulemaking cycle,
we had made numerous attempts to resolve issues related to the
reporting of the CPT consultation codes, including developing and
implementing relevant guidance and educating physicians regarding
documentation, transfer of care, and consultation policy. Despite these
efforts, there was still substantial disagreement and inconsistency
within the physician community regarding these issues. In addition, we
believe that in most cases there is no substantial difference in
physician work between E/M visits and services that would otherwise be
reported with CPT consultation codes. Therefore, we continue to believe
that E/M services that could previously have been reported using the
CPT consultation codes may now be appropriately reported and paid using
other E/M codes, specifically office and other outpatient, initial
hospital and nursing facility care, and subsequent hospital and nursing
facility care E/M codes. This policy allows for correct and consistent
coding for E/M services furnished by physicians and nonphysician
practitioners, as well as provides for appropriate payment for the
specific services that were previously billed using the CPT
consultation codes.
While we continue to believe that promoting effective coordination
of care must be an essential goal of our payment systems, we are
currently not aware of any evidence that the CY 2010 policy change to
no longer recognize the CPT consultation codes is creating problems
regarding care coordination and communication among physicians that
negatively impact the health of Medicare beneficiaries. As we stated in
the CY 2010 PFS final rule with comment period in response to similar
hypothetical concerns expressed by some commenters (75 FR 61774), if we
become aware of such evidence in the future, we would certainly
consider whether there is an appropriate policy response to promote
more effective coordination of care. However, we continue to believe it
is premature to consider what the appropriate responses might be unless
specific evidence of an issue affecting the health of Medicare
beneficiaries comes to our attention. We will continue to be attentive
to any concerns that develop about the effects of the policy on the
goal of promoting effective coordination of care.
In the CY 2010 PFS final rule with comment period (75 FR 61772), we
explained that, although we estimated that there would be
redistributional effects among specialties, we did not believe the
estimated impacts of the change in consultation code policy were
disproportionate to the goals we sought to achieve in finalizing the
proposal. While we understand that commenters are concerned with the
effects of this policy change and that these comments were submitted
after only a half year's experience with the revised policy, the
commenters on the CY 2011 proposed rule did not fundamentally address
the underlying issues that led to our decision to no longer recognize
the consultation codes for PFS payment purposes.
We appreciate the suggestions of the commenters regarding policy
changes to the definitions of new patients and prolonged services.
Regarding the definition of ``new'' patient, we note that we continue
to consider requests on an ongoing basis for new Medicare physician
specialty codes and may establish new codes upon evaluating the
submissions based on the criteria listed in the Medicare Claims
Processing Manual, Pub. 100-04, chapter 26, section 10.8. In fact, we
have approved four new Medicare physician specialty codes in the past 2
years. These additions allow more patients of those subspecialties to
be considered new based on the narrower range of services provided by
the subspecialty within a broader specialty group practice. We
encourage interested stakeholders to submit requests for new specialty
codes

[[Page 73181]]

if they desire a specific code for a different medical specialty or
subspecialty. We do not believe it is necessary to change our current
policy to one that would routinely adopt the CPT policy of identifying
patients seen by physicians in a different subspecialty as ``new''
patients because our current criteria for establishing new Medicare
physician specialty codes already accounts for many of these scenarios.
Medicare physician specialty codes describe the unique types of
medicine that physicians practice. Therefore, we believe our current
definition of ``new'' for reporting office visits to a group practice
appropriately relies upon the Medicare definition of a different
specialty so that that the differential physician resources required to
care for a patient who is truly new to the physician's unique type of
medical practice are appropriately recognized.
Finally, we note that our prolonged service criterion that allows
counting only of face-to-face time for inpatients, as it does for
outpatients, is longstanding. Given that the highest level initial
hospital care E/M visit by a physician typically extends for 70
minutes, in order to report the prolonged physician service CPT code in
the inpatient setting, a physician would need to spend at least an
additional 30 minutes caring for the patient. We are uncertain whether
many inpatient E/M services that would otherwise be reported as CPT
consultation codes extend beyond 100 minutes, even if we were to
consider adopting a policy change to allow counting of unit/floor time
in addition to face-to-face time. If we were to consider such a policy
change in the counting of physician time, we are also concerned that
available documentation in the medical record could make evaluating the
medical necessity of a prolonged service especially problematic.
Therefore, we do not believe it would be appropriate to modify our
interpretation of the counting of time for purposes of reporting the
prolonged service inpatient codes. In most cases, we believe that the
additional time that may be required for an E/M visit to a hospital
inpatient that would otherwise be reported by a CPT consultation code
may be appropriately paid through the Medicare payment for the level of
initial or subsequent hospital care E/M code that is reported that
takes into consideration the face-to-face time the consulting physician
spends with the patient.
We appreciate the commenters' varied perspectives on caring for
Medicare beneficiaries under the recent PFS coding and payment changes
adopted for CY 2010 and continuing in CY 2011. While we did not make CY
2011 proposals to modify our established policies regarding the use of
the PPIS data to calculate the PE RVUs or the reporting of E/M visits
that would otherwise be reported under the CPT consultation codes, and
we are not modifying them for CY 2011, we will continue to monitor the
impact of these policies. We look forward to continuing our dialogue
with stakeholders regarding these and future policy changes under the
PFS.

B. Components of the Fee Schedule Payment Amounts

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

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

C. Most Recent Changes to the Fee Schedule

The CY 2010 PFS final rule with comment period (74 FR 61738)
implemented changes to the PFS and other Medicare Part B payment
policies. It also finalized some of the CY 2009 interim RVUs and
implemented interim RVUs for new and revised codes for CY 2010 to
ensure that our payment systems are updated to reflect changes in
medical practice and the relative value of services. The CY 2010 PFS
final rule with comment period also addressed other policies, as well
as certain provisions of the MIPPA.
As required by the statute at the time of its issuance on October
30, 2009, the CY 2010 PFS final rule with comment period announced the
following for CY 2010: The PFS update of -21.2 percent; the initial
estimate for the sustainable growth rate of -8.8 percent; and the CF of
$28.4061.
On December 10, 2009, we published a correction notice (74 FR
65449) to correct several technical and typographical errors that
occurred in the CY 2010 PFS final rule with comment period. This
correction notice announced a revised CF for CY 2010 of $28.3895.
On December 19, 2009, the Department of Defense Appropriations Act,
2010 (Pub. L. 111-118) was signed into law. Section 1011 of Public Law
111-118 provided a 2-month zero percent update to the CY 2010 PFS
effective only for dates of service from January 1, 2010 through
February 28, 2010.
On March 2, 2010, the Temporary Extension Act of 2010 (Pub. L. 111-
144) was signed into law. Section 2 of Public Law 111-144 extended
through March 31, 2010 the zero percent update to the PFS that was in
effect for claims with dates of service from January 1, 2010 through
February 28, 2010.
In addition, on April 15, 2010, the Continuing Extension Act of
2010 (Pub. L. 111-157) was signed into law. Section 4 of Public Law
111-157 extended through May 31, 2010 the zero percent update to the
PFS that was in effect for claims with dates of services from January
1, 2010 through March 31, 2010. The provision was retroactive to April
1, 2010.
In the May 11, 2010 Federal Register (75 FR 26350), we published a
subsequent correction notice to correct several technical and
typographical errors that occurred in the CY 2010 PFS final rule with
comment period and the December 10, 2009 correction notice. The May 11,
2010 correction notice announced a revised CF for CY 2010 of $28.3868.
On June 25, 2010, the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192) was
signed into law. This law required application of a 2.2 percent update
to the PFS for claims with dates of services from June 1, 2010 through
November 30, 2010. As a result of this change, the PFS conversion
factor was revised to $36.8729 for services furnished during this time
period.
On March 23, 2010 the Patient Protection and Affordable Care Act
(Pub. L. 111-148) was signed into law. Shortly thereafter, on March 30,
2010, the Health Care and Education Reconciliation Act of 2010 (Pub. L.
111-152) was signed into law. These two laws are discussed in this
final rule with comment period and are collectively referred to as the
``Affordable Care Act'' (ACA) throughout this final rule with comment
period.

[[Page 73182]]

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

We received approximately 8,500 timely pieces of correspondence
containing multiple comments on the CY 2011 PFS proposed rule. We note
that we received some comments that were outside the scope of the CY
2011 PFS proposed rule, including public comments on new CY 2011 HCPCS
codes that were not presented in the CY 2011 PFS proposed rule and
existing CY 2010 HCPCS codes with final values for which we made no
proposals for CY 2011. These comments are not addressed in this CY 2011
PFS final rule with comment period. New and revised CY 2011 HCPCS codes
and their CY 2011 interim PFS work, malpractice, and PE RVUs are
displayed in Addendum C to this final rule with comment period, and
these values are open to public comment on this final rule with comment
period. Summaries of the public comments that are within the scope of
the proposals and our responses to those comments are set for the in
the various sections of this final rule with comment period under the
appropriate headings.

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

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

1. Overview
Practice expense (PE) is the portion of the resources used in
furnishing the service that reflects the general categories of
physician and practitioner expenses, such as office rent and personnel
wages but excluding malpractice expenses, as specified in section
1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments
of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to
develop a methodology for a resource-based system for determining PE
RVUs for each physician's service. We develop PE RVUs by looking at the
direct and indirect physician practice resources involved in furnishing
each service. Direct expense categories include clinical labor, medical
supplies, and medical equipment. Indirect expenses include
administrative labor, office expense, and all other expenses. The
sections that follow provide more detailed information about the
methodology for translating the resources involved in furnishing each
service into service-specific PE RVUs. In addition, we note that
section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in
RVUs for a year may not cause total PFS payments to differ by more than
$20 million from what they would have been if the adjustments were not
made. Therefore, if revisions to the RVUs cause expenditures to change
by more than $20 million, we make adjustments to ensure that
expenditures do not increase or decrease by more than $20 million. We
refer readers to the CY 2010 PFS final rule with comment period (74 FR
61743 through 61748) for a more detailed history of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
We use a bottom-up approach to determine the direct PE by adding
the costs of the resources (that is, the clinical staff, equipment, and
supplies) typically required to provide each service. The costs of the
resources are calculated using the refined direct PE inputs assigned to
each CPT code in our PE database, which are based on our review of
recommendations received from the American Medical Association's
(AMA's) Relative Value Update Committee (RUC). For a detailed
explanation of the bottom-up direct PE methodology, including examples,
we refer readers to the Five-Year Review of Work Relative Value Units
Under the PFS and Proposed Changes to the Practice Expense Methodology
proposed notice (71 FR 37242) and the CY 2007 PFS final rule with
comment period (71 FR 69629).
b. Indirect Practice Expense per Hour Data
We use survey data on indirect practice expenses incurred per hour
worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior
to CY 2010, we primarily used the practice expense per hour (PE/HR) by
specialty that was obtained from the AMA's Socioeconomic Monitoring
Surveys (SMS). These surveys were conducted from 1995 through 1999. For
several specialties that collected additional PE/HR data through
supplemental surveys, we incorporated these data in developing the PE/
HR values used annually.
While the SMS was not specifically designed for the purpose of
establishing PE RVUs, we found these data to be the best available at
the time. The SMS was a multispecialty survey effort conducted using a
consistent survey instrument and method across specialties. The survey
sample was randomly drawn from the AMA Physician Master file to ensure
national representativeness. The AMA discontinued the SMS survey in
1999.
As required by the Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113), we also established a process by which specialty
groups could submit supplemental PE data. In the May 3, 2000 Federal
Register, we issued the Medicare Program; Criteria for Submitting
Supplemental Practice Expense Survey Data interim final rule (65 FR
25664) in which we established criteria for acceptance of supplemental
data. The criteria were modified in the CY 2001 and CY 2003 PFS final
rules with comment period (65 FR 65380 and 67 FR 79971, respectively).
In addition to the SMS, we previously used supplemental survey data for
the following specialties: Cardiology; dermatology; gastroenterology;
radiology; cardiothoracic surgery; vascular surgery; physical and
occupational therapy; independent laboratories; allergy/immunology;
independent diagnostic testing facilities (IDTFs); radiation oncology;
medical oncology; and urology.
Because the SMS data and the supplemental survey data were from
different time periods, we historically inflated them by the Medicare
Economic Index (MEI) to put them on as comparable a time basis as we
could when calculating the PE RVUs. This MEI proxy was necessary in the
past due to the lack of contemporaneous, consistently collected, and
comprehensive multispecialty survey data.
The AMA administered a new survey in CY 2007 and CY 2008, the
Physician Practice Expense Information Survey (PPIS), which was
expanded (relative to the SMS) to include nonphysician practitioners
(NPPs) paid under the PFS. The PPIS was designed to update the
specialty-specific PE/HR data used to develop PE RVUs. The AMA and the
CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and
calculated the PE/HR for physician and nonphysician specialties,
respectively. The AMA's summary worksheets and Lewin's final report are
available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10.
(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice
Expense non MDDO Final Report)
The PPIS is a multispecialty, nationally representative, PE survey
of both physicians and NPPs using a consistent survey instrument and
methods highly consistent with those used for the SMS and the
supplemental surveys. The PPIS gathered information

[[Page 73183]]

from 3,656 respondents across 51 physician specialty and healthcare
professional groups.
We believe the PPIS is the most comprehensive source of PE survey
information available to date. Therefore, we used the PPIS data to
update the PE/HR data for almost all of the Medicare-recognized
specialties that participated in the survey for the CY 2010 PFS. When
we changed over to the PPIS data beginning in CY 2010, we did not
change the PE RVU methodology itself or the manner in which the PE/HR
data are used in that methodology. We only updated the PE/HR data based
on the new survey. Furthermore, as we explained in the CY 2010 PFS
final rule with comment period (74 FR 61751), because of the magnitude
of payment reductions for some specialties resulting from the use of
the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/
50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the
previous PE RVUs to the PE RVUs developed using the new PPIS data.
Section 303 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section
1848(c)(2)(H)(i) of the Act, which requires us to use the medical
oncology supplemental survey data submitted in 2003 for oncology drug
administration services. Therefore, the PE/HR for medical oncology,
hematology, and hematology/oncology reflects the continued use of these
supplemental survey data.
We do not use the PPIS data for reproductive endocrinology, sleep
medicine, and spine surgery since these specialties are not separately
recognized by Medicare, and we do not know how to blend these data with
Medicare-recognized specialty data.
Supplemental survey data on independent labs, from the College of
American Pathologists, were implemented for payments in CY 2005.
Supplemental survey data from the National Coalition of Quality
Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended
with supplementary survey data from the American College of Radiology
(ACR) and implemented for payments in CY 2007. Neither IDTFs nor
independent labs participated in the PPIS. Therefore, we continue to
use the PE/HR that was developed from their supplemental survey data.
Finally, consistent with our past practice, the previous indirect
PE/HR values from the supplemental surveys for medical oncology,
independent laboratories, and IDTFs were updated to CY 2006 using the
MEI to put them on a comparable basis with the PPIS data. In the CY
2010 PFS final rule with comment period (74 FR 61753), we miscalculated
the indirect PE/HR for IDTFs as part of this update process. Therefore,
for CY 2011, we are using a revised indirect PE/HR of $479.81 for
IDTFs, consistent with our final policy to update the indirect PE/HR
values from prior supplemental survey data that we are continuing to
use in order to put these data on a comparable basis with the PPIS
data. This revision changes the IDTF indirect percentage from 51
percent to 50 percent for CY 2011.
Previously, we had established PE/HR values for various specialties
without SMS or supplemental survey data by crosswalking them to other
similar specialties to estimate a proxy PE/HR. For specialties that
were part of the PPIS for which we previously used a crosswalked PE/HR,
we instead use the PPIS-based PE/HR. We continue previous crosswalks
for specialties that did not participate in the PPIS. However,
beginning in CY 2010 we changed the PE/HR crosswalk for portable x-ray
suppliers from radiology to IDTF, a more appropriate crosswalk because
these specialties are more similar to each other with respect to
physician time.
In the CY 2010 PFS final rule with comment period (74 FR 61752), we
agreed that, under the current PE methodology, the PPIS data for
registered dieticians should not be used in the calculation of PE RVUs
since these dieticians are paid 85 percent of what a physician would be
paid for providing the service. To include their survey data in the PE
calculation would influence the ratesetting by incorporating what the
services would be paid if performed by registered dieticians and not
strictly what the payment rates would be if provided by physicians. We
further stated that we would utilize the ``All Physicians'' PE/HR, as
derived from the PPIS, in the calculation of resource-based PE RVUs in
lieu of the PE/HR associated with registered dieticians. In the
resource-based PE methodology for CY 2010, while we removed the
specialty of registered dieticians from the ratesetting step we did not
assign the ``All Physicians'' PE/HR to services furnished by registered
dieticians. Instead, we allowed the PE/HR for those services to be
generated by a weighted average of all the physician specialties that
also furnished the services. This method was consistent with our policy
to not use the registered dietician PPIS PE/HR in calculating the PE
RVUs for services furnished by registered dieticians but we did not
actually crosswalk the specialty of registered dietician to the ``All
Physicians'' PE/HR data as we had intended according to the final
policy. Nevertheless, we are affirming for CY 2011 that the final
resource-based PE RVUs have been calculated in accordance with the
final policy adopted in the CY 2010 PFS final rule with comment period
(74 FR 61752) for registered dietician services that crosswalks the
specialty to the ``All Physicians'' PE/HR data.
As provided in the CY 2010 PFS final rule with comment period (74
FR 61751), CY 2011 is the second year of the 4-year transition to the
PE RVUs calculated using the PPIS data. Therefore, in general, the CY
2011 PE RVUs are a 50/50 blend of the previous PE RVUs based on the SMS
and supplemental survey data and the new PE RVUS developed using the
PPIS data as described above. Note that the reductions in the PE RVUs
for expensive diagnostic imaging equipment attributable to the change
to an equipment utilization rate assumption of 75 percent (see 74 FR
61753 through 61755 and section II.A.3. of this final rule with comment
period) are not subject to the transition.
CMS' longstanding policy in a PFS transition payment year is that
if the CPT Editorial Panel creates a new code for that year, the new
code would be paid at its fully implemented PFS amount and not at a
transition rate for that year. Consistent with this policy, all new CY
2011 CPT codes will not be paid based on transitional PE RVUs in CY
2011. Instead, we will pay these services based on the fully
implemented PE RVUs in CY 2011. Additionally, existing CPT codes for
which the global period has changed in CY 2011 will not be subject to
the PPIS PE RVU transition. We believe that changing the global period
of a code results in the CPT code describing a different service to
which the previous PE RVUs would no longer be relevant when the code is
reported for a service furnished in CY 2011. The five CY 2011 existing
CPT codes with global period changes from CY 2010 to CY 2011 are: 11043
(Debridement, muscle, and/or fascia (includes epidermis, dermis, and
subcutaneous tissue, if performed); first 20 sq cm or less); 11044
(Debridement, bone (includes epidermis, dermis, subcutaneous tissue,
muscle and/or fascia, if performed); first 20 sq cm or less); 57155
(Insertion of uterine tandems and/or vaginal ovoids for clinical
brachytherapy); 97597 (Debridement (e.g., high pressure waterjet with/
without suction, sharp selective debridement with scissors,

[[Page 73184]]

scalpel and forceps), open wound, (e.g., fibrin, devitalized epidermis
and/or dermis, exudate, debris, biofilm), including topical
application(s), wound assessment, use of a whirlpool, when performed
and instruction(s) for ongoing care, per session, total wound(s)
surface area; first 20 square centimeters or less); and 97598
(Debridement (e.g., high pressure waterjet with/without suction, sharp
selective debridement with scissors, scalpel and forceps), open wound,
(e.g., fibrin, devitalized epidermis and/or dermis, exudate, debris,
biofilm), including topical application(s), wound assessment, use of a
whirlpool, when performed and instructions(s) for ongoing care, per
session, total wound(s) surface area; each additional 20 square
centimeters, or part thereof (List separately in addition to code for
primary procedure)).
c. Allocation of PE to Services
To establish PE RVUs for specific services, it is necessary to
establish the direct and indirect PE associated with each service.
(i) Direct costs. The relative relationship between the direct cost
portions of the PE RVUs for any two services is determined by the
relative relationship between the sum of the direct cost resources
(that is, the clinical staff, equipment, and supplies) typically
required to provide the services. The costs of these resources are
calculated from the refined direct PE inputs in our PE database. For
example, if one service has a direct cost sum of $400 from our PE
database and another service has a direct cost sum of $200, the direct
portion of the PE RVUs of the first service would be twice as much as
the direct portion of the PE RVUs for the second service.
(ii) Indirect costs. Section II.A.2.b. of this final rule with
comment period describes the current data sources for specialty-
specific indirect costs used in our PE calculations. We allocate the
indirect costs to the code level on the basis of the direct costs
specifically associated with a code and the greater of either the
clinical labor costs or the physician work RVUs. We also incorporate
the survey data described earlier in the PE/HR discussion. The general
approach to developing the indirect portion of the PE RVUs is described
below.
For a given service, we use the direct portion of the PE
RVUs calculated as described above and the average percentage that
direct costs represent of total costs (based on survey data) across the
specialties that perform the service to determine an initial indirect
allocator. For example, if the direct portion of the PE RVUs for a
given service were 2.00 and direct costs, on average, represented 25
percent of total costs for the specialties that performed the service,
the initial indirect allocator would be 6.00 since 2.00 is 25 percent
of 8.00.
We then add the greater of the work RVUs or clinical labor
portion of the direct portion of the PE RVUs to this initial indirect
allocator. In our example, if this service had work RVUs of 4.00 and
the clinical labor portion of the direct PE RVUs was 1.50, we would add
6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50
clinical labor portion) to get an indirect allocator of 10.00. In the
absence of any further use of the survey data, the relative
relationship between the indirect cost portions of the PE RVUs for any
two services would be determined by the relative relationship between
these indirect cost allocators. For example, if one service had an
indirect cost allocator of 10.00 and another service had an indirect
cost allocator of 5.00, the indirect portion of the PE RVUs of the
first service would be twice as great as the indirect portion of the PE
RVUs for the second service.
We next incorporate the specialty-specific indirect PE/HR
data into the calculation. As a relatively extreme example for the sake
of simplicity, assume in our example above that, based on the survey
data, the average indirect cost of the specialties performing the first
service with an allocator of 10.00 was half of the average indirect
cost of the specialties performing the second service with an indirect
allocator of 5.00. In this case, the indirect portion of the PE RVUs of
the first service would be equal to that of the second service.
d. Facility and Nonfacility Costs
For procedures that can be furnished in a physician's office, as
well as in a hospital or facility setting, we establish two PE RVUs:
Facility and nonfacility. The methodology for calculating PE RVUs is
the same for both the facility and nonfacility RVUs, but is applied
independently to yield two separate PE RVUs. Because Medicare makes a
separate payment to the facility for its costs of furnishing a service,
the facility PE RVUs are generally lower than the nonfacility PE RVUs.
e. Services With Technical Components (TCs) and Professional Components
(PCs)
Diagnostic services are generally comprised of two components: A
professional component (PC) and a technical component (TC), each of
which may be performed independently or by different providers, or they
may be performed together as a ``global'' service. When services have
PC and TC components that can be billed separately, the payment for the
global component equals the sum of the payment for the TC and PC. This
is a result of using a weighted average of the ratio of indirect to
direct costs across all the specialties that furnish the global
components, TCs, and PCs; that is, we apply the same weighted average
indirect percentage factor to allocate indirect expenses to the global
components, PCs, and TCs for a service. (The direct PE RVUs for the TC
and PC sum to the global under the bottom-up methodology.)
f. Alternative Data Sources and Public Comments on Final Rule for 2010
In the CY 2010 PFS final rule with comment period (74 FR 61749
through 61750), we discussed the Medicare Payment Advisory Commission's
(MedPAC's) comment that in the future, ``CMS should consider
alternatives to collecting specialty-specific cost data or options to
decrease the reliance on such data.'' We agreed with MedPAC that it
would be appropriate to consider the future of the PE RVUs moving
forward. We sought comments from other stakeholders on the issues
raised by MedPAC for the future. In particular, we requested public
comments regarding MedPAC's suggestion that we consider alternatives
for collecting specialty-specific cost data or options to decrease the
reliance on such data. We noted MedPAC's comment that, ``CMS should
consider if Medicare or provider groups should sponsor future data
collection efforts, if participation should be voluntary (such as
surveys) or mandatory (such as cost reports), and whether a nationally
representative sample of practitioners would be sufficient for either a
survey or cost reports.'' MedPAC also stated that one option for
decreasing the reliance on specialty-specific cost data would be the
elimination of the use of indirect PE/HR data in the last step of
establishing the indirect cost portion of the PE RVUs as described
previously.
Almost all of the commenters on the CY 2010 PFS final rule with
comment period that addressed this issue expressed a general
willingness to work with CMS on methodological improvements or future
data collection efforts. Although no commenters detailed a
comprehensive overall alternative methodology, several commenters did
provide suggestions regarding future data collection efforts

[[Page 73185]]

and specific aspects of the current methodology.
The commenters on the CY 2010 PFS final rule with comment period
that addressed the issue of surveys supported the use of surveys if
they yielded accurate PE information. The few commenters that addressed
the issue of cost reports were opposed to physician cost reports. The
commenters varied with respect to their opinions regarding whether data
collection efforts should be led by organized medicine, individual
specialty societies, or CMS. Several commenters that addressed the
issue of voluntary versus mandatory data collection efforts supported
voluntary data collection efforts and opposed mandatory data collection
efforts.
Some commenters recommended no changes to the methodology or PE
data in the near future. Other commenters indicated that the
methodology and data changes needed to be made for CY 2011. Although
most commenters did not directly address the use of the indirect PE/HR
data, those that did predominately opposed the elimination of the use
of these data.
Many commenters addressed specifics of the PE methodology (as
further described in section II.A.2.c. of this final rule with comment
period). Some were opposed to the scaling factor applied in the
development of the direct PE portion of the PE RVUs so that in the
aggregate the direct portion of the PE RVUs do not exceed the
proportion indicated by the survey data (See Step 4 in g.(ii) below).
Several of these commenters advocated the elimination of this direct
scaling factor, while others indicated that the issue should be
examined more closely.
A few commenters recommended that physician work not be used as an
allocator in the development of the indirect portion of the PE RVUs as
described earlier in this section. A few indicated that physician time,
but not physician work, should be used in the allocation. Other
commenters suggested that indirect costs should be allocated solely on
the basis of direct costs.
We note that many of the issues raised by commenters on the CY 2010
PFS final rule with comment period are similar to issues raised in the
development of the original resource-based PE methodology and in
subsequent revisions to the methodology, including the adoption of the
bottom-up methodology. While we did not propose a broad methodological
change or broad data collection effort in the CY 2011 PFS proposed
rule, we invited comments on our summary of the issues raised by the
commenters on the CY 2010 PFS final rule with comment period, as
discussed in the CY 2011 PFS proposed rule (75 FR 40050). The complete
public comments on the CY 2010 PFS final rule with comment period are
available for public review at http://www.regulations.gov by entering
``CMS-1413-FC'' in the search box on the main page.
Comment: A number of commenters believe the PPIS data are flawed
and, therefore, should not be used to set the PE RVUs for all or
certain categories of PFS services. Other commenters supported the
adoption of the PPIS data and, whether ultimately favoring the adoption
of the PPIS data or not, many commenters stated that the 4-year
transition adopted by CMS is important to physicians and Medicare
beneficiaries to ensure access to care. The commenters explained that
the transition gives physician specialty societies the opportunity to
collect new and more detailed data where appropriate for refinement and
CMS the opportunity to more carefully analyze the new data and its
appropriateness. Although once again the commenters did not provide
specific recommendations on alternatives to a comprehensive survey of
practice expenses or options to decrease the PFS reliance on specialty-
specific cost data, the commenters offered the following suggestions
regarding future practice expense data collection.
Select a reputable company with experience in health care
market research.
Base changes on a comprehensive data source with adequate
participation rates.
Have data independently reviewed in order to ensure
accuracy.
Make data publicly available in time to allow for review
and comment by stakeholders.
Several commenters emphasized the administrative complexity and
burden if CMS were to require all physicians to submit cost reports.
One commenter supported a limited study of practice costs estimated by
cost reports to determine if the current PE RVUs were appropriately
paying physicians for the physician's office costs of services. The
commenter believes that cost reports would be more accurate than the
PPIS methodology. Finally, several commenters indicated a willingness
to engage CMS in more detailed discussion about potential refinements
to the current PE/HR data.
Response: We appreciate the commenters' recommendations regarding
factors we should consider in developing future practice expense data
collection efforts in order to improve the accuracy of the information.
While we are continuing the transition that was adopted in the CY 2010
PFS final rule with comment period (74 FR 61751) under the CY 2011 PFS
to full implementation of the PPIS data for the CY 2013 PFS PE RVUs, we
continue to remain interested in the thoughts of stakeholders regarding
the MedPAC comment that ``CMS should consider alternatives to
collecting specialty-specific cost data or options to decrease the
reliance on such data.'' More specifically, we encourage stakeholders
to contact us at any time if they encounter additional information to
share, develop further ideas or analyses that could inform our ongoing
consideration of physicians' practice expenses, or otherwise would like
to discuss this topic further as part of an open dialogue with us.
While to date, no stakeholders have presented a comprehensive overall
alternative methodology, we remain interested in potential novel or
refined approaches. We also continue to welcome more limited
suggestions for improvements to our current PE methodology or future
practice expense information collection activities.
g. PE RVU Methodology
For a more detailed description of the PE RVU methodology, we refer
readers to the CY 2010 PFS final rule with comment period with comment
period (74 FR 61745 through 61746).
(1) Setup File
First, we create a setup file for the PE methodology. The setup
file contains the direct cost inputs, the utilization for each
procedure code at the specialty and facility/nonfacility place of
service level, and the specialty-specific PE/HR data from the surveys.
(2) Calculate the Direct Cost PE RVUs
Sum the costs of each direct input.
Step 1: Sum the direct costs of the inputs for each service. Apply
a scaling adjustment to the direct inputs.
Step 2: Calculate the current aggregate pool of direct PE costs.
This is the product of the current aggregate PE (aggregate direct and
indirect) RVUs, the CF, and the average direct PE percentage from the
survey data.
Step 3: Calculate the aggregate pool of direct costs. This is the
sum of the product of the direct costs for each service from Step 1 and
the utilization data for that service.
Step 4: Using the results of Step 2 and Step 3 calculate a direct
PE scaling adjustment so that the aggregate direct cost pool does not
exceed the current aggregate direct cost pool and apply it

[[Page 73186]]

to the direct costs from Step 1 for each service.
Step 5: Convert the results of Step 4 to an RVU scale for each
service. To do this, divide the results of Step 4 by the CF. Note that
the actual value of the CF used in this calculation does not influence
the final direct cost PE RVUs, as long as the same CF is used in Step 2
and Step 5. Different CFs will result in different direct PE scaling
factors, but this has no effect on the final direct cost PE RVUs since
changes in the CFs and changes in the associated direct scaling factors
offset one another.
(3) Create the Indirect Cost PE RVUs
Create indirect allocators.
Step 6: Based on the survey data, calculate direct and indirect PE
percentages for each physician specialty.
Step 7: Calculate direct and indirect PE percentages at the service
level by taking a weighted average of the results of Step 6 for the
specialties that furnish the service. Note that for services with TCs
and PCs, the direct and indirect percentages for a given service do not
vary by the PC, TC, and global components.
Step 8: Calculate the service level allocators for the indirect PEs
based on the percentages calculated in Step 7. The indirect PEs are
allocated based on the three components: The direct PE RVUs, the
clinical PE RVUs, and the work RVUs.
For most services the indirect allocator is: Indirect percentage *
(direct PE RVUs/direct percentage) + work RVUs.
There are two situations where this formula is modified:
If the service is a global service (that is, a service
with global, professional, and technical components), then the indirect
allocator is: Indirect percentage (direct PE RVUs/direct percentage) +
clinical PE RVUs + work RVUs.
If the clinical labor PE RVUs exceed the work RVUs (and
the service is not a global service), then the indirect allocator is:
Indirect percentage (direct PE RVUs/direct percentage) + clinical PE
RVUs.

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

For presentation purposes in the examples in Table 2, the formulas
were divided into two parts for each service.
The first part does not vary by service and is the
indirect percentage (direct PE RVUs/direct percentage).
The second part is either the work RVUs, clinical PE RVUs,
or both depending on whether the service is a global service and
whether the clinical PE RVUs exceed the work RVUs (as described earlier
in this step).
Apply a scaling adjustment to the indirect allocators.
Step 9: Calculate the current aggregate pool of indirect PE RVUs by
multiplying the current aggregate pool of PE RVUs by the average
indirect PE percentage from the survey data.
Step 10: Calculate an aggregate pool of indirect PE RVUs for all
PFS services by adding the product of the indirect PE allocators for a
service from Step 8 and the utilization data for that service.
Step 11: Using the results of Step 9 and Step 10, calculate an
indirect PE adjustment so that the aggregate indirect allocation does
not exceed the available aggregate indirect PE RVUs and apply it to
indirect allocators calculated in Step 8.
Calculate the indirect practice cost index.
Step 12: Using the results of Step 11, calculate aggregate pools of
specialty-specific adjusted indirect PE allocators for all PFS services
for a specialty by adding the product of the adjusted indirect PE
allocator for each service and the utilization data for that service.
Step 13: Using the specialty-specific indirect PE/HR data,
calculate specialty-specific aggregate pools of indirect PE for all PFS
services for that specialty by adding the product of the indirect PE/HR
for the specialty, the physician time for the service, and the
specialty's utilization for the service across all services performed
by the specialty.
Step 14: Using the results of Step 12 and Step 13, calculate the
specialty-specific indirect PE scaling factors.
Step 15: Using the results of Step 14, calculate an indirect
practice cost index at the specialty level by dividing each specialty-
specific indirect scaling factor by the average indirect scaling factor
for the entire PFS.
Step 16: Calculate the indirect practice cost index at the service
level to ensure the capture of all indirect costs. Calculate a weighted
average of the practice cost index values for the specialties that
furnish the service. (Note: For services with TCs and PCs, we calculate
the indirect practice cost index across the global components, PCs, and
TCs. Under this method, the indirect practice cost index for a given
service (for example, echocardiogram) does not vary by the PC, TC, and
global component.)
Step 17: Apply the service level indirect practice cost index
calculated in Step 16 to the service level adjusted indirect allocators
calculated in Step 11 to get the indirect PE RVUs.
(4) Calculate the Final PE RVUs
Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs
from Step 17 and apply the final PE budget neutrality (BN) adjustment,
MEI rebasing adjustment, and multiple procedure payment reduction
(MPPR) adjustment.
The final PE BN adjustment is calculated by comparing the results
of Step 18 (prior to the MEI rebasing and MPPR adjustments) to the
current pool of PE RVUs. This final BN adjustment is required primarily
because certain specialties are excluded from the PE RVU calculation
for ratesetting purposes, but all specialties are included for purposes
of calculating the final BN adjustment. (See ``Specialties excluded
from ratesetting calculation'' below in this section.)
As discussed in section II.E.5. of this final rule with comment
period, we are rebasing and revising the Medicare Economic Index (MEI)
for CY 2011. As discussed in section II.C.4. of this final rule with
comment period, section 1848(c)(2)(K) of the Act (as added by section
3134 of the ACA) specifies that the Secretary shall identify
potentially misvalued codes by examining multiple codes that are
frequently billed in conjunction with furnishing a single service.
There is inherent duplication in the PE associated with those services
which are frequently furnished together, so reducing PFS payment for
the second and subsequent services to account for the efficiencies in
multiple service sessions may be appropriate. Consistent with this
provision of the ACA, we are adopting a limited expansion of the
current MPPR policy for imaging services for CY 2011 and a new MPPR
policy for therapy services.
(5) Setup File Information
Specialties excluded from ratesetting calculation: For the
purposes of calculating the PE RVUs, we exclude certain specialties,
such as certain nonphysician practitioners paid at a percentage of the
PFS and low-volume specialties, from the calculation. These specialties
are included for the purposes of calculating the BN adjustment. They
are displayed in Table 1.

[[Page 73187]]

Table 1--Specialties Excluded from Ratesetting Calculation
----------------------------------------------------------------------------------------------------------------
Specialty code Specialty description
----------------------------------------------------------------------------------------------------------------
42........................... Certified nurse midwife.
49........................... Ambulatory surgical center.
50........................... Nurse practitioner.
51........................... Medical supply company with certified orthotist.
52........................... Medical supply company with certified prosthetist.
53........................... Medical supply company with certified prosthetist-orthotist.
54........................... Medical supply company not included in 51, 52, or 53.
55........................... Individual certified orthotist.
56........................... Individual certified prosthestist.
57........................... Individual certified prosthetist-orthotist.
58........................... Individuals not included in 55, 56, or 57.
59........................... Ambulance service supplier, e.g., private ambulance companies, funeral homes,
etc.
60........................... Public health or welfare agencies.
61........................... Voluntary health or charitable agencies.
73........................... Mass immunization roster biller.
74........................... Radiation therapy centers.
87........................... All other suppliers (e.g., drug and department stores).
88........................... Unknown supplier/provider specialty.
89........................... Certified clinical nurse specialist.
95........................... Competitive Acquisition Program (CAP) Vendor.
96........................... Optician.
A0........................... Hospital.
A1........................... SNF.
A2........................... Intermediate care nursing facility.
A3........................... Nursing facility, other.
A4........................... HHA.
A5........................... Pharmacy.
A6........................... Medical supply company with respiratory therapist.
A7........................... Department store.
1............................ Supplier of oxygen and/or oxygen related equipment.
2............................ Pedorthic personnel.
3............................ Medical supply company with pedorthic personnel.
----------------------------------------------------------------------------------------------------------------

Crosswalk certain low volume physician specialties:
Crosswalk the utilization of certain specialties with relatively low
PFS utilization to the associated specialties.
Physical therapy utilization: Crosswalk the utilization
associated with all physical therapy services to the specialty of
physical therapy.
Identify professional and technical services not
identified under the usual TC and 26 modifiers: Flag the services that
are PC and TC services, but do not use TC and 26 modifiers (for
example, electrocardiograms). This flag associates the PC and TC with
the associated global code for use in creating the indirect PE RVUs.
For example, the professional service, CPT code 93010
(Electrocardiogram, routine ECG with at least 12 leads; interpretation
and report only), is associated with the global service, CPT code 93000
(Electrocardiogram, routine ECG with at least 12 leads; with
interpretation and report).
Payment modifiers: Payment modifiers are accounted for in
the creation of the file. For example, services billed with the
assistant at surgery modifier are paid 16 percent of the PFS amount for
that service; therefore, the utilization file is modified to only
account for 16 percent of any service that contains the assistant at
surgery modifier.
Work RVUs: The setup file contains the work RVUs from this
final rule with comment period.
(6) Equipment Cost Per Minute
The equipment cost per minute is calculated as:

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

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

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

[[Page 73188]]

TABLE 2--Calculation of PE RVUs Under Methodology for Selected Codes
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
99213 33533 CABG,
Office arterial, 71020 Chest 71020-TC 71020-26 93000 ECG, 93005 ECG, 93010 ECG,
Step Source Formula visit, est single x-ray Chest x-ray Chest x-ray complete tracing report
Nonfacility facility Nonfacility Nonfacility Nonfacility Nonfacility Nonfacility Nonfacility
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (lab).......... Step 1......... AMA................... ............... 13.32 77.52 5.74 5.74 0.00 6.12 6.12 0.00
(2) Supply cost (sup)......... Step 1......... AMA................... ............... 2.98 7.34 3.39 3.39 0.00 1.19 1.19 0.00
(3) Equipment cost (eqp)...... Step 1......... AMA................... ............... 0.19 0.65 8.17 8.17 0.00 0.12 0.12 0.00
(4) Direct cost (dir)......... Step 1......... ...................... =(1) + (2) + 16.50 85.51 17.31 17.31 0.00 7.43 7.43 0.00
(3).
(5) Direct adjustment (dir Steps 2-4...... See footnote*......... ............... 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50
adj).
(6) Adjusted labor............ Steps 2-4...... =Lab * Dir adj........ =(1)*(5)....... 6.68 38.87 2.88 2.88 0.00 3.07 3.07 0.00
(7) Adjusted supplies......... Steps 2-4...... =Sup * Dir adj........ =(2)*(5)....... 1.50 3.68 1.70 1.70 0.00 0.60 0.60 0.00
(8) Adjusted equipment........ Steps 2-4...... =Eqp * Dir adj........ =(3)*(5)....... 0.10 0.33 4.10 4.10 0.00 0.06 0.06 0.00
(9) Adjusted direct........... Steps 2-4...... ...................... =(6) + (7) + 8.27 42.87 8.68 8.68 0.00 3.73 3.73 0.00
(8).
(10) Conversion factor (CF)... Step 5......... PFS................... ............... 36.87 36.87 36.87 36.87 36.87 36.87 36.87 36.87
(11) Adj labor cost converted. Step 5......... =(Lab * Dir adj)/CF... =(6)/(10)...... 0.18 1.05 0.08 0.08 0.00 0.08 0.08 0.00
(12) Adj supply cost converted Step 5......... =(Sup * Dir adj)/CF... =(7)/(10)...... 0.04 0.10 0.05 0.05 0.00 0.02 0.02 0.00
(13) Adj equipment cost Step 5......... =(Eqp * Dir adj)/CF... =(8)/(10)...... 0.00 0.01 0.11 0.11 0.00 0.00 0.00 0.00
converted.
(14) Adj. direct cost Step 5......... ...................... =(11) + (12) + 0.22 1.16 0.24 0.24 0.00 0.10 0.10 0.00
converted. (13).
(15) Work RVUs................ Setup File..... PFS................... ............... 0.97 33.75 0.22 0.00 0.22 0.17 0.00 0.17
(16) Dir pct.................. Steps 6,7...... Surveys............... ............... 0.26 0.18 0.29 0.29 0.29 0.29 0.29 0.29
(17) Ind pct.................. Steps 6,7...... Surveys............... ............... 0.74 0.82 0.71 0.71 0.71 0.71 0.71 0.71
(18) Ind alloc formula (1st Step 8......... See Step 8............ ............... ((14)/ ((14)/ ((14)/ ((14)/ ((14)/ ((14)/ ((14)/ ((14)/
part). (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17) (16))* (17)
(19) Ind alloc (1st part)..... Step 8......... ...................... See (18)....... 0.65 5.29 0.58 0.58 0.00 0.25 0.25 0.00
(20) Ind alloc formulas (2nd Step 8......... See Step 8............ ............... (15) (15) (15) + (11) (11) (15) (15) + (11) (11) (15)
part).
(21) Ind alloc (2nd part)..... Step 8......... ...................... See (20)....... 0.97 33.75 0.30 0.08 0.22 0.25 0.08 0.17
(22) Indirect allocator (1st + Step 8......... ...................... =(19) + (21)... 1.62 39.04 0.88 0.66 0.22 0.50 0.33 0.17
2nd).
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
(23) Indirect adjustment (ind Steps 9-11..... See footnote** 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37
adj).
(24) Adjusted indirect Steps 9-11..... =Ind alloc * ind adj 0.60 14.47 0.33 0.24 0.08 0.19 0.12 0.06
allocator.
(25) Ind. practice cost index Steps 12-16.... See Steps 12-16 1.11 0.83 0.90 0.90 0.90 0.92 0.92 0.92
(IPCI).
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
(26) Adjusted indirect........ Step 17........ = Adj ind alloc * IPCI =(24) * (25)... 0.67 12.04 0.29 0.22 0.07 0.17 0.11 0.06
(27) MEI rebasing adjustment.. Step 18........ PFS................... ............... 1.18 1.18 1.18 1.18 1.18 1.18 1.18 1.18
(28) MPPR adjustments......... Step 18........ PFS................... ............... 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01
(29) PE RVU................... Step 18........ =(Adj dir + Adj ind) * =((14) + (26)) 1.06 15.68 0.63 0.54 0.09 0.32 0.25 0.07
budn * MEI adj * MPPR * budn * (27)
adj. * (28).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note:
PE RVUs in Table 2, row 29, may not match the values in Addendum B due to rounding.
* The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [Step 2]/[Step 3].
** The indirect adj = [current pe rvus * avg ind pct]/[sum of ind allocators] = [Step 9]/[Step 10].

[[Page 73189]]

3. PE Revisions for CY 2011
a. Equipment Utilization Rate
As part of the PE methodology associated with the allocation of
equipment costs for calculating PE RVUs, we currently use an equipment
utilization rate assumption of 50 percent for most equipment, with the
exception of expensive diagnostic imaging equipment (which is equipment
priced at over $1 million, for example, computed tomography (CT) and
magnetic resonance imaging (MRI) scanners), for which we adopted a 90
percent utilization rate assumption and provided for a 4-year
transition beginning in CY 2010 (74 FR 61755). Therefore, CY 2010 is
the first transitional payment year. Payment is made in CY 2010 for the
diagnostic services listed in Table 3 (those that include expensive
diagnostic imaging equipment in their PE inputs) of the CY 2011 PFS
proposed rule (75 FR 40054) based on 25 percent of the new PE RVUs and
75 percent of the prior PE RVUs for those services.
Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of
the ACA) requires that with respect to fee schedules established for CY
2011 and subsequent years, in the methodology for determining PE RVUs
for expensive diagnostic imaging equipment under the CY 2010 PFS final
rule with comment period, the Secretary shall use a 75 percent
assumption instead of the utilization rates otherwise established in
that rule. The provision also requires that the reduced expenditures
attributable to this change in the utilization rate for CY 2011 and
subsequent years shall not be taken into account when applying the
budget neutrality limitation on annual adjustments described in section
1848(c)(2)(B)(ii)(II) of the Act.
As a result, the 75 percent equipment utilization rate assumption
will be applied to expensive diagnostic imaging equipment in a non-
budget neutral manner for CY 2011, and the resulting changes to PE RVUs
will not be transitioned over a period of years. We will apply the 75
percent utilization rate assumption in CY 2011 to all of the services
to which we currently apply the transitional 90 percent equipment
utilization rate assumption in CY 2010. These services are listed in a
file on the CMS Web site that is posted under downloads for the CY 2010
PFS final rule with comment period at http://www.cms.gov/physicianfeesched/downloads/CODES_SUBJECT_TO_90PCT_USAGE_RATE.zip.
These codes are also displayed in Table 3 at the end of this section.
Comment: Several commenters argued that the 75 percent utilization
rate assumption should not be applied because of the imprecise data on
which the policy was based. The commenters explained that based on an
independent survey, actual equipment utilization rates are close to 50
percent. In addition, the commenters postulated that rural imaging
centers would be adversely affected by the change due to lower
equipment utilization rates than non-rural centers. The commenters
requested that CMS base equipment utilization rate assumptions on
actual utilization data rather than assumptions.
Several other commenters supported the implementation of the 75
percent utilization rate assumption, and MedPAC recommended that CMS
explore increasing the equipment utilization rate assumption for
diagnostic imaging equipment that costs less than $1 million. Finally,
several commenters clarified that certain procedures were not subject
to the provision, including nuclear cardiology services and therapeutic
interventional radiology.
Response: Section 1848(b)(4)(C) of the Act (as added by section
3135(a) of the ACA) requires that with respect to fee schedules
established for CY 2011 and subsequent years, in the methodology for
determining PE RVUs for expensive diagnostic imaging equipment under
the CY 2010 PFS final rule with comment period, the Secretary shall use
a 75 percent assumption instead of the utilization rates otherwise
established in that rule. We acknowledge that further data regarding
actual equipment utilization in the physician's office setting may be
informative, but our use of such data to set the equipment utilization
rate assumption for expensive diagnostic imaging equipment at a value
other than 75 percent would require a statutory change.
We did not propose to expand the 75 percent equipment utilization
rate assumption for CY 2011 to other procedures beyond those that use
CT and MRI scanners as listed in Table 4 of the CY 2011 PFS proposed
rule (75 FR 40055) and Table 3 at the end of this section. Any future
changes in equipment utilization rate assumptions, including any
expansion of the 75 percent equipment utilization rate assumption to
additional expensive diagnostic imaging equipment, would be made
through the annual PFS notice and comment rulemaking cycle.
Furthermore, any changes in equipment utilization rate assumptions for
less costly diagnostic imaging equipment (less than $1 million) or for
therapeutic imaging or other equipment would not be subject to the
statutory provision that specifies a 75 percent assumption. We note
that we are constantly reassessing our methodology for developing the
PE RVUs and would propose any changes to the equipment utilization rate
assumptions for these types of equipment through the annual PFS
rulemaking cycle if we determine such changes could be appropriate.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal without modification. The 75 percent
equipment utilization rate assumption will be applied to expensive
diagnostic imaging equipment in a non-budget neutral manner for CY
2011, and the changes to the PE RVUs will not be transitioned over a
period of years. We will apply the 75 percent utilization rate
assumption in CY 2011 to all of the services to which we currently
apply the transitional 90 percent utilization rate assumption in CY
2010. The CY 2011 codes are displayed in Table 3 at the end of this
section that lists all the codes to which the 75 percent equipment
utilization rate assumption applies for CY 2011. In addition, the codes
subject to this policy are posted under the downloads for the CY 2011
PFS final rule with comment period on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
Additionally, for CY 2011, we proposed to expand the list of
services to which the higher equipment utilization rate assumption
applies to include all other diagnostic imaging services that utilize
similar expensive CT and MRI scanners. The additional 24 CPT codes
(listed in Table 4 of the CY 2011 PFS proposed rule (75 FR 40055)) to
which we proposed to apply the 75 percent equipment utilization rate
assumption also have expensive diagnostic imaging equipment (priced at
over $1 million) included in their PE inputs. These services are
predominantly diagnostic computed tomographic angiography (CTA) and
magnetic resonance angiography (MRA) procedures that include similar
expensive CT and MRI scanners in their direct PE inputs. We indicated
in the CY 2010 PFS final rule with comment period (74 FR 61754) that we
were persuaded by PPIS data on angiography that the extrapolation of
MRI and CT data (and their higher equipment utilization rate) may be
inappropriate. However, this reference was limited to those procedures
that include an angiography room in the direct PE inputs, such as CPT
code 93510 (Left heart catheterization, retrograde, from

[[Page 73190]]

the brachial artery, axillary artery or femoral artery; percutaneous).
In contrast, CTA and MRA procedures include a CT room or MRI room,
respectively, in the direct PE inputs, and the PPIS data confirm that a
higher assumed utilization rate than 50 percent would be appropriate.
The PPIS angiography room data that reflected a 56 percent equipment
utilization rate would not specifically apply to CTA and MRA
procedures. Thus, on further review, we believe it is appropriate to
include CTA and MRA procedures in the list of procedures for which we
assume a 75 percent equipment utilization rate, and we proposed to do
so beginning in CY 2011.
Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as
amended by section 3135 of the ACA), the reduced expenditures
attributable to this change in the utilization rate assumption
applicable to CY 2011 shall not be taken into account when applying the
budget neutrality limitation on annual adjustments described in section
1848(c)(2)(B)(ii)(II) of the Act.
As provided in the CY 2010 PFS final rule with comment period (74
FR 61751), CY 2011 is the second year of the 4-year transition to the
PE RVUs calculated using the PPIS data. We note that the reductions in
the PE RVUs for expensive diagnostic imaging equipment attributable to
the change to an equipment utilization rate assumption of 75 percent
for CY 2011 are not subject to the transition.
Comment: Several commenters urged CMS not to finalize the proposed
expansion of the list of procedures to which the 75 percent equipment
utilization rate assumption would apply, pending further evaluation of
equipment utilization data. While noting the statutory requirement of
section 1848(b)(4)(C) of the Act (as added by section 3135(a) of the
ACA), the commenters believe that CMS is not required to add additional
services to the policy for CY 2011. Other commenters, including MedPAC,
supported the proposed increase in the equipment utilization rate
assumption from 50 percent to 75 percent for the 24 additional services
that use diagnostic imaging equipment priced at over $1 million.
Response: No commenters presented a rationale for not including the
proposed 24 additional services to the 75 percent equipment utilization
rate assumption, when the proposed additions use the same diagnostic CT
or MRI imaging equipment as the current codes to which the policy
applies. We note that the 90 percent equipment utilization rate
assumption that we finalized in the CY 2010 PFS final rule with comment
period (74 FR 61755) applies to CT and MRI scanners when used as
diagnostic imaging equipment, one of these two pieces of equipment is
listed as a direct PE input for the proposed MRA and CTA services, and
no commenters recommended that we remove the CT or MRI equipment inputs
from the additional codes. Therefore, we continue to believe that it is
appropriate to apply the 75 percent equipment utilization rate
assumption beginning in CY 2011 to MRA and CTA procedures, as we
proposed.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to include CTA and MRA procedures in
the 75 percent equipment utilization rate assumption policy because
they include expensive CT and MRI scanners that cost more than $1
million as direct PE inputs for these diagnostic imaging procedures. We
are modifying our proposal, however, and will not include CPT code
77079 (Computed tomography, bone mineral density study, 1 or more
sites; appendicular skeleton (peripheral) (e.g., radius, wrist, heel))
because, upon further analysis for this final rule with comment period,
we noted that the procedure does not include a CT room in its direct PE
inputs.
For CY 2011, we are also adding to the 75 percent equipment
utilization rate assumption policy three new CY 2011 CPT codes for
diagnostic imaging procedures that include a CT room in their direct PE
inputs, specifically CPT codes 74176 (Computed tomography, abdomen and
pelvis; without contrast material); 74177 (Computed tomography, abdomen
and pelvis; with contrast material); and 74178 (Computed tomography,
abdomen and pelvis; without contrast material in one or both body
regions, followed by with contrast material(s) and further sections in
one or both body regions). As new codes for CY 2011, the work, PE, and
malpractice RVUs for these CPT codes that are displayed in Addendum C
to this final rule with comment period are interim final values that
are open to comment. Similarly, the assignment of the 75 percent
equipment utilization rate assumption to these CPT codes, which
contributes to the development of their PE RVUs, is being made on an
interim final basis. We refer readers to section V.C. of this final
rule with comment period for further discussion of the establishment of
interim final RVUs for CY 2011 new and revised codes.
As a result of the CY 2011 changes, the 75 percent equipment
utilization rate assumption will be applied to all diagnostic imaging
procedures with nationally established rates under the PFS in CY 2011
and which include a CT or MRI scanner in their direct PE, consistent
with the statutory requirement of section 1848(b)(4)(C) of the Act (as
added by section 3135(a) of the ACA).
Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as
amended by section 3135 of the ACA), the reduced expenditures
attributable to the change in the utilization rate assumption
applicable to CY 2011 (from the CY 2011 transitional rate for the 90
percent equipment utilization rate assumption for expensive diagnostic
imaging equipment costing over $1 million (CT and MRI scanners) that
would have applied under the final policy established in the CY 2010
PFS final rule with comment period to the 75 percent rate required
under section 1848(b)(4)(C) of the Act) shall not be taken into account
when applying the budget neutrality limitation on annual adjustments
described in section 1848(c)(2)(B)(ii)(II) of the Act.
Table 3 below lists the codes to which the 75 percent equipment
utilization rate assumption applies for CY 2011. The codes subject to
this policy are also posted under the downloads for the CY 2011 PFS
final rule with comment period on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.

Table 3--Final CPT Codes Subject to 75 Percent Equipment Utilization Rate Assumption in CY 2011
----------------------------------------------------------------------------------------------------------------
CPT code Short descriptor
----------------------------------------------------------------------------------------------------------------
70336........................................... Mri, temporomandibular joint(s).
70450........................................... Ct head/brain w/o dye.
70460........................................... Ct head/brain w/dye.
70470........................................... Ct head/brain w/o & w/dye.
70480........................................... Ct orbit/ear/fossa w/o dye.

[[Page 73191]]

70481........................................... Ct orbit/ear/fossa w/dye.
70482........................................... Ct orbit/ear/fossa w/o & w/dye.
70486........................................... Ct maxillofacial w/o dye.
70487........................................... Ct maxillofacial w/dye.
70488........................................... Ct maxillofacial w/o & w/dye.
70490........................................... Ct soft tissue neck w/o dye.
70491........................................... Ct soft tissue neck w/dye.
70492........................................... Ct soft tissue neck w/o & w/dye.
70496........................................... Ct angiography, head.
70498........................................... Ct angiography, neck.
70540........................................... Mri orbit/face/neck w/o dye.
70542........................................... Mri orbit/face/neck w/dye.
70543........................................... Mri orbit/face/neck w/o & w/dye.
70544........................................... Mri angiography head w/o dye.
70545........................................... Mri angiography head w/dye.
70546........................................... Mri angiography head w/o & w/dye.
70547........................................... Mri angiography neck w/o dye.
70548........................................... Mri angiography neck w/dye.
70549........................................... Mri angiography neck w/o & w/dye.
70551........................................... Mri brain w/o dye.
70552........................................... Mri brain w/dye.
70553........................................... Mri brain w/o & w/dye.
70554........................................... Fmri brain by tech.
71250........................................... Ct thorax w/o dye.
71260........................................... Ct thorax w/dye.
71270........................................... Ct thorax w/o & w/dye.
71275........................................... Ct angiography, chest.
71550........................................... Mri chest w/o dye.
71551........................................... Mri chest w/dye.
71552........................................... Mri chest w/o & w/dye.
71555........................................... Mri angio chest w/or w/o dye.
72125........................................... CT neck spine w/o dye.
72126........................................... Ct neck spine w/dye.
72127........................................... Ct neck spine w/o & w/dye.
72128........................................... Ct chest spine w/o dye.
72129........................................... Ct chest spine w/dye.
72130........................................... Ct chest spine w/o & w/dye.
72131........................................... Ct lumbar spine w/o dye.
72132........................................... Ct lumbar spine w/dye.
72133........................................... Ct lumbar spine w/o & w/dye.
72141........................................... Mri neck spine w/o dye.
72142........................................... Mri neck spine w/dye.
72146........................................... Mri chest spine w/o dye.
72147........................................... Mri chest spine w/dye.
72148........................................... Mri lumbar spine w/o dye.
72149........................................... Mri lumbar spine w/dye.
72156........................................... Mri neck spine w/o & w/dye.
72157........................................... Mri chest spine w/o & w/dye.
72158........................................... Mri lumbar spine w/o & w/dye.
72159........................................... Mri angio spine w/o & w/dye.
72191........................................... Ct angiography, pelv w/o & w/dye.
72192........................................... Ct pelvis w/o dye.
72193........................................... Ct pelvis w/dye.
72194........................................... Ct pelvis w/o & w/dye.
72195........................................... Mri pelvis w/o dye.
72196........................................... Mri pelvis w/dye.
72197........................................... Mri pelvis w/o &w/dye.
72198........................................... Mri angio pelvis w/or w/o dye.
73200........................................... Ct upper extremity w/o dye.
73201........................................... Ct upper extremity w/dye.
73202........................................... Ct upper extremity w/o & w/dye.
73206........................................... Ct angio upper extr w/o & w/dye.
73218........................................... Mri upper extr w/o dye.
73219........................................... Mri upper extr w/dye.
73220........................................... Mri upper extremity w/o & w/dye.
73221........................................... Mri joint upper extr w/o dye.
73222........................................... Mri joint upper extr w/dye.
73223........................................... Mri joint upper extr w/o & w/dye.
73225........................................... Mri angio upr extr w/o & w/dye.
73700........................................... Ct lower extremity w/o dye.
73701........................................... Ct lower extremity w/dye.

[[Page 73192]]

73702........................................... Ct lower extremity w/o & w/dye.
73706........................................... Ct angio lower extr w/o & w/dye.
73718........................................... Mri lower extremity w/o dye.
73719........................................... Mri lower extremity w/dye.
73720........................................... Mri lower extr w/& w/o dye.
73721........................................... Mri joint of lwr extre w/o dye.
73722........................................... Mri joint of lwr extr w/dye.
73723........................................... Mri joint of lwr extr w/o & w/dye.
73725........................................... Mri angio lower extr w or w/o dye.
74150........................................... Ct abdomen w/o dye.
74160........................................... Ct abdomen w/dye.
74170........................................... Ct abdomen w/o & w/dye.
74175........................................... Ct angio abdom w/o & w/dye.
74176........................................... Ct abd & pelvis w/o contrast.
74177........................................... Ct abdomen & pelvis w/contrast.
74178........................................... Ct abd & pelv 1+ section/regns.
74181........................................... Mri abdomen w/o dye.
74182........................................... Mri abdomen w/dye.
74183........................................... Mri abdomen w/o and w/dye.
74185........................................... Mri angio, abdom w/or w/o dye.
74261........................................... Ct colonography, w/o dye.
74262........................................... Ct colonography, w/dye.
75557........................................... Cardiac mri for morph.
75559........................................... Cardiac mri w/stress img.
75561........................................... Cardiac mri for morph w/dye.
75563........................................... Cardiac mri w/stress img & dye.
75565........................................... Card mri vel flw map add-on.
75571........................................... Ct hrt w/o dye w/ca test.
75572........................................... Ct hrt w/3d image.
75573........................................... Ct hrt w/3d image, congen.
75574........................................... Ct angio hrt w/3d image.
75635........................................... Ct angio abdominal arteries.
76380........................................... CAT scan follow up study.
77058........................................... Mri, one breast.
77059........................................... Mri, both breasts.
77078........................................... Ct bone density, axial.
77084........................................... Magnetic image, bone marrow.
----------------------------------------------------------------------------------------------------------------

b. HCPCS Code-Specific PE Issues
In this section, we discuss other specific CY 2011 proposals and
changes related to direct PE inputs. The changes that follow were
proposed in the CY 2011 PFS proposed rule and included in the proposed
CY 2011 direct PE database, which is available on the CMS Web site
under the downloads for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. The final direct PE database for CY
2011 is available under the downloads for the CY 2011 PFS final rule
with comment period at the same location.
(1) Biohazard Bags
We identified 22 codes for which the supply item ``biohazard bag''
(SM004) is currently considered a direct PE input. The item is already
properly accounted for in the indirect PE because it is not
attributable to an individual patient service. Therefore, we proposed
to remove the biohazard bag from the CY 2011 direct PE database and
noted that the changes in direct PE inputs for the associated services
were reflected in the proposed CY 2011 direct PE database.
We did not receive any public comments on our proposal to remove
biohazard bags as a supply input. Therefore, we are finalizing our CY
2011 proposal to remove the supply item as a direct PE input for the
associated services. This change is reflected in the final CY 2011
direct PE database.
(2) PE Inputs for Professional Component (PC) Only and Technical
Component (TC) Only Codes Summing to Global Only Codes
In the case of certain diagnostic tests, different but related CPT
codes are used to describe global, professional, and technical
components of a service. These codes are unlike the majority of other
diagnostic test CPT codes where modifiers may be used in billing a
single CPT code in order to differentiate professional and technical
components. When different but related CPT codes are used to report the
components of these services, the different CPT codes are referred to
as ``global only,'' ``professional component (PC) only,'' and
``technical component (TC) only'' codes. Medicare payment systems are
programmed to ensure that the PE RVUs for global only codes equal the
sum of the PE RVUs for the PC and TC only codes. However, it came to
our attention that the direct PE inputs for certain global only codes
do not reflect the appropriate summation of their related TC only and
PC only component code PE inputs as they appear in the direct PE
database. While the PFS payment calculations have been programmed to
apply the correct PE RVUs for the global only code based on a summation
of component code PE RVUs, the direct PE database has reflected
incorrect inputs that are overridden by the payment system. Therefore,
we proposed to correct the direct PE inputs for the global only codes
so that the inputs reflect the appropriate summing of the PE inputs for
the associated PC only and TC only codes. The proposed CY 2011 direct
PE database included PE

[[Page 73193]]

corrections to the 14 CPT codes listed in Table 4.

Table 4--Groups of Related CPT Codes with Proposed Changes to PE Inputs so that Inputs for Professional
Component (PC) Only and Technical Component (TC) Only Codes Sum to Global Only Codes
----------------------------------------------------------------------------------------------------------------
CPT Code Long descriptor
----------------------------------------------------------------------------------------------------------------
93224.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by
continuous original waveform recording and storage, with visual
superimposition scanning; includes recording, scanning analysis with
report, physician review and interpretation.
93225.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by
continuous original waveform recording and storage, with visual
superimposition scanning; recording (includes connection, recording,
disconnection).
93226.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by
continuous original waveform recording and storage, with visual
superimposition scanning; scanning analysis with report.
93230.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by
continuous original waveform recording and storage without
superimposition scanning utilizing a device capable of producing a
full miniaturized printout; including recording, microprocessor-based
analysis with report, physician review and interpretation.
93231.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by
continuous original waveform recording and storage without
superimposition scanning utilizing a device capable of producing a
full miniaturized printout; recording (includes connection, recording,
and disconnection).
93232.................................. Wearable electrocardiographic rhythm derived monitoring for 24 hours by
continuous original waveform recording and storage without
superimposition scanning utilizing a device capable of producing a
full miniaturized printout; microprocessor-based analysis with report.
93268.................................. Wearable patient activated electrocardiographic rhythm derived event
recording with presymptom memory loop, 24-hour attended monitoring,
per 30 day period of time; includes transmission, physician review and
interpretation.
93270.................................. Wearable patient activated electrocardiographic rhythm derived event
recording with presymptom memory loop, 24-hour attended monitoring,
per 30 day period of time; recording (includes connection, recording,
and disconnection).
93271.................................. Wearable patient activated electrocardiographic rhythm derived event
recording with presymptom memory loop, 24-hour attended monitoring,
per 30 day period of time; monitoring, receipt of transmissions, and
analysis.
93720.................................. Plethysmography, total body; with interpretation and report.
93721.................................. Plethysmography, total body; tracing only, without interpretation and
report.
93784.................................. Ambulatory blood pressure monitoring, utilizing a system such as
magnetic tape and/or computer disk, for 24 hours or longer; including
recording, scanning analysis, interpretation and report.
93786.................................. Ambulatory blood pressure monitoring, utilizing a system such as
magnetic tape and/or computer disk, for 24 hours or longer; recording
only.
93788.................................. Ambulatory blood pressure monitoring, utilizing a system such as
magnetic tape and/or computer disk, for 24 hours or longer; scanning
analysis with report.
----------------------------------------------------------------------------------------------------------------

Comment: A number of commenters expressed support for CMS' proposal
to ensure that the direct PE inputs for certain global only codes
reflect the appropriate summation of their related TC only and PC only
component code PE inputs as they appear in the direct PE database. One
commenter questioned why the prior clinical labor time for the global
only codes in the PE database did not match the direct PE inputs that
must have been used in CY 2010 to generate the PE RVUs, given that the
PE RVUs for the global only codes were the sum of the PE RVUs for the
component codes.
Response: We appreciate the commenters' support for the proposal,
and we are finalizing our correction of the direct PE inputs for the
global only codes so that the inputs reflect the appropriate summing of
the PE inputs for the associated PC only and TC only codes. In response
to the commenter who questioned why prior clinical labor time for the
global only codes in the PE database did not match the direct PE inputs
that must have been used to generate the PE RVUs for payment, we note
that Medicare payment systems are programmed to ensure that the PE RVUs
for global only codes equal the sum of the PE RVUs for the PC and TC
only codes. Therefore, rather than relying upon the direct PE inputs
for the global only codes to determine the PE RVUs, which would have
not resulted in values that equaled the summation of the component code
PE RUVs, our PFS system was programmed so that the PE RVUs for the
global only codes were set as the sum of the PE RVUS for the component
codes. We expect the corrections to the inputs as incorporated in the
direct PE database to alleviate any confusion caused by the prior
inclusion of inputs associated with the global only codes that were not
actually used to generate the PE RVUs.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to correct the direct PE inputs for the
global only codes so that the inputs reflect the appropriate summing of
the PE inputs for the associated PC only and TC only codes. The final
CY 2011 direct PE database includes PE corrections to the 14 CPT codes
listed in Table 4.
(3) Equipment Time Inputs for Certain Diagnostic Tests
In the CY 2011 PFS proposed rule (75 FR 40056), we stated that we
had recently identified equipment time PE inputs that we believed were
incorrect for four CPT codes associated with certain diagnostic tests
(each is displayed in Table 4):
CPT code 93225 is the TC only code that includes the
connection, recording, and disconnection of the holter monitor (CMS
Equipment Code EQ127) used in 24-hour continuous electrocardiographic
rhythm derived monitoring. The CY 2010 equipment time input for the
holter monitor is 42 minutes, which parallels the intra-service
clinical labor input time for the CPT code. However, we believed that
the equipment time should reflect the 24 hours of continuous monitoring
in which the device is used exclusively by the patient. Therefore, we
proposed to change the monitor equipment time for CPT code 93225 to
1440 minutes, the number of minutes in 24 hours.
CPT code 93226 is the TC only code that includes the
scanning analysis with report. We believed that the number of minutes
the monitor (CMS Equipment

[[Page 73194]]

Code EQ127) is used in this service should parallel the intra-service
clinical labor input time of 52 minutes during which the monitor is in
use, instead of the CY 2010 equipment time of 1440 minutes, because
this code does not represent 24 hours of device use. Therefore, we
proposed to change the monitor equipment time for CPT code 93226 to 52
minutes.
CPT 93224 is the global only code that includes the
connection, recording, and disconnection of the monitor (CMS Equipment
Code EQ127) and the scanning analysis with report, as well as the
physician review and interpretation. We proposed direct PE inputs for
CPT code 93224 to include 1492 total minutes of monitor time (which
represents the total monitor time we proposed for CPT codes 93225 and
93226).
CPT code 93788 is the TC only code that describes the
scanning analysis with report for ambulatory blood pressure monitoring.
We believed that the equipment time input for the blood pressure
monitor should parallel the 10 minutes of clinical labor input for the
CPT code since that is the time during which the monitor is in use. In
CY 2010, the equipment time input for the monitor is 1440 minutes,
which is appropriate only for CPT code 93786, the code that describes
the 24 hours of ambulatory blood pressure monitoring recording.
Therefore, we proposed to correct the equipment time input for the
ambulatory blood pressure monitor in CPT code 93788 to 10 minutes.
CPT code 93784 is the global only code that includes the
recording, the scanning analysis with report, and the physician
interpretation and report for ambulatory blood pressure monitoring. We
proposed to establish the direct PE inputs for CPT code 93784 to
include 1450 total minutes of time for the ambulatory blood pressure
monitor (which represents the proposed total amount of monitor time
included in CPT codes 93786 and 93788).
The proposed CY 2011 direct PE database reflected these changes.
Comment: Several commenters pointed out that the prior assignment
of the 1440 minutes of holter monitor equipment time to CPT code 93226
stemmed from discussions between CMS and provider groups that resulted
in PE policies initially implemented in CY 2007 (72 FR 18910). The
commenters recommended that CMS retain the 1440 minutes of holter
monitor equipment for CPT code 93326, consistent with current policy,
rather than reassign the 1440 minutes of holter monitor equipment time
as proposed to CPT code 93226.
Response: We agree with the commenters that it would be most
appropriate to maintain our established policy for the equipment times
associated with CPT codes 93225 and 93226, based upon further
description of the direct practice expenses experienced by the current
providers that typically furnish these services to Medicare
beneficiaries. Therefore, we are not adopting the equipment time
changes that we proposed for CPT codes 93225 and 93226. However, we are
revising the direct PE inputs for CPT code 93224, a global only code,
to include the total equipment time for the holter monitor that is
incorporated in component codes CPT codes 93225 and 93226, as discussed
in section II.A.3.b.(2). of this final rule with comment period. The PE
inputs for CPT code 93224 did not previously correctly reflect the
summation of the direct PE inputs for the component codes.
Comment: One commenter supported the proposed changes to the direct
PE inputs for CPT codes 93784 through 93788. However, the commenter was
confused about why 1440 minutes of equipment time were assigned to CPT
code 93786, which the commenter stated is used only for the technical
component of scanning the data rather than recording the data.
Response: As we stated in our proposal, we believe that the direct
PE inputs for CPT code 93786 are currently correct because the code
describes the recording of the data. We believe that the commenter may
have inadvertently referred to CPT code 93786 instead of CPT code
93788, which is the technical component code that describes the
scanning rather than the recording of the data. We proposed to remove
the 1440 minutes associated with the scanning analysis from the inputs
for CPT code 93788, not CPT code 93786.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals to change the ambulatory blood
pressure monitor equipment times included as direct PE inputs for CPT
codes 938784 and 93788, while maintaining the current equipment time
direct PE input for CPT code 93786. However, we are not finalizing our
proposals to change the holter monitor equipment times included as
direct PE inputs for CPT codes 93225 and 93226, but instead will
maintain the inputs for CPT codes 93225 and 93226 as they were for CY
2010. We are also revising the direct PE inputs for CPT code 93224 to
include the total equipment time for the holter monitor that is
incorporated in CPT codes 93225 and 93226. The equipment times in the
final CY 2011 direct PE database reflect these decisions.
(4) Cobalt-57 Flood Source
Stakeholders requested that CMS reevaluate the useful life of the
Cobalt-57 flood source (CMS Equipment Code ER001), given their estimate
of approximately 271 days for the source's half-life. The CY 2010
useful life input in the CY 2010 direct PE database for the Cobalt-57
flood source is 5 years. Using publicly available catalogs, we found
that the Cobalt-57 flood source is marketed with a useful life of 2
years. Therefore, we proposed to change the useful life input from the
current 5 years to 2 years. The Cobalt-57 flood source was included
with the revised useful life input for 96 HCPCS codes in the proposed
CY 2011 direct PE database.
Comment: One commenter supported the proposal to change the useful
life input from 5 years to 2 years for the Cobalt-57 flood source.
Response: We appreciate the commenter's support for our proposal.
After consideration of the public comment we received, we are
finalizing our CY 2011 proposal to change the useful life input in the
direct PE database for the Cobalt-57 flood source from 5 years to 2
years. This change is included in the final CY 2011 direct PE database.
(5) Venom Immunotherapy
One stakeholder provided updated price information for the venoms
used for the five venom immunology CPT codes, specifically 95145
(Professional services for the supervision of preparation and provision
of antigens for allergen immunotherapy (specify number of doses);
single stinging insect venom); 95146 (Professional services for the
supervision of preparation and provision of antigens for allergen
immunotherapy (specify number of doses); 2 single stinging insect
venoms); 95147 (Professional services for the supervision of
preparation and provision of antigens for allergen immunotherapy
(specify number of doses); 3 single stinging insect venoms); 95148
(Professional services for the supervision of preparation and provision
of antigens for allergen immunotherapy (specify number of doses); 4
single stinging insect venoms); 95149 (Professional services for the
supervision of preparation and provision of antigens for allergen
immunotherapy (specify number of doses); 5 single stinging insect
venoms).
In the CY 2004 PFS final rule with comment period (68 FR 63206), we
adopted a pricing methodology that utilizes the average price of a 1
milliliter

[[Page 73195]]

dose of venom and adds that price per dose as direct PE inputs for CPT
codes 95145 and 95146. When a patient requires three stinging insect
venoms, as for CPT code 95147, the price input for a 3-vespid mix is
used. This 3-vespid mix price is also used to value CPT codes 95148
(four venoms) and 96149 (five venoms), with the single venom price
added once to CPT code 97148 and twice to CPT code 97149.
As requested by the stakeholder, we updated the price inputs for
the 1-milliliter dose of venom to $16.67 and for the 3-vespid mix to
$30.22 in the proposed CY 2011 direct PE database.
Comment: One commenter supported the proposal to update the price
inputs for the venoms used for venom immunotherapy.
Response: We appreciate the information provided by stakeholders
regarding the price inputs for venom immunotherapy supplies, consistent
with our interest in utilizing accurate market prices as the direct PE
inputs for these items.
After consideration of the public comment we received, we are
finalizing our CY 2011 proposals to update the price inputs for the 1-
milliliter dose of venom to $16.67 and for the 3-vespid mix to $30.22
in the CY 2011 direct PE database. These changes are included in the
final CY 2011 direct PE database.
(6) Equipment Redundancy
Stakeholders recently brought to our attention that the ECG, 3-
channel (with SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011)
incorporates all of the functionality of the pulse oximeter with
printer (CMS Equipment Code EQ211). Therefore, in HCPCS codes where CMS
Equipment Code EQ011 is present, CMS Equipment Code EQ211 is redundant.
On this basis, we proposed to remove the pulse oximeter with printer
(CMS Equipment Code EQ211) as an input for the 118 codes that also
contain the ECG, 3-channel (with SpO2, NIBP, temp, resp) (CMS Equipment
Code EQ011). We made these adjustments in the proposed CY 2011 direct
PE database.
We received no public comments regarding this proposal to address
the pulse oximeter equipment redundancy. Therefore we are finalizing
our CY 2011 proposal without modification. We have made these
adjustments in the final CY 2011 direct PE database.
(7) Equipment Duplication
We recently identified a number of CPT codes with duplicate
equipment inputs in the PE database. We proposed to remove the
duplicate equipment items and modified the proposed CY 2011 direct PE
database accordingly as detailed in Table 5.

TABLE 5--CPT Codes With Proposed Removal of Duplicate Equipment Items in the Direct PE Database
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS equipment code
CPT Code for duplicate Description of equipment
equipment
--------------------------------------------------------------------------------------------------------------------------------------------------------
19302.............................. P-mastectomy w/1n removal. EF014 light, surgical.
ED005 camera, digital system, 12 megapixel (medical grade).
19361.............................. Breast reconstr w/lat flap EF031 table, power.
EQ168 light, exam.
44157.............................. Colectomy w/ileoanal anast EF031 table, power.
EQ168 light, exam.
44158.............................. Colectomy w/neo-rectum EF031 table, power.
pouch. EQ168 light, exam.
56440.............................. Surgery for vulva lesion.. EF031 table, power.
EQ170 light, fiberoptic headlight w-source.
57296.............................. Revise vag graft, open abd EF031 table, power.
EQ170 light, fiberoptic headlight w-source.
58263.............................. Vag hyst w/t/o & vag EF031 table, power.
repair.
59610.............................. Vbac delivery............. EF031 table, power.
67228.............................. Treatment of retinal EL005 lane, exam (oph).
lesion. EQ230 slit lamp (Haag-Streit), dedicated to laser use.
76813.............................. Ob us nuchal meas, 1 gest. ED024 film processor, dry, laser.
77371.............................. Srs, multisource.......... EQ211 pulse oximeter w-printer.
ED018 computer workstation, cardiac cath monitoring.
EL011 room, angiography.
93540.............................. Injection, cardiac cath... EQ011 ECG, 3-channel (with SpO2, NIBP, temp, resp).
EQ032 IV infusion pump.
EQ088 contrast media warmer.
EQ211 pulse oximeter w-printer.
93542.............................. Injection for heart x-rays ED018 computer workstation, cardiac cath monitoring.
EL011 room, angiography.
EQ011 ECG, 3-channel (with SpO2, NIBP, temp, resp).
EQ032 IV infusion pump.
EQ088 contrast media warmer.
EQ211 pulse oximeter w-printer.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Comment: One commenter pointed out that the equipment duplication
issue for CPT codes 93540 and 93542 is irrelevant because these codes
would no longer be reported for Medicare in CY 2011. The commenter
stated that the codes are being replaced by a new set of diagnostic
cardiac catheterization CPT codes.
Response: We agree with the commenter's assessment that our
proposal for these codes is not relevant for CY 2011 because these
codes are being deleted.
Comment: One commenter reviewed the duplicate inputs and offered a
correction regarding CPT code 19302 (Mastectomy, partial (eg,
lumpectomy,

[[Page 73196]]

tylectomy, quadrantectomy, segmentectomy); with axillary
lymphadenectomy). The commenter pointed out that one of the line-items
erroneously duplicated (light, surgical, EF014) for that code should
have originally been applied to CPT code 19304 (Mastectomy,
subcutaneous).
Response: We appreciate the commenter bringing this error to our
attention and we agree with the commenter's assessment.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to remove the duplicate equipment items
from the CY 2011 direct PE database as detailed in Table 5, with
modification to transfer the duplicate surgical light input from CPT
code 19302 to CPT code 19304. These changes are reflected in the final
CY 2011 direct PE database.
(8) Establishing Overall Direct PE Supply Price Inputs Based on Unit
Prices and Quantities
In the CY 2011 PFS proposed rule (75 FR 40057), we stated that we
had identified minor errors in total price inputs for a number of
supply items due to mathematical mistakes in multiplying the item unit
price and the quantity used in particular CPT codes for the associated
services. We proposed to modify the direct PE database to appropriately
include the overall supply price input for a supply item as the product
of the unit price and the quantity of the supply item used in the CPT
code. Most of the overall supply price input changes were small, and we
adjusted the proposed CY 2011 direct PE database accordingly. The CPT
and Level II HCPCS codes and associated supplies for nonfacility and
facility settings that were subject to these corrections are displayed
in Tables 6 and 7, respectively.
BILLING CODE 4120-01-P

[[Page 73197]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.233

[[Page 73198]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.234

[[Page 73199]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.235

[[Page 73200]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.236

[[Page 73201]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.237

[[Page 73202]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.238

[[Page 73203]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.239

BILLING CODE 4120-01-C
Comment: Several commenters agreed that the overall supply price
inputs should be equal to the product of the supply price and the
quantity associated with each code. Some commenters pointed out that
for many of the supply items displayed in Tables 6 and 7, the overall
supply prices remained incorrect in the proposed CY 2011 direct PE
database. The commenters speculated that an underlying programming
error may have led to incorrect calculations.
Response: In constructing the proposed CY 2011 direct PE database
posted on the CMS web site, we inadvertently retained a display column
of data that reflected our previous calculation error, despite our
correct calculation of the values for PFS ratesetting purposes. We have
corrected the underlying process error that led to the incorrect
display. We have modified the direct PE database for the CY 2011 PFS
final rule with comment period to appropriately display the overall
supply price input for a supply item as the product of the unit price
and the quantity of the supply item used in the CPT code.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to modify the direct PE database to
include the overall supply price input for a supply item as the product
of the unit price and the quantity of the supply item used in the CPT
code. We have modified the display column within the publicly available
database to reflect the proper calculation. These changes are reflected
in the final CY 2011 direct PE database.
c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE Inputs
In a March 2010 letter, the AMA RUC made specific PE
recommendations that we considered in the CY 2011 PFS proposed rule (75
FR 40062 through 40063). The proposed changes that follow were included
in the proposed CY 2011 direct PE database, which is available on the
CMS Web site under the downloads for the CY 2011 PFS proposed rule at
http://www.cms.gov/PhysicianFeeSched/. The final direct PE database for
CY 2011 is available under the downloads for the CY 2011 PFS final rule
with comment period at the same location.
(1) Electrogastrography and Esophageal Function Test
We proposed to accept the AMA RUC recommendations for the CY 2011
PE inputs for the following CPT codes: 91132 (Electrogastrography,
diagnostic, transcutaneous); 91133 (Electrogastrography, diagnostic,
transcutaneous; with provocative testing); 91038 (Esophageal function
test, gastroesophageal reflux test with nasal catheter intraluminal
impedance electrode(s) placement, recording, analysis and
interpretation; prolonged (greater than 1 hour, up to 24 hours)). For
CPT code 91038, we assumed a useful life of 5 years for the equipment
item ``ZEPHR impedance/pH reflux monitoring system with data recorder,
software, monitor, workstation and cart,'' based on its entry in the
AHA's publication, ``Estimated Useful Lives of Depreciable Hospital
Assets,'' which we use as a standard reference. The proposed CY 2011
direct PE database was changed accordingly.
(2) 64-Slice CT Scanner and Software
The AMA RUC submitted an updated recommendation regarding the
correct pricing of the 64-slice CT scanner and its accompanying
software. Based on the documentation accompanying the recommendation,
we accepted this recommendation and proposed to update the price input
for the 64-slice scanner and software. This affected the following four
CPT codes that use either the scanner, the software, or both: 75571
(computed tomography, heart, without contrast material, with
quantitative evaluation of coronary calcium); 75572 (Computed
tomography, heart, with contrast material, for evaluation of cardiac
structure and morphology (including 3D image postprocessing, assessment
of cardiac function, and evaluation of venous structures, if
performed)); 75573 (Computed tomography, heart, with contrast material,
for evaluation of cardiac structure and morphology in the setting of
congenital heart disease (including 3D image postprocessing, assessment
of LV cardiac function, RV structure and function and evaluation of
venous structures, if performed)); and 75574 (Computed tomographic
angiography, heart, coronary arteries and bypass grafts (when present),
with contrast material, including 3D image post processing (including
evaluation of cardiac structure and morphology, assessment of cardiac
function, and evaluation of venous structure, if performed)). The
proposed CY 2011 direct PE database was modified accordingly.
(3) Breath Hydrogen Test
The AMA RUC provided recommendations regarding the PE inputs for
CPT code 91065 (breath

[[Page 73204]]

hydrogen test (e.g., for detection of lactase deficiency, fructose
intolerance, bacterial overgrowth, or oro-cecal gastrointestinal
transit). We accepted the recommendations with two modifications. We
folded the two pieces of equipment listed as ``quinGas Table-Top
Support Stand, 3 Tank'' and ``Drying Tube, Patient Sample'' into the
``BreathTrackerDigital SC Instrument'' and summed their inputs into one
equipment line-item, since these equipment items are used together
specifically for the service in question. We increased the useful life
input of the ``BreathTrackerDigital SC Instrument'' from 7 to 8 years
based on our use of the American Hospital Association (AHA)'s
publication entitled, ``Estimated Useful Lives of Depreciable Hospital
Assets'' as a standard reference. Additionally, because the AMA RUC did
not include equipment times in their recommendations for this CPT code,
we used 53 minutes as the total time for all equipment items based on
the total intra-service period for the clinical labor, consistent with
our general policy for establishing equipment times. These
modifications were reflected in the proposed CY 2011 direct PE
database.
(4) Radiographic Fluoroscopic Room
A recent AMA RUC review of services that include the radiographic
fluoroscopic room (CMS Equipment Code EL014) as a direct PE input
revealed that the use of the item is no longer typical for certain
services in which it is specified within the current direct cost
inputs. The AMA RUC recommended to CMS that the radiographic
fluoroscopic room be deleted from CPT codes 64420 (Injection,
anesthetic agent; intercostal nerve, single); 64421 (Injection,
anesthetic agent; intercostal nerves, multiple, regional block); and
64620 (Destruction by neurolytic agent, intercostal nerve). We accepted
these recommendations and, therefore, these changes were included in
the proposed CY 2011 direct PE database.
Comment: Several commenters generally expressed support for our
acceptance of these AMA RUC-recommended direct PE inputs with the
stated refinements. The AMA RUC expressed appreciation for CMS'
acceptance of the committee's recommendations.
Response: We appreciate the assistance of stakeholders in our
efforts to utilize the most accurate direct PE inputs for PFS services.
We also appreciate the judicious work of the AMA RUC in providing these
recommendations in time for us to respond to them and include our
proposals in the CY 2011 proposed rule.
Comment: One commenter expressed concern about these
recommendations on the basis of the flawed professional composition of
the AMA RUC. The commenter stated that without fair representation by
all specialties, including nonphysician practitioners who may bill Part
B directly under the PFS, CMS' reliance on the AMA RUC as representing
the professional views and knowledge of all healthcare specialties for
purposes of establishing the direct PE inputs for services paid under
the PFS is deeply flawed.
Response: As we have stated previously (69 FR 66243), because the
AMA RUC is an independent committee, we are not in a position to set
the requirements for AMA RUC membership. Concerned stakeholders should
communicate directly with the AMA RUC regarding its professional
composition. We note that we alone are responsible for all decisions
about the direct PE inputs for purposes of PFS payment so, while the
AMA RUC provides us with recommendations for new and revised CPT codes
in the context of what we believe is its broad expertise, we ultimately
remain responsible for determining the direct PE inputs for all new or
revised services.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposals to accept the AMA RUC recommendations,
with certain changes described above, regarding the direct PE inputs
for electrogastrography and esophageal function tests, the 64-slice CT
scanner and software, the breath hydrogen test, and certain procedures
that no longer require a radiographic fluoroscopic room. These
decisions are reflected in the final CY 2011 direct PE database.
(5) Cystometrogram
The AMA RUC recently identified a rank order anomaly regarding CPT
code 51726 (Complex cystometrogram (i.e., calibrated electronic
equipment)). Currently, this procedure has higher PE RVUs, despite
being less resource-intensive than the three CPT codes for which it
serves as the base: 51727 (Complex cystometrogram (i.e., calibrated
electronic equipment); with urethral pressure profile studies (i.e.,
urethral closure pressure profile), any technique); 51728 (Complex
cystometrogram (i.e., calibrated electronic equipment); with voiding
pressure studies (that is, bladder voiding pressure), any technique);
and 51729 (Complex cystometrogram (i.e., calibrated electronic
equipment); with voiding pressure studies (that is, bladder voiding
pressure) and urethral pressure profile studies (that is, urethral
closure pressure profile), any technique).
Since the AMA RUC's general view is that CPT codes with a 0-day
global period do not have pre-service time associated with the code,
the AMA RUC recommended removing the nonfacility pre-service clinical
labor time from the PE inputs for 51726. Additionally, the AMA RUC
recommended that the nonfacility clinical intra-service staff time for
CPT code 51276 be reduced from the 118 minutes of intra-service
clinical labor time currently assigned to the code to 85 minutes of
intra-service clinical labor time. These changes would resolve the rank
order anomaly and bring the PE inputs for CPT code 51726 into alignment
with the other three codes. Finally, and for the reasons stated above,
the AMA RUC recommended that CMS remove the 23 minutes of pre-service
nonfacility clinical labor time from CPT code 51725 (Simple
cystometrogram (CMG) (for example, spinal manometer)). We agreed with
the AMA RUC recommendations, proposed to accept these recommendations
for CY 2011 and, therefore, changed the direct PE inputs for CPT codes
51725 and 51726 in the nonfacility setting in the proposed CY 2011
direct PE database.
Comment: Some commenters argued that the rank order anomaly
resulted from clinical labor inputs that were too low in the more
complex codes, rather than too high in the base codes. These commenters
stated that the AMA RUC and CMS had addressed the wrong ``end'' of the
rank order anomaly in making the changes to the clinical labor minutes
assigned to CPT codes 51725 and 51726. Several commenters on the CY
2010 PFS final rule with comment period, where new CY 2011 CPT code
51727, 51728, and 51729 were assigned interim direct PE inputs, also
argued that CPT codes 51727, 51728, and 51729 should have additional
clinical labor inputs, including a greater number of minutes during the
intra-service period and minutes during the pre-service period.
Response: We have reviewed the direct PE inputs for all five CPT
codes in this series and continue to agree with the AMA RUC's
recommendations regarding changes for CY 2011. Specifically, we believe
the pre-service nonfacility clinical labor time for the 0-day global
period CPT codes 51725 and 51726 should be removed and the intra-
service clinical labor time for CPT code 51726 should also be reduced,
consistent with the usual treatment of

[[Page 73205]]

other 0-day global codes. We believe the AMA RUC provided
recommendations to us regarding the direct PE inputs for these four
cystometrogram services that accurately reflect the costs of the
resources (that is, the clinical labor, equipment, and supplies)
typically required to furnish these services to Medicare beneficiaries.
Comment: Several commenters requested that CMS change the supply
inputs included in the direct PE database for the complex
cystometrogram services. For example, the commenters requested that
single dual sensor catheters replace the single sensor catheters
currently included as direct PE inputs for these codes. The commenters
stated that both the catheters and their price inputs are outdated. In
other cases, the commenters explained that certain supplies in the
database were not those typically used by certain physician specialties
in performing the services.
Response: We rely on our review of recommendations received from
the AMA RUC in order to make changes to the clinical labor, supply, and
equipment inputs for CPT codes within the direct PE database. We have
no reason to believe that the supplies used in the complex
cystometrogram procedures described by CPT codes 51727, 51728, and
51729 are outdated because these were new codes for CY 2010 and the AMA
RUC recently addressed their direct PE inputs when initially
recommending values for the services. We believe the AMA RUC's
extensive expertise and broad perspective generally allows it to
accurately identify the direct PE inputs for new and revised CPT codes.
We encourage stakeholders who believe that enhancements in technology
or changes in medical practice have resulted in changes in the supplies
or equipment typically used in furnishing a particular service to
address these concerns with the AMA RUC.
As we discuss further in section II.A.3.e. of this final rule with
comment period with respect to our proposal regarding updating supply
and equipment price inputs, we welcome public requests for updates to
supply price and equipment price and useful life inputs associated with
existing codes through the process we are adopting beginning in CY
2011.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to accept the recommendations of the
AMA RUC regarding the revised direct PE inputs for CPT codes 51725 and
52726. The final direct PE inputs are included in the final CY 2011
direct PE database.
d. Referral of Existing CPT Codes for AMA RUC Review
As part of our review of high cost supplies, we conducted a
clinical review of the procedures associated with high cost supplies to
confirm that those supplies currently are used in the typical case
described by the CPT codes. While we confirmed that most high cost
supplies could be used in the procedures for which they are currently
direct PE inputs, we noted that one of the high cost supplies, fiducial
screws (CMS Supply Code SD073) with a current price of $558, is
included as a direct PE input for two CPT codes, specifically 77301
(Intensity modulated radiotherapy plan, including dose-volume
histograms for target and critical structure partial tolerance
specifications) and 77011 (Computed tomography guidance for
stereotactic localization). The documentation used in the current
pricing of the supply item describes a kit that includes instructions,
skull screws, a drill bit, and a collar for the TALON[reg] System
manufactured by Best nomos. Best nomos' literature describes the
insertion of the screws into the patient's skull to ensure accurate
set-up. When CPT codes 77301 and 77011 were established in CY 2002 and
CY 2003, respectively, we accepted the AMA RUC recommendations to
include fiducial screws in the PE for these services. Upon further
review, while we understand why this supply may still be considered a
typical PE input for CPT code 77011, we do not now believe that
fiducial screws, as described in the Best nomos literature, would
typically be used in CPT code 77301, where the most common clinical
scenario would be treatment of prostate cancer.
Therefore, in order to ensure that CPT codes 77301 and 77011 are
appropriately valued for CY 2011 through the inclusion or exclusion of
fiducial screws in their PE, in the CY 2011 PFS proposed rule (75 FR
40063), we asked the AMA RUC to review these CPT codes with respect to
the inclusion of fiducial screws in their PE. We requested that the AMA
RUC make recommendations to us regarding whether this supply should be
included in the PE or removed from the PE for CPT codes 77301 and 77011
in a timeframe that would allow us to adopt interim values for these
codes for CY 2011, should the AMA RUC recommend a change. Were the AMA
RUC to continue to recommend the inclusion of fiducial screws in the PE
for CPT code 77301 and/or 77011 for CY 2011, we requested that the AMA
RUC provide us with a detailed rationale for the inclusion of this
specialized supply in the PE for the typical case reported under the
relevant CPT code. We also requested that the AMA RUC furnish updated
pricing information for the screws if they were to continue to
recommend the screws as a PE input for one or both of these CPT codes
in CY 2011.
Comment: The AMA RUC recommended that CMS remove the fiducial
screws as a direct PE input from both CPT codes 77011 and 77301.
Several commenters also agreed that the fiducial screws would not
typically be used with CPT code 77301. Additionally, multiple
commenters pointed out that the fiducial screws may now be reported
using HCPCS supply code A4648 (Tissue marker, implantable, any type,
each) when the markers are implanted.
Response: We appreciate the responsiveness of the AMA RUC to our
request and the interest of the other commenters in this issue.
After consideration of the public comments we received and the AMA
RUC recommendation following publication of the CY 2011 PFS proposed
rule, for CY 2011, we are accepting the AMA RUC's recommendation and
removing fiducial screws from the direct PE database as inputs for CPT
codes 77011 and 77301. Because the direct PE inputs for these codes are
being revised on an interim final basis for CY 2011, the changes are
subject to public comment on this final rule with comment period.
e. Updating Equipment and Supply Price Inputs for Existing Codes
Historically, we have periodically received requests to change the
PE price inputs for supplies and equipment in the PE database. In the
past, we have considered these requests on an ad hoc basis and updated
the price inputs as part of quarterly or annual updates if we believed
them to be appropriate. In the CY 2011 PFS proposed rule (75 FR 49963),
we proposed to establish a regular and more transparent process for
considering public requests for changes to PE database price inputs for
supplies and equipment used in existing codes.
We proposed to act on public requests to update equipment and
supply price inputs annually through rulemaking by following a regular
and consistent process as discussed in the following paragraphs. We
proposed to use the annual PFS proposed rule released in the summer and
the final rule with comment period released on or about

[[Page 73206]]

November 1 each year as the vehicle for making these changes.
We would accept requests for updating the price inputs for supplies
and equipment on an ongoing basis; requests must be received no later
than December 31 of each calendar year to be considered for inclusion
in the next proposed rule. In that next proposed rule, we would present
our review of submitted requests to update price inputs for specific
equipment or supplies and our proposals for the subsequent calendar
year. We would then finalize changes in the final rule with comment
period for the upcoming calendar year. Our review of the issues and
consideration of public comments may result in the following outcomes
that would be presented in the final rule with comment period:
Updating the equipment or supply price inputs, as
requested.
Updating the equipment or supply price inputs, with
modifications.
Rejecting the new price inputs.
Declining to act on the request pending a recommendation
from the AMA RUC.
To facilitate our review and preparation of issues for the proposed
rule, at a minimum, we would expect that requesters would provide the
following information:
Name and contact information for the requestor.
The name of the item exactly as it appears in the direct
PE database under downloads for the most recent PFS final rule with
comment period, available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
In order to best evaluate the requests in the context of our goal
of utilizing accurate market prices for these items as direct PE
inputs, we also would expect requestors to provide multiple invoices
from different suppliers/manufacturers. In some cases, multiple sources
may not be available, whereupon a detailed explanation should be
provided to support the request. When furnishing invoices, requestors
should take into consideration the following parameters:
++ May be either print or electronic but should be on supplier and/
or manufacturer stationery (for example, letterhead, billing statement,
etc.)
++ Should be for the typical, common, and customary version of the
supply or equipment that is used to furnish the services.
++ Price should be net of typical rebates and/or any discounts
available, including information regarding the magnitude and rationale
for such rebates or discounts.
++ If multiple items are presented on the same invoice, relevant
item(s) should be clearly identified.
We solicited public comments on this process, including the
information that requestors should furnish to facilitate our full
analysis in preparation for the next calendar year's rulemaking cycle.
Comment: Several commenters supported establishing a regular and
more transparent process for considering public requests for changes to
the direct PE price inputs for supplies and equipment used in existing
codes. However, other commenters were concerned that the process might
prevent CMS from making timely corrections to the database that are
brought to the attention of the agency by specialty societies or other
stakeholders. These commenters suggested creating an expedited process
whereby mistakes could be corrected.
Response: We appreciate the broad support for the proposal. We
believe that this process, though regular, would not limit our ability
to correct technical errors that are discovered by the agency or
brought to our attention by stakeholders. On these occasions, we would
continue to correct errors and issue correction notices to final rules
when appropriate. The regular process for updating supply and equipment
prices is intended to reflect significant changes in the market prices
of supplies and equipment that are used in the direct PE database. It
would not substitute for the timely correction of technical errors.
Comment: Some commenters were concerned that the proposed process
would necessitate a 12- to 24-month delay between CMS' acknowledgement
of a price update and the resulting change in PE RVU calculations. The
commenters pointed out that the current ad hoc process has historically
resulted in a fairly timely response from the agency in most
circumstances and were concerned that the formalization of the process
might result in unnecessary delays. One commenter suggested creating a
process for quarterly updates to the supply and equipment price inputs.
Response: We understand that some commenters are concerned about
the timelines for price updates. However, we believe that the value of
the transparency of the proposed process outweighs its potential for
slowing the previous ad hoc process. Additionally, it is important to
acknowledge that in most previous cases, price input updates would not
have been immediately effective since such updates have always required
CMS' review, concurrence, and processing through the rate setting
methodology prior to any change in Medicare payment rates.
Additionally, many stakeholders already provide public comments to CMS
regarding specific issues addressed in our annual rate setting for the
PFS through the notice and comment rulemaking process. Therefore, we
believe that the annual process offers both an economic use of
stakeholders' resources, as well as the best opportunity for broad
public input into proposed price changes. These are qualities any
accelerated alternative, such as quarterly updates, would lack.
We believe that an annual update process most effectively promotes
both timeliness and transparency, while also allowing for public
comment and input regarding our proposals before the adoption of
pricing changes that could have a significant effect on payment for
services under the PFS.
Comment: Some commenters asserted that it may be more difficult to
obtain invoices for some supplies that are not frequently used and
there should be acceptable alternative sources of information,
including price lists or other information from the manufacturer. One
commenter suggested that in the case of items that are not used in high
volumes in physicians' office, volume or other discounts are unlikely
for physicians' practices.
Response: Even though the direct PE inputs should reflect the
resource costs required for typical cases, we understand that there may
be circumstances in which updated invoices or invoices that reflect
volume or other discounts may be difficult to obtain. As stated in our
proposal, we will consider a detailed written explanation in support of
requests submitted without the documentation usually required.
Comment: One commenter urged that the updating of supply and
equipment prices be only for ``like'' items and not for ``newer
technology'' items. The commenter requested that CMS refer the initial
review of new supply and equipment inputs to the AMA RUC Practice
Expense Subcommittee for review and recommendation back to CMS. Other
commenters made specific requests for additions, deletions, or
substitutions of supply and equipment items associated with particular
codes.
Response: We appreciate the opportunity to clarify that this
regular and consistent process would only apply to the price inputs for
supply and equipment items. As part of our review of equipment price
inputs, we will also consider updates to the useful life of equipment
insofar as that information is

[[Page 73207]]

supported by similar documentation. However, we will continue to
encourage stakeholders who believe that there should be additions,
deletions, or substitutions of direct PE inputs associated with
particular codes to address these concerns through the AMA RUC,
including when a stakeholder believes that enhanced technology has
replaced older technology in the typical case of a particular service.
We believe the AMA RUC recommendations are an efficient and effective
mechanism to inform our review of changes to the clinical labor,
supply, and equipment inputs within the direct PE database.
Comment: One commenter was concerned about the potential for CMS to
reject the requested price input outright and suggested that CMS be
required to explain its rejection of the request for an updated price
input.
Response: We appreciate the concerns of the commenter and consider
this perspective as providing additional support for instituting such a
regular and transparent process. As we stated in the CY 2011 proposed
rule (75 FR 40063), we would present our review of submitted requests
to update price inputs for specific equipment or supplies and our
proposals for the subsequent calendar year in the annual proposed rule.
This process would provide CMS an annual opportunity to explain our
review and decisions regarding public requests for changes in direct PE
price inputs.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to act on public requests to update
equipment and supply price inputs annually through rulemaking by
following a regular and consistent process as discussed in the
preceding paragraphs. We will use the annual PFS proposed rule released
in the summer and the final rule with comment period released on or
about November 1 each year as the vehicle for making these changes. In
order to make the most effective use of the rulemaking process and be
responsive to the concerns of stakeholders that we consider the most
recent evidence available, we ask that requests for updates to supply
price inputs or equipment price or useful life inputs be submitted as
comments to the PFS final rule with comment period each year, subject
to the deadline for public comments applicable to that rule.
Alternatively, stakeholders may submit requests to CMS on an ongoing
basis throughout a given calendar year to CMS [email protected]. Requests received by the end of a calendar year
will be considered in rulemaking during the following year. For
example, requests received by December 31, 2010 will be considered in
conjunction with the CY 2012 PFS rulemaking cycle. We refer readers to
the description earlier in this section of the minimum information we
are requesting that stakeholders provide in order to facilitate our
review and preparation of issues for the proposed rule.
In the CY 2012 PFS proposed rule, scheduled to be released in the
summer of CY 2011, we will present a review of any timely requests we
receive to update supply price inputs or equipment price or useful life
inputs. After reviewing the issues and responding to the public
comments, we will finalize our decision as one of the outcomes listed
below for each request in the final rule with comment period for CY
2012.
Updating the equipment or supply price inputs, as
requested.
Updating the equipment or supply price inputs, with
modifications.
Rejecting the new price inputs.
Declining to act on the request pending a recommendation
from the AMA RUC.
f. Other Issues
We received other public comments on matters related to direct PE
inputs that were not the subject of proposals in the CY 2011 PFS
proposed rule. We thank the commenters for sharing their views and
suggestions. Because we did not make any proposals regarding these
matters, we do not generally summarize or respond to such comments in
this final rule with comment period. However, we are summarizing and
responding to several of the public comments in order to reiterate or
clarify certain information.
Comment: Several commenters stated that the clinical labor minutes
for CPT code 37210 (Uterine fibroid embolization (UFE, embolization of
the uterine arteries to treat uterine fibroids, leiomyomata),
percutaneous approach inclusive of vascular access, vessel selection,
embolization, and all radiological supervision and interpretation,
intraprocedural roadmapping, and imaging guidance necessary to complete
the procedure) are inconsistent with recommendations forwarded to CMS
by the AMA RUC for CY 2007 and accepted by CMS in the CY 2007 PFS final
rule with comment period (71 FR 69643). The commenters indicated that
10 minutes of clinical labor time were erroneously not attributed to
this CPT code in the proposed CY 2011 direct PE database.
Response: We agree with the commenters' assessment and appreciate
being informed of the error. The 10 minutes of clinical labor time
missing from the direct PE inputs for CPT code 37210 have been
incorporated and this change is reflected in the final CY 2011 direct
PE database.
Comment: Several commenters expressed concerns regarding the
current direct PE inputs for various services. One commenter submitted
extensive information regarding a perceived disparity between the
equipment inputs for echocardiography services and those for other
ultrasound services. Another commenter requested that CMS ask the AMA
RUC to establish nonfacility RVUs for the placement or insertion of
high dose rate brachytherapy catheters/applicators because it is common
practice, especially in gynecology, for physicians to perform such
procedures in their offices or in freestanding clinics. One commenter
stated that the proposed PE RVUs do not provide sufficient payment to
cover the cost of prothrombin time (PT)/international normalized ratio
(INR) home monitoring services and recommended that CMS alter the
direct PE inputs for those services. Another commenter requested that
CMS alter direct PE inputs for holter monitoring based on changes to
the language in CPT code descriptors from the current ``24 hours'' to
``up to 48 hours,'' even when the AMA RUC did not recommend such
changes.
Response: We did not propose CY 2011 changes to the direct PE
inputs for any of those services referenced by the commenters and,
therefore, their direct PE inputs have already been finalized in a
prior year's PFS rulemaking. As we have previously stated in this
section, we encourage stakeholders who believe a change is required in
the direct PE inputs associated with a particular service in the
typical case that is furnished in the facility or nonfacility setting
to address these concerns with the AMA RUC with respect to codes that
have been reviewed by the AMA RUC. The direct PE inputs for existing
services paid under the PFS have all been adopted through rulemaking
that has allowed for public notice and comment, so their current direct
PE inputs are final unless we would make a proposal to change them in a
future year. In most cases, we like to receive and review
recommendations from the AMA RUC for new and revised codes or other
codes for which another review has been conducted in order to assist us
in determining whether we should make changes to the clinical labor,
supply, and equipment inputs within the direct

[[Page 73208]]

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

B. Malpractice Relative Value Units (RVUs)

1. Background
Section 1848(c) of the Act requires that each service paid under
the PFS be comprised of three components: Work, PE, and malpractice.
From 1992 to 1999, malpractice RVUs were charge-based, using weighted
specialty-specific malpractice expense percentages and 1991 average
allowed charges. Malpractice RVUs for new codes after 1991 were
extrapolated from similar existing codes or as a percentage of the
corresponding work RVU. Section 4505(f) of the BBA required us to
implement resource-based malpractice RVUs for services furnished
beginning in 2000. Therefore, initial implementation of resource-based
malpractice RVUs occurred in 2000.
The statute also requires that we review, and if necessary adjust,
RVUs no less often than every 5 years. The first review and update of
resource-based malpractice RVUs was addressed in the CY 2005 PFS final
rule with comment period (69 FR 66263). Minor modifications to the
methodology were addressed in the CY 2006 PFS final rule with comment
period (70 FR 70153). In the CY 2010 PFS final rule with comment
period, we implemented the second review and update of malpractice
RVUs. For a discussion of the second review and update of malpractice
RVUs see the CY 2010 PFS proposed rule (74 FR 33537) and final rule
with comment period (74 FR 61758).
2. Malpractice RVUs for New and Revised Services Effective Before the
Next 5-Year Review
Currently, malpractice RVUs for new and revised codes effective
before the next 5-Year Review (for example, effective CY 2011 through
CY 2014) are determined by a direct crosswalk to a similar ``source''
code or a modified crosswalk to account for differences in work RVUs
between the new/revised code and the source code. For the modified
crosswalk approach, we adjust the malpractice RVUs for the new/revised
code to reflect the difference in work RVUs between the source code and
the AMA RUC's recommended work value (or the work value we are applying
as an interim final value under the PFS) for the new code. For example,
if the interim final work RVUs for the new/revised code are 10 percent
higher than the work RVUs for the source code, the malpractice RVUs for
the new/revised code would be increased by 10 percent over the source
code RVUs. This approach presumes the same risk factor for the new/
revised code and source code but uses the work RVUs for the new/revised
code to adjust for risk-of-service. The assigned malpractice RVUs for
new/revised codes effective between updates remain in place until the
next 5-Year Review.
For CY 2011, we explained that we will continue our current
approach for determining malpractice RVUs for new/revised codes that
become effective before the next 5-Year Review and update. Under this
approach we crosswalk the new/revised code to the RVUs of a similar
source code and adjust for differences in work (or, if greater, the
clinical labor portion of the fully implemented PE RVUs) between the
source code and the new/revised code. Additionally, we stated that we
would publish a list of new/revised codes and the analytic crosswalk(s)
used for determining their malpractice RVUs in the CY 2011 final rule
with comment period, which we have not previously done. We also
explained that the CY 2011 malpractice RVUs for new/revised codes would
be implemented as interim final values in the CY 2011 PFS final rule
with comment period, where they would be subject to public comment, and
finalized in the CY 2012 PFS final rule with comment period.
Comment: Several commenters supported the continuation of our
current approach to determining malpractice RVUs for new/revised codes
that become effective before the next 5-Year Review and update. The
commenters stated that publication of the new/revised codes and the
analytic crosswalk(s) used for determining their malpractice RVUs in
the final rule is a move toward greater transparency. A few commenters
requested that CMS provide the rationale used for selecting crosswalks
for new/revised codes and subject the rationale to public comment.
Response: For purposes of determining malpractice RVUs for the CY
2011 new/revised codes, we accepted all source code recommendations
submitted by the AMA RUC. We understand that the AMA RUC-recommended
source codes for new/revised codes were based on the expected similar
specialty mix of practitioners furnishing the source code and the new/
revised code. In other words, the medical specialties furnishing a
source code were expected to be similar to the specialty mix furnishing
the new/revised code. In adopting all of the AMA RUC's source code
recommendations for CY 2011, we agree with its assessment of these
similarities in each new/revised code case. If we were to disagree with
the AMA RUC's malpractice source code recommendations in a future year
for any new/revised codes, we would provide the rationale for both our
difference of opinion and the alternative source code we select for
purposes of establishing the interim final malpractice RVUs.
After consideration of the public comments we received, we are
continuing our current approach of assigning the interim final
malpractice RVUs for new/revised codes based on the methodology
described earlier in this section. We adjusted the malpractice RVUs of
the CY 2011 new/revised codes for differences in work RVUs (or, if
greater, the clinical labor portion of the fully implemented PE RVUs)
between the source code and the new/revised code to reflect the
specific risk-of-service for the new/revised code. The source code
crosswalks for the CY 2011 new/revised codes are being adopted on an
interim final basis and are subject to public comment on this CY 2011
final rule with comment period, as are the CY 2011 malpractice RVUs of
the new/revised codes that are listed in Addendum C to this final rule
with comment period. The malpractice RVUs for the CY 2011 new/revised
codes will be finalized in the CY 2012 PFS final rule with comment
period, where we will also respond to the public comments received on
the values that are included in this CY 2011 final rule with comment
period.
Table 8 lists the CY 2011 new/revised codes and their respective
source codes for determining the interim final CY 2011 malpractice
RVUs. We are also posting this crosswalk on the CMS Web site under the
downloads for the CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
BILLING CODE 4120-01-P

[[Page 73209]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.240

[[Page 73210]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.241

[[Page 73211]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.242

[[Page 73212]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.243

[[Page 73213]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.244

BILLING CODE 4120-01-C
3. Revised Malpractice RVUs for Selected Disc Arthroplasty Services
As discussed in the CY 2010 PFS proposed rule (74 FR 33539), we
assign malpractice RVUs to each service based upon a weighted average
of the risk factors of all specialties that furnish the service. For
the CY 2010 review of malpractice RVUs, we used CY 2008 Medicare
payment data on allowed services to establish the frequency of a
service by specialty. CPT code 22856 (Total disc arthroplasty
(artificial disc), anterior approach, including discectomy with end
plate preparation (includes osteophytectomy for nerve root or spinal
cord decompression and microdissection), single interspace, cervical)
had zero allowed services for CY 2008. Therefore, our contractor
initially set the level of services to 1, and assigned a risk factor
according to the average risk factor for all services that do not
explicitly have a separate technical or professional component. We
proposed to adopt our contractor's initial malpractice RVUs for CPT
code 22856 in the CY 2010 proposed rule. Application of the average
physician risk factor would have resulted in a significant decrease in
malpractice RVUs for CPT code 22856 in CY 2010.
Several commenters on the CY 2010 PFS proposed rule expressed
concern regarding the proposed malpractice RVUs for CPT code 22856,
which represented a proposed reduction of more than 77 percent. The
commenters stated that this service is predominantly furnished by
neurosurgeons and orthopedic surgeons. Given the high risk factors
associated with these specialty types and the changes in malpractice
RVUs for comparable services, the commenters stated that a reduction in
the malpractice RVUs of this magnitude for CPT code 22856 could not be
correct.
After consideration of the public comments, for CY 2010, we set the
risk factor for CPT code 22856 as the weighted average risk factor of
six comparable procedures mentioned by the commenters: CPT code 22554
(Arthrodesis, anterior interbody technique, including minimal
discectomy to prepare interspace (other than for decompression);
cervical below C2); CPT code 22558 (Arthrodesis, anterior interbody
technique, including minimal discectomy to prepare interspace (other
than for decompression); lumbar); CPT code 22857 (Total disc
arthroplasty (artificial disc), anterior approach, including discectomy
to prepare interspace (other than for decompression), single
interspace, lumbar); CPT code 22845 (Anterior instrumentation; 2 to 3
vertebral segments (list separately in addition to code for primary
procedure)); CPT code 63075 (Discectomy, anterior, with decompression
of spinal cord and/or nerve root(s), including osteophytectomy;
cervical, single interspace); and CPT code 20931 (Allograft for spine
surgery only; structural (list separately in addition to code for
primary procedure)). The weighted average risk factor for these
services is 8.4.
Since publication of the CY 2010 PFS final rule with comment
period, stakeholders have mentioned that we made significant changes to
the malpractice RVUs for CPT code 22856 in CY 2010. The commenters also
brought to our attention that other services are clinically similar to
CPT code 22856 and have similar work RVUs and, therefore, some
stakeholders believe these services should all have similar malpractice
RVUs. Services mentioned by the stakeholders that are clinically
similar to CPT code 22856 include CPT code 22857; CPT code 22861
(Revision including replacement of total disc arthroplasty (artificial
disc), anterior approach, single interspace;

[[Page 73214]]

cervical); CPT code 22862 (Revision including replacement of total disc
arthroplasty (artificial disc) anterior approach, lumbar); CPT code
22864 (Removal of total disc arthroplasty (artificial disc), anterior
approach, single interspace; cervical); and CPT code 22865 (Removal of
total disc arthroplasty (artificial disc), anterior approach, single
interspace; lumbar).
After further review of this issue, for CY 2011 we proposed to
apply the same risk factor used for CPT code 22856 to certain other
services within this family of services (CPT codes 22857 through 22865)
for which there were no allowed services in CY 2008. CPT codes 22861
and 22864 had zero allowed services in CY 2008 and our contractor
initially set their malpractice RVUs in the same way as it did for CPT
code 22856. Therefore, for CY 2011 we proposed to assign the weighted
average risk factor used for CPT code 22856 (that is, the weighted
average of the risk factors for CPT codes 20931, 22554, 22558, 22845,
22857, and 63075) to CPT codes 22861 and 22864. However, CPT codes
22857, 22862, and 22865 are low volume services (allowed services under
100). Our policy for low volume services is to apply the risk factor of
the dominant specialty as indicated by our claims data. Thus, for CY
2011 we proposed to continue to apply our policy for low volume
services to CPT codes 22857, 22862, and 22865.
Comment: A few commenters expressed support for the proposed
changes in malpractice RVUs for disc arthroplasty services that are
similar to CPT code 22856. One commenter urged CMS to finalize the
proposal in the CY 2011 PFS final rule.
Response: We appreciate the commenters' support for our proposal.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to apply the same risk factor used for
CPT code 22856 to CPT codes 22861 and 22864 for purposes of setting the
malpractice RVUs for these codes prior to the next 5-Year Review of
malpractice RVUs.

C. Potentially Misvalued Services Under the Physician Fee Schedule

1. Valuing Services Under the PFS
As discussed in section I. of this final rule with comment period,
in order to value services under the PFS, section 1848(c) of the Act
requires the Secretary to determine relative values for physicians'
services based on three components: The work, practice expense (PE),
and malpractice components. Section 1848(c)(1)(A) of the Act defines
the work component to include ``the portion of the resources used in
furnishing the service that reflects physician time and intensity in
furnishing the service.'' Additionally, the statute provides that the
work component shall include activities that occur before and after
direct patient contact. Furthermore, the statute specifies that with
respect to surgical procedures, the valuation of the work component for
the code would reflect a ``global'' concept in which pre-operative and
post-operative physicians' services related to the procedure would also
be included.
In addition, section 1848(c)(2)(C)(i) of the Act specifies that
``the Secretary shall determine a number of work relative value units
(RVUs) for the service based on the relative resources incorporating
physician time and intensity required in furnishing the service.'' As
discussed in detail in sections I.A.2. and I.A.3. of this final rule
with comment period, the statute also defines the PE and malpractice
components and provides specific guidance in the calculation of the
RVUs for each of these components. Section 1848(c)(1)(B) of the Act
defines the PE component as ``the portion of the resources used in
furnishing the service that reflects the general categories of expenses
(such as office rent and wages of personnel, but excluding malpractice
expenses) comprising practice expenses.''
Section 1848(c)(2)(C)(ii) of the Act specifies that the ``Secretary
shall determine a number of practice expense relative value units for
the services for years beginning with 1999 based on the relative
practice expense resources involved in furnishing the service.''
Furthermore, section 1848(c)(2)(B) of the Act directs the Secretary to
conduct a periodic review, not less often than every 5 years, of the
RVUs established under the PFS. Finally, on March 23, 2010, the ACA was
enacted, further requiring the Secretary to periodically review and
identify potentially misvalued codes and make appropriate adjustments
to the relative values of those services identified as being
potentially misvalued. Section 3134(a) of the ACA added a new section
1848(c)(2)(K) of the Act which requires the Secretary to periodically
identify potentially misvalued services using certain criteria, and to
review and make appropriate adjustments to the relative values for
those services. Section 3134(a) of the ACA also added a new section
1848(c)(2)(L) of the Act which requires the Secretary to develop a
validation process to validate the RVUs of potentially misvalued codes
under the PFS and make appropriate adjustments.
As discussed in section I.A.1. of this final rule with comment
period, we establish physician work RVUs for new and revised codes
based on our review of recommendations received from the AMA RUC. The
AMA RUC also provides recommendations to CMS on the values for codes
that have been identified as potentially misvalued. To respond to
concerns expressed by MedPAC, the Congress, and other stakeholders
regarding accurate valuation of services under the PFS, the AMA RUC
created the Five-Year Review Identification Workgroup in 2006. In
addition to providing recommendations to CMS for work RVUs, the AMA
RUC's Practice Expense Subcommittee reviews direct PE (clinical labor,
medical supplies, and medical equipment) for individual services and
examines the many broad methodological issues relating to the
development of PE RVUs.
In accordance with section 1848(c) of the Act, we determine
appropriate adjustments to the RVUs, taking into account the
recommendations provided by the AMA RUC and MedPAC, and publish the
explanation for the basis of these adjustments in the PFS proposed and
final rules. We note that section 1848(c)(2)(A)(ii) of the Act
authorizes the use of extrapolation and other techniques to determine
the RVUs for physicians' services for which specific data are not
available, in addition to taking into account the results of
consultations with organizations representing physicians.
2. Identifying, Reviewing, and Validating the RVUs of Potentially
Misvalued Services Under the PFS
a. Background
In its March 2006 Report to Congress, MedPAC noted that ``misvalued
services can distort the price signals for physicians' services as well
as for other health care services that physicians order, such as
hospital services.'' In that same report MedPAC postulated that
physicians' services under the PFS can become misvalued over time for a
number of reasons: ``For example, when a new service is added to the
physician fee schedule, it may be assigned a relatively high value
because of the time, technical skill, and psychological stress that are
required to perform it. Over time, skill, and stress involved may
decline as physicians become more familiar with the service and more
efficient at providing it. The amount of physician work needed to
furnish an existing service may decrease when new technologies are
incorporated. Services

[[Page 73215]]

can also become overvalued when practice expenses decline. This can
happen when the costs of equipment and supplies fall, or when equipment
is used more frequently, reducing its cost per use. Likewise, services
can become undervalued when physician work increases or practice
expenses rise.'' In the ensuing years since MedPAC's 2006 report,
additional groups of potentially misvalued services have been
identified by Congress, CMS, MedPAC, the AMA RUC, and other
stakeholders.
In recent years CMS and the AMA RUC have taken increasingly
significant steps to address potentially misvalued codes. As MedPAC
noted in its March 2009 Report to Congress, in the intervening years
since MedPAC made the initial recommendations, ``CMS and the AMA RUC
have taken several steps to improve the review process.'' Most
recently, section 1848(c)(2)(K)(ii) of the Act (as added by section
3134 of the ACA) directed the Secretary to specifically examine
potentially misvalued services in seven categories as follows:
(1) Codes and families of codes for which there has been the
fastest growth.
(2) Codes or families of codes that have experienced substantial
changes in practice expenses.
(3) Codes that are recently established for new technologies or
services.
(4) Multiple codes that are frequently billed in conjunction with
furnishing a single service.
(5) Codes with low relative values, particularly those that are
often billed multiple times for a single treatment.
(6) Codes which have not been subject to review since the
implementation of the RBRVS (the so-called ``Harvard-valued codes'').
(7) Other codes determined to be appropriate by the Secretary.
Section 1848(c)(2)(K)(iii) of the Act (as added by section 3134 of
the ACA) also specifies that the Secretary may use existing processes
to receive recommendations on the review and appropriate adjustment of
potentially misvalued services. In addition, the Secretary may conduct
surveys, other data collection activities, studies, or other analyses
as the Secretary determines to be appropriate to facilitate the review
and appropriate adjustment of potentially misvalued services. This
section authorizes the use of analytic contractors to identify and
analyze potentially misvalued codes, conduct surveys or collect data,
and make recommendations on the review and appropriate adjustment of
potentially misvalued services. Finally, section 1848(c)(2)(K)(iii)(V)
of the Act (as added by section 3134 of the ACA) specifies that the
Secretary may make appropriate coding revisions (including using
existing processes for consideration of coding changes) which may
include consolidation of individual services into bundled codes for
payment under the physician fee schedule.
b. Progress in Identifying and Reviewing Potentially Misvalued Codes
Over the last several years, CMS, in conjunction with the AMA RUC,
has identified and reviewed numerous potentially misvalued codes in all
seven of the categories specified in section 1848(c)(2)(K)(ii) (as
added by section 3134 of the ACA), and we plan to continue our work
examining potentially misvalued codes in these areas over the upcoming
years, consistent with the new legislative mandate on this issue. In
the current process, the AMA RUC reviews potentially misvalued codes
that are identified either by CMS or through its own processes and
recommends revised work RVUs and/or direct PE inputs for those codes to
CMS. CMS then assesses the recommended revised work RVUs and/or direct
PE inputs and, in accordance with section 1848(c) of the Act, we
determine if the recommendations constitute appropriate adjustments to
the RVUs under the PFS. Since CY 2009, CMS and the AMA RUC have
identified over 700 potentially misvalued codes.
For example, in regard to the first category (codes and families of
codes for which there has been the fastest growth), for CY 2009 CMS
identified over 100 potentially misvalued codes for which an analysis
of the utilization data showed an annual growth in allowed services of
10 percent (or more) for 3 consecutive years (73 FR 38586). Each of
these codes had allowed charges of $1 million or more in CY 2007. We
published this list in the CY 2009 PFS proposed rule (73 FR 38586
through 38589) and requested that the AMA RUC immediately begin a
review of the codes on this list. Meanwhile, in parallel with CMS'
efforts, the AMA RUC also initiated processes to identify and review
potentially misvalued codes on an ongoing basis using certain screens,
including screens for ``CMS fastest growing procedures'' and ``high
volume growth.'' Both of these AMA RUC screens are applicable to the
first category of potentially misvalued codes specified in the ACA. We
plan to continue to analyze Medicare claims data over future years to
identify additional services that exhibit rapid growth and high
Medicare expenditures for referral to the AMA RUC for review as
potentially misvalued codes.
Pertaining to the second category specified in section
1848(c)(2)(K)(ii) of the Act (as added by section 3134 of the ACA)
(codes or families of codes that have experienced substantial changes
in practice expenses), in CY 2009 we requested that the AMA RUC
continue its review of direct PE inputs, focusing particularly on high-
volume codes where the PE payments are increasing significantly under
the transition to the new PE methodology (73 FR 38589). The AMA RUC has
responded by sending CMS recommendations for revised direct PE inputs
for codes identified for PE review on an ongoing basis.
Additionally in CY 2009, we began an initiative to review and
update the prices for high-cost supplies in order to ensure the
accuracy and completeness of the direct PE inputs. We discuss our most
recent efforts in refining the process to update the prices of high-
cost supplies in section II.C.5. of this final rule with comment
period.
For the third category of potentially misvalued codes identified in
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) (codes
that are recently established for new technologies or services), the
AMA RUC routinely identifies such codes through a screen based on 3
years of Medicare claims data, and sends CMS recommendations for
revised work RVUs and/or direct PE inputs for these codes on an ongoing
basis. The AMA RUC may determine that a code for a new service requires
reevaluation or does not require reevaluation, or it may conclude, on a
case-by-case basis, that more than 3 years of claims data are necessary
before the code can be reviewed. In that case, it would determine the
appropriate future timeframe for review.
We also note that in its June 2008 Report to Congress entitled
``Reforming the Health Care System'' and in the context of a discussion
about primary care, MedPAC acknowledges, ``* * * Efficiency can improve
more easily for other types of services, such as procedures, with
advances in technology, technique, and other factors. Ideally, when
such efficiency gains are achieved, the fee schedule's relative value
units (RVUs) for the affected services should decline accordingly,
while budget neutrality would raise the RVUs for the fee schedule's
primary care services.'' (page 27). Section II.C.5. of this final rule
with comment period includes a discussion regarding periodic updates to
the costs of high-cost supplies. This discussion is highly relevant to
new technology services, where growth in volume of a

[[Page 73216]]

service as it diffuses into clinical practice may lead to a decrease in
the cost of expensive supplies. We also expect that other efficiencies
in physician work and PE may be achieved after an initial period of
relative inefficiency that reflects the ``learning curve.'' We plan to
pay particular attention to the work values and direct PE inputs for
these new services and the AMA RUC's periodic review process to ensure
that any efficiencies are captured under the PFS over time, recognizing
that the appropriate timing for revaluing these services needs to be
considered on a case-by-case basis depending on the growth rate in
service volume.
We have also addressed the fourth category (multiple codes that are
frequently billed in conjunction with furnishing a single service) in
rulemaking prior to the enactment of the ACA. As discussed in the CY
2009 PFS proposed rule (73 FR 38586), we have a longstanding policy of
reducing payment for multiple surgical procedures performed on the same
patient, by the same physician, on the same day. Over the ensuing
years, the multiple procedure payment reduction (MPPR) policy has been
extended to a number of nuclear diagnostic and diagnostic imaging
procedures. We continue our work to recognize efficiencies in this area
with a new CY 2011 policy to expand the MPPR policy to additional
combinations of imaging services and to therapy services for CY 2011 as
described in section II.C.4. of this final rule with comment period.
We note the AMA RUC has also established a screen to identify
services performed by the same physician on the same date of service 95
percent of the time or more. Over the past 2 years, the CPT Editorial
Panel has established new bundled codes to describe a comprehensive
service for certain combinations of these existing services that are
commonly furnished together, and the AMA RUC has recommended work
values and direct PE inputs to CMS for these comprehensive service
codes that recognize the associated efficiencies. We look forward to
working with the AMA RUC in this joint effort to examine codes commonly
reported together and more appropriately value common combinations
services.
We address the fifth category of potentially misvalued codes (codes
with low relative values, particularly those that are often billed
multiple times for a single treatment) in section II.C.3.b. of this
final rule with comment period. That is, we have provided a list of
services with low work RVUs that are commonly reported with multiple
units in a single encounter and requested that the AMA RUC review these
codes that we have identified as potentially misvalued.
The sixth category (codes which have not been subject to review
since the implementation of the RBRVS (the so-called ``Harvard-valued
codes'')) also continues to be addressed by CMS and the AMA RUC on an
ongoing basis. As we noted in the CY 2009 PFS proposed rule (73 FR
38589), there were at that time approximately 2,900 codes, representing
$5 billion in annual spending, that were originally valued using
Harvard data and had not subsequently been evaluated by the AMA RUC.
Consequently, in CY 2009, we requested that the AMA RUC engage in an
ongoing effort to review the remaining Harvard-valued codes, focusing
first on the high-volume, low-intensity codes (73 FR 38589). In
response to our request, the AMA RUC initially conducted an analysis of
Harvard-valued services with utilization above 10,000 services per
year, which resulted in a list of 296 distinct services (73 FR 69883).
The AMA RUC, in its public comment on the CY 2009 proposed rule, stated
that it believes it would be effective to limit any review to these 296
services and also noted that of the 296 services identified, 23 had
already been identified by another screen and were in the process of
being reviewed (73 FR 69883). To date, the AMA RUC has reviewed and
submitted to CMS recommendations for revised work RVUs and/or direct PE
inputs for a number of Harvard-valued codes, prioritizing those codes
with utilization of over 1 million services. The AMA RUC and CMS intend
to continue our ongoing assessment of Harvard-valued codes, next
targeting codes with utilization of over 100,000 services.
Finally, the seventh category of potentially misvalued codes in
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) is all
other codes determined to be appropriate by the Secretary. In this
category, CMS has previously proposed policies and requested that the
AMA RUC review codes for which there have been shifts in the site-of-
service (site-of-service anomalies), as well as codes that qualify as
``23-hour stay'' outpatient services. The policies for valuation of
both the site-of-service anomaly codes and the ``23-hour stay'' codes
are developed further in sections II.C.3.d. and e., respectively, of
this final rule with comment period. For CY 2011, we have also
identified codes with low work RVUs but that are high volume based on
claims data as another category of potentially misvalued codes and
referred these codes to the AMA RUC for review, as discussed in section
II.C.3.b. of this final rule with comment period. In addition, for CY
2011 we have newly targeted key codes that the AMA RUC uses as
reference services for valuing other services, termed ``multispecialty
points of comparison'' services, and referred these to the AMA RUC for
review as potentially misvalued codes as described in section II.C.3.a.
of this final rule with comment period. Finally, we note the AMA RUC
has also established screens to identify potentially misvalued codes in
additional categories, including codes with a high intra-service work
per unit of time (IWPUT) and codes representing services that had been
surveyed by one specialty, but are now performed by a different
specialty. We will continue to review AMA RUC recommendations for
revised work RVUs and/or direct PE inputs for codes that fall into
these categories.
As a result of the combined efforts of CMS and the AMA RUC to
address potentially misvalued codes, for CY 2009 the AMA RUC
recommended revised work values and/or PE inputs for 204 misvalued
services (73 FR 69883). For CY 2010, an additional 113 codes were
identified as misvalued and the AMA RUC provided new recommendations
for revised work RVUs and/or PE inputs to CMS as discussed in the CY
2010 PFS final rule with comment period (74 FR 61778). Upon review of
the AMA RUC-recommended work RVUs, CMS accepted the majority of the
values as appropriate adjustments to the RVUs under the PFS, in
accordance with section 1848(c) of the Act. However, for a number of
codes, mainly the site-of-service anomaly codes, we indicated that
although we would accept the AMA RUC valuations for these codes on an
interim basis through CY 2010, we had ongoing concerns about the
methodology used by the AMA RUC to review these services (73 FR 69883
and 74 FR 61776 through 61778, respectively). In the CY 2010 PFS final
rule with comment period, we requested that the AMA RUC reexamine the
site-of-service anomaly codes and use the building block methodology to
revalue the services (74 FR 61777). In that same rule, we also stated
that we would continue to examine these codes and consider whether it
would be appropriate to propose additional changes in future
rulemaking. We discuss our CY 2011 proposals with respect to these
codes in section II.C.3.d. of this final rule with comment period.

[[Page 73217]]

c. Validating RVUs of Potentially Misvalued Codes
In addition to identifying and reviewing potentially misvalued
codes, section 1848(c)(2)(L) (as added by section 3134 of the ACA)
specifies that the Secretary shall establish a formal process to
validate relative value units under the PFS. The validation process may
include validation of work elements (such as time, mental effort and
professional judgment, technical skill and physical effort, and stress
due to risk) involved with furnishing a service and may include
validation of the pre-, post-, and intra-service components of work.
The Secretary is directed to validate a sampling of the work RVUs of
codes identified through any of the seven categories of potentially
misvalued codes specified by section 1848(c)(2)(K)(ii) of the Act (as
added by section 3134 of the ACA). Furthermore, the Secretary may
conduct the validation using methods similar to those used to review
potentially misvalued codes, including conducting surveys, other data
collection activities, studies, or other analyses as the Secretary
determines to be appropriate to facilitate the validation of RVUs of
services. Currently, while CMS does assess the AMA RUC-recommended work
RVUs to determine if the recommendations constitute appropriate
adjustments to the RVUs under the PFS, we intend to establish a more
extensive validation process of RVUs in the future in accordance with
the requirements of section 1848(c)(2)(L) of the Act (as added by
section 3134 of the ACA). Therefore, in the CY 2011 PFS proposed rule
(75 FR 40068), we solicited public comments on possible approaches and
methodologies that we should consider for a validation process. We were
interested in public comments regarding approaches, including the use
of time and motion studies, to validate estimates of physician time and
intensity that are factored into the work RVUs for services with rapid
growth in Medicare expenditures, one of the categories that the statute
specifically directs CMS to examine. We indicated that we plan to
discuss the validation process in a future PFS rule once we have
considered the matter further in conjunction with any public comments
and other input from stakeholders that we receive.
Comment: Some commenters were skeptical that there could be viable
alternative methods to the existing AMA RUC code review process for
validating physician time and intensity that would preserve the
appropriate relativity of specific physician's services under the
current payment system. These commenters generally urged CMS to rely
solely on the AMA RUC to provide valuations for services under the PFS.
A number of commenters expressed the belief that since CMS has reviewed
the AMA RUC recommendations for codes and generally accepted these
valuations in the past, these actions constitute a ``CMS validation
process.'' The commenters asserted that this current ``CMS validation
process'' more than meets the requirement of section 1848(c)(2)(L) of
the Act (as added by section 3134 of the ACA).
In addition, a number of commenters opposed the approach of using
time and motion studies to validate estimates of physician time and
intensity, stating that properly conducted time and motion studies are
extraordinarily expensive and, given the thousands of codes paid under
the PFS, it would be unlikely that all codes could be studied. The
commenters generally opposed applying different methodologies to
valuing different services under the PFS and supported using a
consistent methodology for all codes. Some commenters observed that it
would be extremely difficult for CMS to establish a process by which to
validate a sample of work RVUs under the PFS because of the relative
nature of the system. Specifically, one commenter noted that the
``advantages of a relative system are considerable--they allow scaling
based on available funds and make it far easier for a payer such as
Medicare to set rates for multiple services with a single adjustment to
the conversion factor. However, one disadvantage of a relative system
is that it cannot be externally validated unless all components are
included in the validation. Services cannot be examined for absolute
accuracy, only for relative precision. If we identify some component of
the calculation used to generate the RVU that is incorrect, it is
impossible to know whether this is a systemic error or an issue with an
individual code. If it is a systemic error, then it does not invalidate
the relative value system, which merely must operate on an even playing
field.'' That is, many commenters believe that as long as appropriate
relativity is maintained in the work RVUs for services valued under the
PFS, the specific methodology for valuing services is less important.
Accordingly, many commenters expressed support for the AMA RUC's use of
``magnitude estimation'' to develop the recommended value for a service
and urged CMS to accept the AMA RUC's recommendations as the most
informed and best estimation of the true value of physician work for a
service.
In contrast, some commenters declared that ``the flaws inherent in
the RUC system are the lack of accountability and transparency.'' These
commenters believe that the AMA RUC's composition as a professional
panel puts cognitive services at a disadvantage and suggested that
``the composition of the RUC needs to be modified to more accurately
reflect the desired workforce composition. At present primary care
specialties are under-represented which we [the commenters] believe
contributes to the overvaluation of procedural codes and undervaluation
of cognitive codes.'' Similarly, other commenters noted that while
certified registered nurse anesthetists (CRNAs) furnished approximately
32 million anesthesia services in the United States annually and can
bill Medicare directly for their services, ``the AMA RUC excludes CRNAs
from directly participating in its deliberations because CRNAs are not
physicians.'' These commenters noted that ``without fair representation
by all specialties that bill Part B directly, CMS' reliance on the AMA-
RUC as representing the professional views and knowledge of all
healthcare specialties is deeply flawed.'' The commenters also advised
that ``while the RUC relies on persuasion and brokering deals, RVUs
need to be validated empirically.'' In general, these commenters
believe that since section 1848(c)(2)(L) of the Act (as added by
section 3134 of the ACA) expressly specifies that CMS has the authority
to conduct surveys and studies and collect data, CMS should develop a
process that uses empirical evidence as the basis for validation of
work RVUs.
Response: We agree with the commenters that the work before us to
develop a formal validation process as specified by section
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) will be
a challenging but worthwhile effort to ensure accurate valuation of
physician work under the PFS. While we have reviewed AMA RUC
recommendations for codes and frequently accepted these valuations in
the past, we disagree with the commenters' assertion that these actions
constitute a formal CMS validation process as envisioned by section
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). Section
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA) clearly
specifies a new requirement that ``the Secretary shall establish a
process to validate relative value units under the fee schedule.''
While we solicited

[[Page 73218]]

comments on the possibility of using time and motion studies to support
a future validation process, we understand that these studies would
require significant resources and we remain open to suggestions for
other approaches to developing a validation process.
In response to the commenters who raised the issue of the AMA RUC's
most commonly used approach for valuing codes, referred to as
``magnitude estimation,'' we note that the AMA RUC does not rely on a
single consistent methodology to value codes. Based on our historical
and current review of the AMA RUC recommendation summaries which
accompany the work RVU recommendations for each code newly valued or
revalued by the AMA RUC each year, we have noticed that the AMA RUC
appears to use a variety of methodologies in its valuation process. For
some codes, the AMA RUC uses magnitude estimation in conjunction with
survey data from surveys conducted by the specialty societies to
support the values. For other codes, the AMA RUC uses magnitude
estimation to override the results of the survey data, recommending to
CMS a value that is not based on survey data, but rather, justified in
terms of its appropriate relativity within the system to other similar
services. The AMA RUC may also elect to use a crosswalk approach in
valuing a code by applying a work value from a currently valued code to
the code under review based on the clinical similarity of the
procedures or explicit considerations of pre-, intra-, and post-service
time. In some instances, we note that the AMA RUC has asserted that it
uses the building block methodology to value the code, a methodology we
have historically supported (74 FR 61777). Since the AMA RUC uses a
variety of methodologies for valuing codes, not just magnitude
estimation supported by survey data, or our recommended methodology of
valuation based on building blocks, we foresee that validation of the
work RVUs will be complex, perhaps requiring an initial study of the
all the possible valuation methodologies currently being employed by
the AMA RUC so that we can better understand how relativity between
services under the PFS has developed and been maintained over the
years.
As we have stated previously (69 FR 66243), because the AMA RUC is
an independent committee, we are not in a position to set the
requirements for AMA RUC membership regarding primary care specialties
or other types of practitioners. Concerned stakeholders should
communicate directly with the AMA RUC regarding its professional
composition. We note that we alone are responsible for all decisions
about establishing the RVUs for purposes of PFS payment so, while the
AMA RUC provides us with recommendations regarding the work and direct
PE inputs for new and revised CPT codes in the context of its broad
expertise, we determine the interim final RVUs for all new or revised
services. Additionally, the interim RVUs are subject to public comment
and we respond to those comments in a final rule when we adopt the
final RVUs for the new and revised CPT codes. We believe that the
formal validation process will further complement the ongoing work of
the AMA RUC to provide recommendations to us regarding the valuation of
PFS services.
Comment: While a number of commenters strongly opposed CMS' plans
to develop a formal validation process, many other commenters expressed
support for the development and establishment of a system-wide
validation process of the work RVUs under the PFS. The commenters
commended CMS for seeking new approaches to validation, as well as
being open to suggestions from the public on this process. A number of
commenters submitted technical advice and offered their time and
expertise as resources for CMS to draw upon in any examination of
possible approaches to developing a formal validation process.
Furthermore, MedPAC advised that a formal validation process should
include validating the fee schedule's estimates of physician time.
MedPAC noted that ``Contract research for CMS and the Assistant
Secretary for Planning and Evaluation has shown that some of the time
estimates are likely too high. In addition, the Government
Accountability Office has found that the fee schedule does not
adequately account for efficiencies occurring when a physician
furnishes multiple services for the same patient on the same day.''
Finally, MedPAC suggested that CMS should consider alternative
approaches, ``such as collecting data on a recurring basis from a
cohort of practices and other facilities where physicians and
nonphysician clinical practitioners work.''
Some commenters noted that ``involving RUC experts, those who are
most intimately acquainted with and possess the deepest level of
expertise and experience makes the most sense'' and stated that these
individuals ``are also those best equipped to provide insights and
guidance to help shape an independent validation system.'' A number of
commenters asked CMS to confirm that stakeholders would be given the
opportunity to comment on any specific proposals for a validation
process that CMS plans to implement.
Response: We thank the many commenters who generously offered to
help and provided technical suggestions, including the use of
statistical modeling and possible sources of data that we should
consider in developing a validation process. We will review MedPAC's
suggestions to examine physician time in the formal validation process.
We will also consider the commenters' recommendation that we include
the AMA RUC and other professional groups who also have a stake in
ensuring appropriate payment for practitioners' services. As we stated
previously, we intend to establish a more extensive validation process
of RVUs in the future in accordance with the requirements of section
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA). We note
that MedPAC, in providing comments to the CY 2011 PFS proposed rule,
``strongly supports efforts to improve the accuracy of the fee
schedule's RVUs.'' We plan to discuss the validation process in more
detail in a future PFS rule once we have considered the matter further
in conjunction with the public comments that we have received in
response to our solicitation in the CY 2011 proposed rule as well as
other input from stakeholders. Moreover, we note that any proposals we
would make on the formal validation process would be subject to public
comment, and we would consider those comments before finalizing any
policies.
3. CY 2011 Identification and Review of Potentially Misvalued Services
In this section, we discuss codes that may be potentially misvalued
according to five different criteria:
Codes on the multi-specialty points of comparison list;
Codes with low work RVUs commonly billed in multiple units
per single encounter;
Codes with high volume and low work RVUs;
Codes with site-of-service anomalies; and
Codes that qualify as ``23-hour stay'' outpatient
services.
a. Codes on the Multispecialty Points of Comparison List
The AMA RUC uses a scale referred to as the multispecialty points
of comparison (MPC) to evaluate the reasonableness of a specialty
society's recommended RVU value for a service.

[[Page 73219]]

The MPC list contains reference codes of established comparison
services that are used in the valuation of new codes. The current MPC
list consists of 316 codes which the AMA RUC may use to compare and
contrast the relativity of codes under review to existing relative
values. Since the AMA RUC may use the values on the MPC list as a basis
for relativity when determining the values for new, revised, and newly
reviewed codes (including potentially misvalued codes), it is essential
that the services on the MPC list be appropriately valued since any
codes misvalued on the MPC list could contribute to the misvaluing of
other codes under review. While we believe that the entire MPC list
should be assessed to ensure that services are paid appropriately under
the PFS, we prioritized the review of the MPC list, ranking the codes
by allowed service units and charges based on CY 2009 claims data. We
proposed to refer the codes in Table 9 to the AMA RUC for review in CY
2011.

Table 9--Codes on the MPC List Referred for AMA RUC Review
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
66984......................... Cataract surg w/iol, 1 stage.
97110......................... Therapeutic exercises.
43239......................... Upper GI endoscopy, biopsy.
20610......................... Drain/inject, joint/bursa.
78815......................... Pet image w/ct, skull-thigh.
45385......................... Lesion removal colonoscopy.
45380......................... Colonoscopy and biopsy.
11721......................... Debride nail, 6 or more.
17000......................... Destruct premalg lesion.
92980......................... Insert intracoronary stent.
74160......................... Ct abdomen w/dye.
71020......................... Chest x-ray.
11100......................... Biopsy, skin lesion.
66821......................... After cataract laser surgery.
52000......................... Cystoscopy.
92083......................... Visual field examination(s).
73721......................... Mri jnt of lwr extre w/o dye.
93010......................... Electrocardiogram report.
77334......................... Radiation treatment aid(s).
92250......................... Eye exam with photos.
95810......................... Polysomnography, 4 or more.
77003......................... Fluoroguide for spine inject.
11056......................... Trim skin lesions, 2 to 4.
76700......................... Us exam, abdom, complete.
77290......................... Set radiation therapy field.
77300......................... Radiation therapy dose plan.
43235......................... Uppr gi endoscopy, diagnosis.
71275......................... Ct angiography, chest.
95900......................... Motor nerve conduction test.
31231......................... Nasal endoscopy, dx.
95165......................... Antigen therapy services.
94060......................... Evaluation of wheezing.
31575......................... Diagnostic laryngoscopy.
------------------------------------------------------------------------

Comment: While some commenters agreed with CMS that the entire MPC
list should be assessed to ensure that services are paid appropriately
under the PFS, and supported the proposal that the AMA RUC review the
services listed in Table 9, a number of other commenters expressed
surprise that CMS seemed to be suggesting that any code on the MPC list
could be classified as potentially misvalued. Many commenters noted
that the MPC list of codes is considered the ``gold standard'' within
the PFS and it is used to help judge the appropriate relativity of
procedures across specialties. A number of commenters assured CMS that
the codes on the MPC list have been thoroughly vetted and, therefore,
these commenters took issue with CMS for implying that the codes could
somehow be considered potentially misvalued. Specifically, one
commenter noted, ``[t]he assumption of the specialties, the RUC and CMS
has been that these services are appropriately valued and well
established.'' Another commenter expressed the concern as follows:
``[c]hallenging the rank order of the MPC list essentially negates 20
years of RUC work. Obtaining new data to validate the old data
inevitably leads to the problem of what should be done if the data
yield different results. Is there any reason to believe that a newer
survey is a more accurate survey, or that the data analysis and
subsequent opinion of the current or future RUCs will be more valid
than that of previous RUCs? Admittedly data collection methods have
become more refined in the past 20 years, but that neither means nor
implies that relativity amongst physician services has changed.'' Some
commenters reminded CMS that the AMA RUC is already planning to review
some codes on the MPC list in the coming year, while other commenters
noted that some of the codes on the MPC list have been reviewed by the
AMA RUC within the past 6 years. Some commenters did not believe that
some of the well-established services on the MPC list would need
another review and that the resources required to re-review such
services could be better used elsewhere. Furthermore, some commenters
believe that if a code has been surveyed as part of the potentially
misvalued services initiative during the last 5 years and it is
identified again using a different screen, that it need not be
resurveyed again.
Finally, several commenters noted that while reviewing all the
codes on the MPC list would ``be a substantial undertaking for the RUC,
properly valuing these services will help restore equity in the
physician payment system.'' The commenters further suggested that CMS
should specify to the AMA RUC what it considers good survey
methodology, including the use of peer review and time studies.
Response: We note that the vast majority of commenters, whether
they supported or opposed our proposal, acknowledged the significant
and central role that the MPC list plays in the valuation of services
under the PFS. Because it is currently the ``gold standard'' to which
other codes, across specialties, are compared, we agree with the
commenters who suggested that codes on this list should be vetted,
though we disagree that we should assume this has been done or occurs
automatically and systematically. We also acknowledge that the AMA RUC
recently has reviewed some of the codes and is planning to review more
codes on the MPC list. Our proposal suggested prioritizing the review
of the codes by ranking them according to utilization which, in our
view, would potentially provide the most immediate benefit to the
system.
If a code on the MPC list has not been reviewed recently--certainly
more recently than 6 years ago--we believe that the code is vulnerable
to being potentially misvalued and that the misvaluation of an MPC code
could disproportionately affect the correct valuation of other related
services under the PFS. Given the rapid changes in medical practice, we
have no reason to believe that the relativity of the MPC codes would
not have changed over the past 20 years and we would expect that more
recent survey data would more accurately reflect the physician work in
current medical practice. If the codes are resurveyed and newer more
accurate data are available, we would support using the most recent
available data to value physician work under the PFS, which is
consistent with our general policy to use the most current data
whenever possible and practicable to update the PFS.
Given the evolving review process of the AMA RUC over the past
several years, CMS' strong interest in ensuring current and appropriate
physician work values for PFS services, and the increased emphasis on
revaluing established services that are potentially misvalued, we are
requesting that the AMA RUC provide a current and comprehensive
recommendation on the appropriate physician work value, including
describing and affirming the methodology for the recommended work
value, for all of the codes listed in Table 9. To the extent the AMA
RUC chooses to limit its work in reexamining MPC codes that have
recently been evaluated, consistent with our usual practice, we will
consider the context when we evaluate the AMA RUC's recommendation for
the value of the code.

[[Page 73220]]

Although valuation is ultimately our responsibility, the AMA RUC
and CMS remain partners in ensuring the appropriate valuation of
physician work for services under the PFS and we believe our proposal
serves to enhance this process. Accordingly, after consideration of the
public comments we received, we are finalizing our CY 2011 proposal and
we look forward to receiving the AMA RUC's recommendations for the
codes listed in Table 9.
b. Codes With Low Work RVUs Commonly Billed in Multiple Units Per
Single Encounter
Consistent with section 1848(c)(2)(K)(ii) of the Act (as added by
section 3134 of the ACA) which identifies categories of potentially
misvalued codes for our review, we believe services with low work RVUs
that are commonly billed with multiple units in a single encounter are
an additional appropriate category for identifying potentially
misvalued codes. An example of a high multiple/low work RVU service is
CPT code 95004 (Percutaneous tests (scratch, puncture, prick) with
allergenic extracts, immediate type reaction, including test
interpretation and report by a physician, specify number of tests). For
purposes of compiling a list of the high multiple/low work RVU
services, we defined a high multiple service as one that is commonly
performed in multiples of 5 or more per day. Then, we selected from
high multiple services with work RVUs of less than or equal to 0.5
RVUs. We note that in selecting 5 per day as the minimum threshold for
the number of common services performed in a multiple service
encounter, we intended to establish a meaningful threshold which, in
conjunction with the threshold for work RVUs of 0.5 RVUs or less, would
produce a reasonable number of services for the RUC to review that have
substantial total work RVUs for the comprehensive service furnished
during a single treatment. That is, as a general example, with a work
RVU threshold of 0.5 RVUs and a multiple threshold of 5 per day, the
total work RVUs for a typical treatment would equate to 2.5 RVUs, which
is approximately comparable to a high level office visit, an
interpretation of a complex imaging procedure, or a minor surgical
procedure.
In the CY 2011 PFS proposed rule (75 FR 40069), we requested that
the AMA RUC review the codes in Table 10.

Table 10--Codes With Low Work RVUs That are Commonly Billed in Multiple
Units Referred for AMA RUC Review
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
95904......................... Sense nerve conduction test.
17003......................... Destruct premalg les, 2-14.
95004......................... Percut allergy skin tests.
11101......................... Biopsy, skin add-on.
95024......................... Id allergy test, drug/bug.
76000......................... Fluoroscope examination.
95144......................... Antigen therapy services.
95010......................... Percut allergy titrate test.
88300......................... Surgical path, gross.
95027......................... Id allergy titrate--airborne.
95015......................... Id allergy titrate--drug/bug.
95148......................... Antigen therapy services.
------------------------------------------------------------------------

c. Codes With High Volume and Low Work RVUs
We believe that codes that have low work RVUs but are high volume
based on claims data are another category of potentially misvalued
codes. Although these codes have low work RVUs (less than or equal to
0.25 RVUs), the high utilization of these codes represents significant
expenditures under the PFS such that their appropriate valuation is
especially important. Table 11 contains a list of such codes and we
requested that the AMA RUC review these codes in the CY 2011 PFS
proposed rule (75 FR 40069).

Table 11: Codes With Low Work RVUs That Are High Volume Referred for AMA
RUC Review
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
71010.......................... Chest x-ray.
73510.......................... X-ray exam of hip.
97035.......................... Ultrasound therapy.
88313.......................... Special stains group 2.
73630.......................... X-ray exam of foot.
72100.......................... X-ray exam of lower spine.
73030.......................... X-ray exam of shoulder.
73562.......................... X-ray exam of knee, 3.
73560.......................... X-ray exam of knee, 1 or 2.
94010.......................... Breathing capacity test.
77052.......................... Comp screen mammogram add-on.
88304.......................... Tissue exam by pathologist.
73564.......................... X-ray exam, knee, 4 or more.
72170.......................... X-ray exam of pelvis.
74000.......................... X-ray exam of abdomen.
73610.......................... X-ray exam of ankle.
11719.......................... Trim nail(s).
73620.......................... X-ray exam of foot.
92567.......................... Tympanometry.
73110.......................... X-ray exam of wrist.
73130.......................... X-ray exam of hand.
93701.......................... Bioimpedance, cv analysis.
72040.......................... X-ray exam of neck spine.
92543.......................... Caloric vestibular test.
------------------------------------------------------------------------

Comment: A number of commenters agreed with CMS' proposal for the
AMA RUC to review codes with low work RVUs that are commonly billed
with multiple units, and codes with high volume and low work RVUs.
Other commenters did not support these proposals based on a belief that
just because a code has low work RVUs, the conclusion should not
necessarily be drawn that the code is potentially misvalued.
Response: While we do not believe that low work RVUs automatically
indicate that the code is misvalued, we believe that some codes in this
category may be vulnerable to being potentially misvalued because they
have not been subject to review recently, there are particular
challenges associated with establishing appropriate low work RVUs for
services, and these services would not likely be subject to AMA RUC
revaluation without CMS' recommendation. Accordingly, after
consideration of the public comments we received, we are finalizing our
CY 2011 proposal and we look forward to receiving the AMA RUC's
recommendation for the codes listed in Tables 10 and 11.
d. Codes With Site-of-Service-Anomalies
In previous years, we requested that the AMA RUC review codes that,
according to the Medicare claims database, have experienced a change in
the typical site of service since the original valuation of the code.
For example, we have found services that originally were furnished in
the inpatient setting but for which current claims data show the
typical case has shifted to being furnished outside the inpatient
setting. Since the procedures were typically performed in the inpatient
setting when the codes were originally valued, the work RVUs for these
codes would have been valued to include the inpatient physician work
furnished, as well as to reflect the intensive care and follow-up
normally associated with an inpatient procedure. If the typical case
for the procedure has shifted from the inpatient setting to an
outpatient or physician's office setting, it is reasonable to expect
that there have been changes in medical practice, and that such changes
would represent a decrease in physician time or intensity or both. The
AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes
for CY 2009 and 11 codes for CY 2010 that were identified as having
site-of-service anomalies.
In the CY 2010 PFS proposed and final rules with comment period (74
FR 33556 and 74 FR 61777, respectively), we encouraged the AMA RUC to
utilize the building block methodology when revaluing services with
site-of-service

[[Page 73221]]

anomalies. Specifically, where the AMA RUC has determined in its review
that changes in the inclusion of inpatient hospital days, office
visits, and hospital discharge day management services (that is, the
``building blocks'' of the code) are warranted in the revaluation of
the code, we asked the AMA RUC to adjust the site-of-service anomaly
code for the work RVUs associated with those changes.
Additionally, we suggested that in cases where the AMA RUC has
adjusted the pre-service, intra-service and post-service times of the
code under review, the AMA RUC should also make associated work RVU
adjustments to account for those changes. However, we remained
concerned that in the AMA RUC's recommendations of the work RVUs for
the CYs 2009 and 2010 site-of-service anomaly codes, the AMA RUC may
have determined that eliminating or reallocating pre-service and post-
service times, hospital days, office visits, and hospital discharge day
management services was appropriate to reflect the typical case that is
now occurring in a different setting, but the work RVUs associated with
those changes may not have been systematically extracted or reallocated
from the total work RVU value for the service.
In the CYs 2009 and 2010 PFS final rules with comment period (73 FR
69883 and 74 FR 61776 through 61778, respectively), we indicated that
although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had
ongoing concerns about the methodology used by the AMA RUC to review
these services. We requested that the AMA RUC reexamine the site-of-
service anomaly codes and use the building block methodology to revalue
the services (74 FR 61777). We also stated that we would continue to
examine these codes and consider whether it would be appropriate to
propose additional changes in future rulemaking.
Accordingly, in preparation for CY 2011 rulemaking, we conducted a
comprehensive analysis of the codes that the AMA RUC reviewed for CYs
2009 and 2010 due to site-of-service anomaly concerns. We
systematically applied the reverse building block methodology to the 29
codes from CY 2009 and 11 codes from CY 2010 as follows:
First, we obtained the original work RVU value assigned to
the code (this is the ``starting value'') and made a list of the
building block services with RVUs that were originally associated with
the code (that is, before the AMA RUC reviewed the code for site-of-
service anomalies).
Next, we examined the AMA RUC-recommended changes to the
building blocks of the code.
We then deducted the RVUs associated with the AMA RUC's
recommended eliminations from the code's starting RVU value.
Generally, the AMA RUC eliminated inpatient hospital visit building
blocks from the value of the code since the site-of-service for the
code has shifted from the inpatient setting to another setting. We
noted in some cases, the AMA RUC left an inpatient hospital visit in
the valuation of the code. We believe this is inconsistent with the
change in the site-of-service to non-inpatient settings. Accordingly,
we adhered to the methodology and deducted the RVUs associated with all
inpatient hospital visits from the starting value. In cases where the
AMA RUC recommended adding or substituting outpatient visits, we also
added or substituted the RVUs associated with those changes to the
starting value. If the AMA RUC recommended changes to the pre-, intra-,
or post-service times, we calculated the incremental change in RVUs
associated with that time and either added or deducted that RVU amount
from the starting value. We noted that the RVU values associated with
the incremental time change were calculated using the intensity
associated with the particular pre-, intra-, or post-period. For the
intensity of the intra-service period, we utilized the original IWPUT
associated with the code. The AMA RUC generally recommended allowing
only half of a hospital discharge day management service for the site-
of-service anomaly codes. That is, CPT code 99238 (Hospital discharge
day management; 30 minutes or less) has a work RVU value of 1.28;
therefore, half the value associated with CPT code 99238 is 0.64.
Accordingly, if a code had one CPT code 99238 listed as part of the
original valuation, we deducted 0.64 RVUs from the starting value.
We standardized the methodology so that each of the site-of-service
anomaly codes had half of a hospital discharge day management service
value accounted in the valuation. Finally, we noted that while we
eliminated the RVUs associated with all inpatient hospital visits built
into the code's starting value, because the typical case no longer
occurs in the inpatient setting, we allowed for the possibility that in
some cases, some part of the work which had been furnished in the
inpatient setting may continue to be furnished even in the outpatient
setting. Therefore, to be conservative in our deductions of work RVUs
associated with the inpatient hospital codes from the starting values,
we allowed the intra-time of any inpatient hospital visits included in
the original valuation to migrate to the post-service period of the
code. Accordingly, while we deducted the full RVUs of an inpatient
hospital visit from the starting value, we added the intra-service time
of the inpatient hospital visit to the post-service time of the code
and accounted for the incremental change in RVUs. The following
description provides an example of our methodology.
CPT code 21025 (Excision of bone (e.g., for osteomyelitis or bone
abscess); mandible) has a starting value of 11.07 RVUs. Table 12 shows
the building blocks that are included in the original valuation of the
code.

Table 12
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Median intra- Immediate post- Original
Pre-service time service time service time 99231 99232 99238 99211 99212 99213 IWPUT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
75 min........................ 120 min......... 43 min.......... 1 visit.......... 1 visit.......... 1 visit.......... 2 visits......... 2 visits......... 2 visits......... 0.0145
(0.76 RVUs)...... (1.39 RVUs)...... (1.28 RVUs)...... (0.36 RVUs)...... (0.96 RVUs)...... (1.94 RVUs)......
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The AMA RUC removed two inpatient hospital visits and reduced the
outpatient visits from 6 to 4 visits. Table 13 shows the building
blocks that were recommended for CY 2009 by the AMA RUC after its
review of the code for site-of-service anomalies.

[[Page 73222]]

Table 13
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Median intra- Immediate post- Original
Pre-service time service time service time 99231 99232 99238 99211 99212 99213 IWPUT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
85 min........................ 90 min.......... 30 min.......... 2 visits......... 2 visits......... 0.0530
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Next we calculated the RVUs associated with the changes to the
building blocks recommended by the AMA RUC. We note that the immediate
post-service value of 0.38 RVUs (Table 14) includes 30 minutes of
intra-service time from inpatient hospital CPT code 99231 (Level 1
subsequent hospital care, per day). Also, the median intra-service
value of 0.44 RVUs (Table 14) was determined using the starting IWPUT
value of 0.0145. Additionally, our methodology accounted for a half of
a hospital discharge day management service (CPT code 99238) for the
site-of-service anomaly code. Table 14 shows the RVU changes to the
building blocks that were calculated based on the methodology discussed
above.

Table 14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Median intra- Immediate post-
Pre-service time service time service time 99231 99232 99238 99211 99212 99213
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.22 RVUs...................... -0.44 RVUs........ 0.38 RVUs......... -0.76 RVUs......... -1.39 RVUs........ -0.64 RVUs........ -0.36 RVUs........ .................. ..................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the final step, the RVUs associated with the changes to the
building blocks recommended by the AMA RUC (Table 14) were deducted
from or added to the starting value of 11.07 RVUs, which resulted in
the CY 2011 reverse building block value of 8.08 RVUs (11.07 + 0.22-
0.44 + 0.38 - 0.76 - 1.39 - 0.64 - 0.36 = 8.08).
The methodology discussed above was applied to each of the site-of-
service anomaly codes from CYs 2009 and 2010 and the results are
summarized in Tables 15 and 16.
BILLING CODE 4120-01-P

[[Page 73223]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.245

[[Page 73224]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.246

BILLING CODE 4120-01-C
For most codes in Tables 15 and 16, the CY 2011 reverse building
block methodology produced a value that was somewhat lower than the AMA
RUC-recommended value. While our results suggested that the majority of
the codes with site-of-service anomalies continue to be overvalued
under the AMA RUC's most recent recommendations, we also found that the
methodology may produce a result that is considerably reduced or, in
several cases, a negative value. We understand that in previous years,
stakeholders have expressed confusion as to why the application of a
building block methodology would produce negative values. We believe in
some cases, the starting value, that is, the original work RVU, may
have been misvalued using building block inputs that were not
consistent with the service, although the overall work value of the
code may have been consistent with the values for other similar
services. Moreover, a number of these services are the Harvard-valued
codes, for which the RVUs were established many years ago based on
historical inputs that may no longer be appropriate for the code. An
attempt to extract the RVUs associated with these inappropriate inputs
through the reverse building block methodology could produce aberrant
results. Furthermore, in some cases, we noticed that the original IWPUT
of the code was negative even before the code was reviewed by the AMA
RUC for a site-of-service anomaly. A negative value for the IWPUT is
counterintuitive to the IWPUT concept, indicating that the code was
originally misvalued at the building block level. At a minimum, we
believe that in cases where the reverse building block methodology
produced aberrant results, and where clinical review indicated a need
for further analysis, the codes should be referred back to the AMA RUC
for review and new valuation should be performed based on the building
block methodology.
We noted the application of the reverse building block methodology
is an objective way to account for changes in the resources resulting
from the change in the site-of-service in which the typical service is
furnished. However, because relative values under the PFS are
``relative,'' that is, where work relative value units for a code are
established relative to work relative value units for other codes, the
recommended methodology of valuing services based on input building
blocks is best applied within the context of the AMA RUC discussion.
For example, we recognize that the AMA RUC looks at families of codes
and may assign RVUs based on a particular code ranking within the
family. This method of valuing services preserves relativity within the
relative value scale for that code family. However, we have stated that
we believe the relative value scale requires each service to be valued
based on the resources used in furnishing the service as specified in
section 1848(c)(1)(A) of the Act, which defines the physician work
component to include ``the portion of the resources used in furnishing
the service that reflects physician time and intensity in furnishing
the service.'' Furthermore, section 1848(c)(2)(C)(i) of the Act
specifies that ``the Secretary shall determine a number of work
relative value units (RVUs) for the service based on the relative
resources incorporating physician time and intensity required in
furnishing the service.'' Read together, these two sections of the
statute support our intention to rely on the building block methodology
to determine appropriate work RVUs for codes.
We noted that we continue to rely on the extensive expertise
provided by the AMA RUC to recommend appropriate input building blocks
for codes. Additionally, the AMA RUC's unique infrastructure and broad
perspective permits the valuation of a code within the context of
relativity to the entire relative value system. Therefore, we believe
that the recommended methodology of valuing services based on input
building blocks is best applied within the context of the AMA RUC
discussion.
Accordingly, in the CY 2011 PFS proposed rule (75 FR 40072), we
requested that the AMA RUC review the CPT codes displayed in Tables 15
and 16. In addition, where the application of the CY 2011 reverse
building block methodology produced an aberrant result that is clearly
not a reflection of physician work for the service, we requested that
the AMA RUC review the

[[Page 73225]]

input building blocks and recommend an appropriate RVU value that is
both consistent with the building blocks of the code and appropriate
relative to the values for other codes in the family. For other codes
where the application of the CY 2011 reverse building block methodology
produced a result that is consistent with the physician work for the
service, we encouraged the AMA RUC to confirm the values and recommend
these work values for CY 2011. In this way, we hoped to receive new AMA
RUC recommendations for all of the codes in Tables 15 and 16 for CY
2011. Furthermore, we indicated that if the recommendations that we
received from the AMA RUC were not consistent with the building block
methodology and not appropriate relative to the values of other
services, and the application of the CY 2011 reverse building block
methodology produced a result that CMS medical advisors believe is
consistent with the work for the service, we proposed to adopt the CY
2011 reverse building block methodology values that are listed in
Tables 15 and 16 for CY 2011. In cases where the reverse building block
methodology produced a negative work value, we suggested that the AMA
RUC review and revise the building blocks of the code so that a new
valuation could be determined based on the building block methodology.
For such codes, if the revised recommendations that we hoped to receive
from the AMA RUC were still not consistent with the building block
methodology upon revision, because we could not pay for these services
based on negative work RVUs, we proposed to modify the AMA RUC-
recommended values for these codes as CMS determined to be clinically
appropriate and adopt the CMS-modified RVUs on a interim final basis
for CY 2011.
In their future work, we urged the AMA RUC to use the building
block methodology when valuing services or provide CMS with extensive
rationale for cases where the AMA RUC believes the building block
methodology is inappropriate for a specific code. Since section
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA)
specifies that the Secretary shall establish a process to validate work
RVUs of potentially misvalued codes under the PFS, as we have discussed
earlier in this section, we believe codes that are valued using the
building block methodology would be more likely to meet the standards
of a systematic RVU validation process that could be developed in
accordance with the requirements of the statute.
Comment: While several commenters supported CMS' recommendation to
use the reverse building block methodology to value physician work for
codes identified as having site-of-service anomalies, the majority of
commenters strongly opposed the reverse building block methodology,
expressing concern that the methodology produced very low or negative
work RVUs for a number of the codes listed in Tables 14 and 15. Several
letter writing campaigns by groups of providers and beneficiaries
affected by some of the codes listed in Tables 14 and 15 produced
scores of comments expressing confusion and alarm that CMS appeared to
be on the verge of finalizing negative work RVUs. Some commenters noted
that the values calculated by the application of the reverse building
block methodology would result in rank order anomalies across the PFS.
Many commenters reiterated CMS' observation that some of the codes
were originally Harvard-valued, for which the RVUs were established
many years ago based on historical inputs that may no longer be
appropriate for the code, and an attempt to extract the RVUs associated
with these inappropriate inputs through the reverse building block
methodology would produce aberrant (that is, very low or negative)
results. Some commenters disagreed with CMS' statement that if the
typical case for the procedure has shifted from the inpatient setting
to an outpatient or physician's office setting, it would be reasonable
to expect that there have been changes in medical practice, and that
such changes would represent a decrease in physician time, or
intensity, or both. These commenters believe that that this assumption
is fundamentally wrong and that the reverse actually may be true. One
commenter noted, ``When a procedure migrates from the inpatient to the
outpatient setting, the physician work and practice expense actually
increase. The result is more office visits, more utilization of office
staff, more consumption of office supplies, and no decrease in legal
liability to the physician (and in some instances increased legal
liability as functions formerly performed by hospital staff are now
done by physician office staff).''
A number of commenters asserted that any mathematical or
computational methodology used to value physician work is simply
absurd. Many commenters stated their preference for the AMA RUC's
established valuation process which the commenters believe is based on
specialty society survey data. Other commenters asserted that the AMA
RUC's use of magnitude estimation is the only methodology that makes
sense in assigning physician work values to individual services because
the PFS is a relative system and maintaining appropriate relativity
between the services is paramount in valuing physician work.
Response: We acknowledge that commenters overwhelmingly objected to
the proposed reverse building block methodology because, in some cases,
it produced very low or negative physician work values. While we
explained in the proposed rule (75 FR 40071 through 40072) the possible
reasons why negative values could be generated in the application of
the reverse building block methodology, the commenters generally
disregarded this explanation and summarily dismissed the methodology as
invalid based on the reasoning that negative work values are absurd.
Responding to the commenters who were concerned that CMS was preparing
to implement negative work RVUs imminently, we assure the commenters
that at no time was this a possibility, as we made clear in the CY 2011
PFS proposed rule (75 FR 40072) where we acknowledge that we could not
pay for services based on negative work RUVs. As we stated in the
proposed rule, in cases where the reverse building block methodology
produced a negative work value, we suggested that the AMA RUC review
and revise the building blocks of the code so that a new valuation
could be determined based on the building block methodology. We further
proposed that if we did not believe the AMA RUC recommended values were
consistent with the building block methodology, we would modify the
recommended values as we determined to be clinically appropriate and
adopt the modified RVUs on an interim final basis for CY 2011.
The AMA RUC has not provided revised work recommendations to us for
these codes for CY 2011. Therefore, in light of the strong public
opposition to the reverse building block methodology and since we
remain convinced that the values for the codes with site-of-service
anomalies listed in Tables 14 and 15 continue to be misvalued based on
our clinical review of the building blocks for those services as
recommended previously by the AMA RUC, we believe that the most
appropriate action is to continue to await the further AMA RUC review
of these codes that we requested in the CY 2011 PFS proposed rule (75
FR 40072). However, after consideration of the public comments we
received, we are modifying our CY 2011 proposal and we will not apply
the reverse building block methodology to value any of these codes for
CY 2011 as we proposed. We

[[Page 73226]]

are requesting that the AMA RUC reconsider its previously recommended
values that have been applied on an interim basis in CYs 2009 and 2010,
as applicable, and revise the work RVUs to better reflect the intensity
of the services and the revised physician times and post-procedure
visits included in the valuation of these codes. As we stated in the CY
2011 PFS proposed rule (75 FR 40072), we suggest that the AMA RUC
review and revise the building blocks of the codes so that a new
valuation can be determined based on the building block methodology.
Until we receive the revised values from the AMA RUC for CY 2012 and
can make a determination regarding them, we will continue to accept the
existing AMA RUC-recommended work RVUs listed in Tables 14 and 15 on an
interim basis for CY 2011. We would follow our usual method of
reviewing the AMA RUC recommendations in the context of the associated
valuation methodologies it used for CY 2012 and would either accept the
recommendations for these codes or provide alternative work values that
would be adopted on an interim final basis for CY 2012 and open to
public comment on the CY 2012 PFS final rule with comment period.
e. Codes With ``23-hour'' Stays
In the CY 2010 PFS proposed rule (74 FR 33557), we requested that
the AMA RUC review services that are typically performed in the
outpatient setting and require a hospital stay of less than 24 hours.
We stated in the proposed rule that we believed these to be primarily
outpatient services and expressed concern that the value of evaluation
and management (E/M) visits for inpatients was inappropriately included
in the valuation of codes that qualify as ``23-hour stay'' outpatient
services.
We received a number of comments in response to the discussion in
the CY 2010 proposed rule. The AMA RUC stated that it already values
stays of less than 23 hours appropriately by reducing the hospital
discharge day management service (that is, CPT code 99238), from 1 day
to a half day. The AMA RUC also explained that when the AMA RUC refers
to 23-hour stay services in discussions at AMA RUC meetings, it is
referring primarily to services that are reported in the Medicare
claims database as typically outpatient services, but where the patient
is kept overnight and, on occasion, even longer in the hospital.
Because the AMA RUC believes the patient stays overnight in the
hospital, it believes the inclusion of inpatient E/M visits to be
appropriate in the valuation of this category of codes.
We believe that the 23-hour stay issue encompasses several
scenarios. The typical patient is commonly in the hospital for less
than 24 hours, which often means the patient may indeed stay overnight
in the hospital. On occasion, the patient may stay longer than a single
night in the hospital; however, in both cases, the patient is
considered for Medicare purposes to be a hospital outpatient, not an
inpatient, and our claims data support that the typical 23-hour stay
service is billed as an outpatient service. Accordingly, we believe
that the valuation of the codes that fall into the 23-hour stay
category should not reflect work that is typically associated with an
inpatient service. For example, inpatient E/M visit codes such as CPT
codes 99231 (Level 1 subsequent hospital care, per day); 99232 (Level 2
subsequent hospital care, per day); and 99233 (Level 3 subsequent
hospital care, per day), should not be included at the full value in
the valuation of 23-hour stay services.
Currently, the valuation of 23-hour stay services is conducted in a
nonuniform manner by the AMA RUC. The AMA RUC has indicated that it
currently includes a half hospital discharge day management service and
no hospital inpatient visits for outpatient services with expected
hospital stays of 23 hours or less. In contrast, for those outpatient
services where the AMA RUC believes that the recovery period could be
longer than 23 hours, the AMA RUC stated in its comment on the CY 2010
PFS proposed rule that it currently includes a full hospital discharge
day management service and one or more inpatient E/M visits in the
code's value. However, we note the typical 23-hour stay service is
billed as an outpatient service and so long as the typical case
continues to be billed as an outpatient service, we believe the code
should not incorporate physician work values for services that are
typically associated with an inpatient service. In the CY 2010 PFS
proposed rule and final rule with comment period (74 FR 33556 and 74 FR
61777, respectively), we stated that we believed the use of inpatient
E/M visit codes for services rendered in the post-service period for
outpatient 23-hour stay procedures would result in overpayment for pre-
and post-service work that would not be furnished. Accordingly, we
proposed in the CY 2010 proposed rule (74 FR 33556 through 33557) not
to allow any additional inpatient E/M service to be billed for care
furnished during the post-procedure period when care is furnished for
an outpatient service requiring less than a 24-hour hospital stay.
However, we find it is plausible that while the patient receiving
the 23-hour stay service remains a hospital outpatient, the patient
would typically be cared for by the physician furnishing the procedure
during that post-procedure period. While we do not believe that post-
procedure hospital ``visits'' would be at the inpatient level since the
typical case is an outpatient who would be ready to be discharged from
the hospital in 23 hours or less, we agree that the intra-service time
of the inpatient hospital visit may be included in the valuation for
the 23-hour stay code.
Accordingly, for CY 2011 we modified our proposed CY 2010 approach
and suggested that in the future, when the AMA RUC reviews new and
potentially misvalued codes that are identified as 23-hour stay
services, the AMA RUC would apply the following methodology:
Begin with the starting RVU value of the 23-hour stay code
under review and decrease the hospital discharge day management service
from one day to a half day.
Deduct the RVUs of inpatient hospital visits from the
starting RVU value.
Reallocate the time associated with the intra-service
portion of the inpatient hospital visits to the immediate post-service
time of the 23-hour stay code under review.
Example: A 23-hour stay code is currently valued at 15 RVUs and has
1 hospital discharge day management service and 1 level 3 subsequent
hospital care visit incorporated in this value.
Applying step (1): 15-0.64* = 14.36
Applying step (2): 14.36-2** = 12.36
Applying step (3): 12.36 + (30 minutes x 0.0224)*** =
13.032 RVUs

* Value associated with \1/2\ hospital discharge day management
service.
** Value associated with an inpatient hospital visit, CPT code
99233.
*** Value associated with the reallocated intra-service time
multiplied by the post-service intensity of the 23-hour stay code.

Finally, we note that since work relative value units are
established by the Secretary in the context of relativity to other
codes in the system, the recommended methodology for the evaluation of
23-hour stay codes is best applied within the context of relativity. We
appreciate that the AMA RUC has the ability to assess the 23-hour stay
code after application of the recommended methodology to ensure

[[Page 73227]]

appropriate relativity of this code and other codes within the system.
We strongly encourage the AMA RUC to apply the recommended methodology
to ensure the consistent and appropriate valuation of the physician
work for these services.
Comment: A number of commenters asserted that if a service is
performed in the hospital and the patient stays overnight, the work of
the physician is typically the same regardless of whether the hospital
designates the patient receiving the services as an inpatient or
outpatient. Other commenters supported CMS' position in that it is
appropriate for physicians' services related to the post-procedure care
of the patient to be recognized and the intra-service time of the
inpatient hospital visit should be included in the valuation for the
23-hour stay code. Some commenters noted that recent issues associated
with hospital observation care may also be impacting CPT observation
care codes, and these commenters ``request that any changes in the 23+
hour stay policy be deferred until after the RUC conducts its
consideration of hospital observation services in February 2011.''
Response: While some commenters advocated for a deferral on the
issue of valuing 23-hour stay services, we note that a number of
commenters supported CMS' proposed approach. As we stated in the CY
2010 PFS proposed rule (74 FR 33557) and affirmed in the CY 2011 PFS
proposed rule (75 FR 40072), we believe these services, for a typical
patient, would be considered for Medicare purposes to be hospital
outpatient services, not inpatient services, and our claims data
support that the typical 23-hour stay service is billed as an
outpatient service. Furthermore, since the typical patient commonly
remains in the hospital for less than 24 hours, even if the stay
extends overnight, and discharge from the hospital is therefore
imminent, we believe the acuity of the typical patient is less than
that of a typical inpatient who is admitted to the hospital, resulting
in less intensity for the physician work to care for the hospital
outpatient immediately following a 23-hour stay procedure. Accordingly,
we believe that the valuation of the codes that fall into the 23-hour
stay category should not reflect physician work that is typically
associated with an inpatient service. Furthermore, we do not believe
that it would be more beneficial to suspend valuing 23-hour services in
the manner we discussed in the proposed rule until after the AMA RUC's
review of hospital observation care services. Even if the AMA RUC were
to provide future recommendations to us for valuing surgical procedures
in which hospital observation care services were substituted for
hospital inpatient care visits, we believe that we should treat the
valuation of the physician time in the same manner as discussed
previously, that is, by valuing the intra-service time of the hospital
observation care service in the immediate post-service time of the 23-
hour stay code being valued.
Accordingly, in light of the support from the commenters, we are
finalizing our proposed approach to valuing 23-hour stay services by
allowing the intra-service portion of the subsequent hospital care
visits (or observation care visits in the future if the AMA RUC were to
recommend them instead as building blocks for outpatient surgical
services) furnished to outpatients in the hospital post-procedure to be
allocated to the immediate post-service time of the procedure to
account for the physician work in these cases. We encourage the AMA RUC
to apply this methodology itself in the recommendations it provides to
us for valuing 23-hour stay codes, in order to ensure the consistent
and appropriate valuation of the physician work for these services.
4. Expanding the Multiple Procedure Payment Reduction (MPPR) Policy to
Additional Nonsurgical Services
a. Background
Medicare has a longstanding policy to reduce payment by 50 percent
for the second and subsequent surgical procedures furnished to the same
patient by the same physician on the same day, largely based on the
presence of efficiencies in the practice expense (PE) and pre- and
post-surgical physician work. Effective January 1, 1995, the MPPR
policy, with the same percentage reduction, was extended to nuclear
medicine diagnostic procedures (CPT codes 78306, 78320, 78802, 78803,
78806, and 78807). In the CY 1995 PFS final rule with comment period
(59 FR 63410), we indicated that we would consider applying the policy
to other diagnostic tests in the future.
Consistent with recommendations of MedPAC in its March 2005 Report
to Congress on Medicare Payment Policy, under the CY 2006 PFS, the MPPR
policy was extended to the technical component (TC) of certain
diagnostic imaging procedures performed on contiguous areas of the body
in a single session (70 FR 70261). The reduction recognizes that, for
the second and subsequent imaging procedures, there are some
efficiencies in clinical labor, supplies, and equipment time. In
particular, certain clinical labor activities and supplies are not
duplicated for subsequent procedures and, because equipment time and
indirect costs are allocated based on clinical labor time; those would
also be reduced accordingly.
The imaging MPPR policy currently applies to computed tomography
(CT) and computed tomographic angiography (CTA), magnetic resonance
imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound
services within 11 families of codes based on imaging modality and body
region. When we adopted the policy in CY 2007, we stated that we
believed efficiencies were most likely to occur when contiguous body
areas are the focus of the imaging because the patient and equipment
have already been prepared for the second and subsequent procedures,
potentially yielding resource savings in areas such as clerical time,
technical preparation, and supplies (70 FR 45850). Therefore, the MPPR
policy currently applies only to procedures involving contiguous body
areas within a family of codes, not across families, and to those
procedures that are furnished in a single session. Additionally, while
the MPPR policy applies to TC-only services and to the TC of global
services, it does not apply to professional component (PC) services.
Under the current imaging MPPR policy, full payment is made for the
TC of the highest-paid procedure, and payment is reduced by 25 percent
of the TC for each additional procedure when an MPPR scenario applies.
We had originally planned to phase in the MPPR policy over a 2-year
period, with a 25 percent reduction in CY 2006 and a 50 percent
reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act
of 2005 (DRA) (Pub. L. 109-171) capped the PFS payment amount for most
imaging procedures at the amount paid under the hospital outpatient
prospective payment system (OPPS). In view of the DRA, we determined
that it would be prudent to retain the MPPR at 25 percent while we
continued to examine the appropriate payment levels (71 FR 69659). The
DRA also exempted reduced expenditures attributable to the MPPR policy
from the PFS budget neutrality provision. Most recently, effective July
1, 2010, section 3135(b) of the ACA increased the MPPR on the TC of
imaging services under the policy established in the CY 2006 PFS final
rule with comment period from 25 to 50 percent and exempted the reduced
expenditures attributable to this further change from the PFS budget
neutrality provision.

[[Page 73228]]

In the July 2009 GAO report entitled, ``Medicare Physician
Payments: Fees Could Better Reflect Efficiencies Achieved when Services
are Provided Together,'' the GAO recommended that we take further steps
to ensure that fees for services paid under the PFS reflect
efficiencies that occur when services are furnished by the same
physician on the same beneficiary on the same day. The GAO recommended
the following: (1) Expanding the existing MPPR policy to the PC to
reflect efficiencies in physician work for certain imaging services;
and (2) expanding the MPPR to reflect PE efficiencies that occur when
certain nonsurgical, nonimaging services are furnished together. The
GAO also encouraged us to focus on service pairs that have the most
impact on Medicare spending.
In the March 2010 report, MedPAC noted its concerns about
mispricing of services under the PFS. MedPAC indicated that it would
explore whether expanding the unit of payment through packaging or
bundling would improve payment accuracy and encourage more efficient
use of services.
In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR
33554, respectively), we stated that we planned to analyze nonsurgical
services commonly furnished together (for example, 60 to 75 percent of
the time) to assess whether an expansion of the MPPR policy could be
warranted. MedPAC encouraged us to consider duplicative physician work,
as well as PE, in any expansion of the MPPR policy.
b. CY 2011 Expansion of the Imaging Technical Component MPPR Policy to
Additional Combinations of Imaging Services
Over the past 2 years, the AMA RUC has examined several services
billed 90 percent or more of the time together as part of the
potentially misvalued service initiative and, in several cases, created
one code to describe the complete service, with a value that reflects
the expected efficiencies. Notwithstanding the bundling work of the
RUC, there may be additional imaging and other diagnostic services that
are furnished together less than 90 percent of the time where we could
still expect efficiencies in the TC, and in some cases in the PC,
resulting in potential overpayment for these services under current
policy when furnished together.
Section 1848(c)(2)(K) of the Act (as added by section 3134 of the
ACA) specifies that the Secretary shall identify potentially misvalued
codes by examining multiple codes that are frequently billed in
conjunction with furnishing a single service, and review and make
appropriate adjustments to their relative values. As a first step in
applying this provision, we proposed a limited expansion of the current
imaging MPPR policy for CY 2011. We will continue to review other
possible expansions of the MPPR policy to the TC and/or PC of imaging
procedures or other diagnostic tests for the future. Any further
changes will be addressed in future rulemaking.
In a related policy for hospital outpatient payment of imaging
services, in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68559 through 68569), the OPPS adopted a policy to pay for two or more
CT and CTA, MRI and MRA, or ultrasound procedures furnished in the same
session through a single composite ambulatory payment classification
(APC) group. These composite APC payments were based on the 11 families
of codes subject to the MPPR under the PFS that were collapsed into 3
imaging families for the OPPS according to their modality--1 for
ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services.
At that time, we stated our belief that the contiguous body area
concept that was incorporated in the PFS imaging families was not
necessary for potential efficiencies to be achieved in an imaging
session. We provided examples to illustrate that we would not expect
second and subsequent imaging services of the same modality involving
noncontiguous body areas to require duplicate facility resources
(comparable to the TC under the PFS) for clinical labor activities such
as greeting the patient, providing education and obtaining consent,
retrieving prior exams, setting up an intravenous infusion, and
preparing and cleaning the room, any more than second and subsequent
imaging procedures of the same modality involving contiguous body
areas. While we noted that multiple imaging claims under the OPPS are
generally within the same imaging modality and involve contiguous body
areas the vast majority of the time, we estimated that the collapsed 3
families, as opposed to the 11 PFS families, would add 12 percent
additional claims to those eligible for a single composite APC payment
under the OPPS based on the provision of 2 or more imaging services in
a single session, allowing us to capture additional claims with
efficiencies.
Taking into consideration the OPPS policy that was adopted in the
CY 2009 OPPS/ASC final rule with comment period, for CY 2011 under the
PFS, we proposed to apply the MPPR regardless of family, that is, the
policy would apply to multiple imaging services furnished within the
same family of codes or across families. This proposal would simplify
the current imaging MPPR policy in a way that is consistent with the
standard PFS MPPR policy for surgical procedures that does not group
procedures by body region. Therefore, the MPPR would apply to CT and
CTA, MRI and MRA, and ultrasound procedures services furnished to the
same patient in the same session, regardless of the imaging modality,
and not limited to contiguous body areas.
Because of the different pieces of equipment used for CT/CTA, MRI/
MRA, and ultrasound procedures, it would be unlikely that a single
practitioner would furnish more than one imaging procedure involving 2
different modalities to one patient in a single session where the
proposed MPPR policy would apply. On the other hand, while most
multiple procedures furnished with a single modality in one session
would involve procedures currently assigned to one of the 11 imaging
families, it would not be uncommon for more than one imaging procedure
of the same modality to be furnished across families and, like the
scenario for hospital outpatient imaging services, we would expect
efficiencies to occur in these cases. Therefore, we believe that an
expansion of the current imaging MPPR policy to account for
efficiencies in such situations would allow us to pay more
appropriately for these multiple imaging procedure sessions, consistent
with our ongoing efforts to address misvalued services.
The expansion of the imaging MPPR policy to include all of the
current codes in a single family to which the standard 50 percent
reduction for second and subsequent procedures would apply would reduce
payment for 20 percent more services than the current MPPR policy under
the PFS. Thus, in CY 2011, we would capture additional efficiencies and
pay more appropriately in these cases. We note that section
1848(c)(2)B)(v)(VI) (as added by section 3135(b) of the ACA)) specifies
that reduced expenditures attributable to the increase in the imaging
MPPR from 25 to 50 percent in CY 2011 are excluded from the PFS budget
neutrality adjustment. However, the reduced payment for code
combinations that would newly be subject to the imaging MPPR policy
under this proposal would be made in a budget neutral manner under the
PFS, as these new combinations are not included under section
1848(b)(4)(D) (as added by section 3135(b) of the ACA), which addresses
``single-session imaging to

[[Page 73229]]

consecutive body parts'' under the established imaging MPPR policy.
We also proposed to add the CY 2010 codes displayed in Table 17 of
the CY 2011 PFS proposed rule (75 FR 40075) to the list of imaging
services subject to the MPPR policy in CY 2011. These four codes (CPT
codes 75771 through 75774) were newly created for CY 2010 and are
similar to codes currently in imaging family 2, titled CT and CTA
(Chest/Thorax/Abdomen/Pelvis).
We further note that new CY 2010 CPT codes 74261 (Computed
tomography (CT) colonography, diagnostic, including image
postprocessing; without contrast material) and 74262 (Computed
tomography (CT) colonography, diagnostic, including image
postprocessing; with contrast material(s) including non-contrast
images, if performed) were added to the CY 2010 MPPR policy through the
July 2010 PFS quarterly update, with a retroactive effective date of
January 1, 2010. These codes replaced CPT code 0067T (Computed
tomographic (CT) colonography (that is, virtual colonoscopy);
diagnostic) in CY 2010, which was on the list of procedures subject to
the imaging MPPR policy prior to CY 2010.
As discussed earlier in this section, reduced expenditures
attributable to the increase in the MPPR for multiple imaging
procedures to consecutive body parts (that is, those previously
designated in the same family of codes) are exempt from the budget
neutrality provision of the PFS. However, the reduced expenditures
attributable to the MPPR for combinations of multiple imaging
procedures that we proposed for CY 2011 (the MPPR for multiple imaging
procedures not involving consecutive body parts) would be subject to
budget neutrality adjustment under the PFS. We note that this
formulation for whether reduced expenditures are exempt from budget
neutrality applies both to procedures currently subject to the imaging
MPPR and to new codes that would be subject to the policy in CY 2011
and in future years. To the extent that imaging procedures described by
the new codes are furnished in combination with other procedures that
are subject to the imaging MPPR on consecutive body areas, the reduced
expenditures attributable to the MPPR for these combinations would be
exempt from the PFS budget neutrality adjustment.
Comment: With one exception, the commenters uniformly opposed the
proposal to consolidate the imaging families for application of the
imaging MPPR and urged CMS not to finalize the proposal. The exception
was MedPAC, which supported the policy as reasonable and consistent
with the hospital OPPS policy on multiple imaging and the PFS MPPR
policy for multiple surgical procedures, neither of which are limited
to procedures involving contiguous body areas.
Many commenters pointed out that the AMA RUC has worked to resolve
any duplication in the direct PE inputs for services commonly furnished
together over the past few years. The commenters stated that new
bundled services were implemented in CY 2010 and speculated that
additional ones would be implemented in the future and, therefore,
concluded that a general MPPR to adjust PFS payment when imaging
services are commonly furnished together is not necessary. The
commenters argued that any duplication in the PE should be resolved at
the code pair level. The AMA RUC urged CMS to continue to work within
the established processes and offered for its Practice Expense
Subcommittee to review specific code pairs about which CMS was
concerned regarding potential PE duplication and recommend a course of
action that would be fair and consistent.
Response: The imaging MPPR is not intended to supersede the AMA RUC
process that values services described by CPT codes. We encourage the
AMA RUC to continue examining code pairs for PE duplication based upon
the typical case and appropriately valuing new comprehensive codes for
bundled services that are established by the CPT Editorial Panel.
However, we believe that it is necessary to address the PE duplication
immediately for imaging code pairs that have not been recently reviewed
or bundled into single comprehensive codes. We note that as more code
combinations are bundled into a single complete service reported by one
CPT code, they would no longer be subject to the MPPR. For example,
there are new CY 2011 codes to describe abdominal and pelvic CT scans
furnished together, specifically CPT codes 74176 (Computed tomography,
abdomen and pelvis; without contrast material); 74177 (Computed
tomography, abdomen and pelvis; with contrast material); and 74178
(Computed tomography, abdomen and pelvis; without contrast material in
one or both body regions, followed by with contrast material(s) and
further sections in one or both body regions). We are accepting the AMA
RUC recommendations for the direct PE inputs for these codes for CY
2011 and, therefore, their TCs are valued accordingly. Whereas prior to
CY 2011, the 50 percent imaging MPPR would have applied to the TC of
the second service when an abdominal and pelvic CT were furnished in
the same imaging session, this will no longer be the case in CY 2011.
Instead, the TC payment for the comprehensive code will reflect the
valuing of the specific services furnished in combination with one
another. Thus, we believe our current and proposed MPPR formulations
are consistent with the AMA RUC's work to review code pairs for
potential PE duplication and to appropriately value comprehensive codes
for a bundle of component services.
Comment: Numerous commenters opposed applying the MPPR to
noncontiguous body area imaging services using the same modality and to
combinations of imaging services involving different modalities. Many
commenters indicated that there is no major duplication in clinical
labor activities when two studies of noncontiguous body areas using a
single imaging modality are furnished in the same session and even less
duplication when imaging services are furnished in a separate session
on the same day using different modalities. The commenters argued that
the duplication in clinical labor activities that occurs in the pre-
and post-operative periods for multiple surgical procedures does not
apply to imaging services.
More specifically, several commenters observed that the minimal
duplicate costs of a few minutes of technician time do not justify a 50
percent payment reduction in the TC for the second service. Some
commenters also believe that the imaging MPPR creates an incentive for
physicians to order separate procedures on different days, thereby
discouraging efficiencies. In addition, the commenters contended that
the imaging MPPR is detrimental to patient care, access, and
convenience.
One commenter asserted that it is not appropriate to compare the
OPPS composite ambulatory payment classification (APC) groups to
office-based imaging as a justification for expanding the imaging MPPR
under the PFS. The commenter cited an analysis of OPPS payment
demonstrating that CMS pays hospitals for the second imaging study at
nearly 100 percent of the amount paid for a single study, concluding
that not until the third study would the payment be reduced from the
sum of what would otherwise be paid under the OPPS if the studies were
performed alone.
Another commenter agreed that the current PFS imaging families
could be further collapsed to eliminate the contiguous body area
concept but opposed applying the MPPR across

[[Page 73230]]

modalities. The commenter suggested establishing three families to
parallel the modality-based APC groups used under the OPPS, that is,
CT/CTA, MRI/MRA, and ultrasound. Another commenter noted that highly
specialized clinics often treat complex conditions and perform multiple
imaging services on noncontiguous body areas primarily for good patient
care. As an example of a situation when complex imaging services are
used to diagnose and treat significant medical conditions, the
commenter indicated that a CT of the chest may be furnished, resulting
in a diagnosis of lung cancer. In addition, the same commenter noted
that appropriate treatment of the patient's neurological signs and
symptoms also requires a CT of the head, because primary lung tumors
account for 50 percent of all metastatic brain tumors. The commenter
explained that these medically necessary combinations of imaging
services are often performed in a single imaging session. Results of
the initial imaging service, contended the commenter, could change the
course of treatment for the patient and it would be prudent not to
delay or complicate a patient's treatment plan. The commenter also
pointed out that it is a convenience to the patient to have same day
access for all imaging services.
Another commenter acknowledged that while some efficiencies are
gained in certain situations and settings when multiple imaging
services are furnished together, the expanded MPPR policy would not
appropriately pay for the additional studies required for the majority
of patients with significant medical conditions. The commenter
explained that highly organized clinics treating these complex patients
often structure patient encounters so that there are intervening
consultations with multiple providers and additional tests in between
imaging services.
Response: While most multiple procedures furnished with a single
modality in 1 session would involve procedures currently assigned to 1
of the 11 imaging families, it would not be uncommon for more than 1
imaging procedure of the same modality to be furnished across families,
and we would expect efficiencies to occur in these cases. As noted by
MedPAC, the proposed PFS MPPR expansion to eliminate the concept of
contiguous body areas as the basis for a payment reduction due to
efficiencies is consistent with the established hospital OPPS policy on
multiple imaging and the PFS MPPR policy for multiple surgical
procedures, neither of which is limited to procedures involving
contiguous body areas. While we acknowledge that the OPPS composite
imaging APCs utilize a different payment methodology than an MPPR to
reflect the level of efficiencies when multiple imaging services are
furnished together, consideration of the specific body areas imaged is
not an aspect of the OPPS policy. The OPPS methodology continues to
distinguish among services using different imaging modalities in part
because of the statutory requirement that APCs be clinically
homogenous. This same limitation would not apply to an MPPR. Despite
the differences in their payment methodologies, both the OPPS and the
PFS strive to recognize the efficiencies in the TCs when multiple
imaging services are furnished together. We continue to believe that
there are significant efficiencies in the TCs when multiple imaging
procedures of the same modality are furnished on noncontiguous body
areas in the same imaging a session, and believe that an expanded
imaging MPPR under the PFS is an important policy refinement to pay
more appropriately for the comprehensive imaging service under such
circumstances.
Because most of the combinations of imaging services furnished in
one session that are not now subject to the imaging MPPR occur within
one modality, we believe it would be unnecessarily complex to continue
separate families (even if fewer than 11) for different imaging
modalities to address the limited circumstances when imaging services
furnished with more than one modality are performed in a single imaging
session. Even in these unusual cases, we would expect certain
efficiencies in the TCs, such as the establishment of venous access
only one time. Finally, the more general proposed policy would provide
a streamlined basis for our further consideration of other possible
expansions of an MPPR policy to the TC and/or PC of imaging procedures
or other diagnostic tests in the future.
Consistent with our current expectations for provider ordering
practices under the established imaging MPPR policy for single
modality, contiguous body area imaging studies, under an expanded MPPR
we would not expect providers to order multiple imaging procedures of
different modalities or for noncontiguous body areas on different days
or order different imaging sessions on the same day simply to garner
increased payment unless it were medically reasonable and necessary
that the studies be furnished on different days or in different
sessions on the same day. However, where it is medically necessary to
have intervening consultations among multiple providers or other
diagnostic tests furnished to a patient between imaging services on the
same day to which the MPPR would otherwise apply, such cases would
constitute separate imaging sessions and the MPPR would not apply.
Comment: Many commenters addressed CMS' assertion that because of
the different pieces of equipment used for CT/CTA, MRI/MRA, and
ultrasound procedures it would be unlikely that a single practitioner
would furnish more than one imaging procedure involving two different
modalities to one patient in a single session where the proposed MPPR
policy would apply. While most commenters agreed with this statement,
the commenters questioned why CMS would implement the proposal if this
were the case. When procedures are furnished across modalities, the
commenters believe them to be separate and distinct procedures with
little or no overlap and argue that efficiencies cannot be achieved.
The commenters asserted that CMS offered no data to support its
expectation that efficiencies would occur when different imaging
modalities are furnished at the same time. Many commenters requested a
more rigorous analysis, validated evidence to support the proposed
expansion, and an opportunity for stakeholders to comment on the
analysis.
A number of the commenters agreed that specialized staff with
different expertise and certification is often needed to furnish
services within the different imaging modalities. When multiple imaging
is necessary, the commenters explained that two appointments are
created, and the patient is checked in twice, prepared and instructed
twice, educated on each study independently, transported from one room
to another, and furnished separate supplies such as contrast and IV
tubing, following which the two rooms are cleaned.
Response: We agree with the majority of commenters that in most
cases a practitioner would not furnish more than one imaging procedure
involving two different modalities to one patient in a single session.
While there may be some instances where the MPPR applies to two
different modalities used in a single session, the MPPR would not apply
in most cases because this clinical scenario is uncommon. In response
to the commenters who questioned why we proposed to apply an MPPR
across modalities, we believe that if, in the unusual case, more than
one imaging service of different modalities were

[[Page 73231]]

furnished to a patient in a single session, there would be some
efficiencies in the TC, such as greeting the patient only one time and
setting up one intravenous line. We acknowledge that the application of
a general MPPR policy to numerous imaging service combinations may
result in an overestimate of the efficiencies in some cases and an
underestimate in others, but this can be true for any service paid
under the PFS, and we believe it is important to establish a general
policy to pay appropriately for the TCs of combinations of imaging
services upon which we may consider building in the future. We do not
believe that it is administratively efficient or necessary for
appropriate payment to maintain modality-specific imaging families
given the uncommon occurrences of pairs of imaging services involving
different modalities furnished by one practitioner on the same day to a
single patient that we observe in our claims data.
Comment: Several commenters generally opposed the inclusion of
nondiagnostic radiation oncology imaging procedures in any future
expansion of the MPPR policy, given the clinical differences between
radiation oncology and diagnostic imaging. In addition, one commenter
noted that cardiologists commonly provide echocardiography services and
peripheral vascular ultrasound tests. While both types of services use
ultrasound technology that resembles the technology used in the
ultrasound procedures currently subject to the imaging MPPR, the
commenter reported that these services are furnished using a different
machine and different staff who have different expertise so the imaging
MPPR policy.
Response: We did not propose to expand the existing contiguous body
area MPPR policy, which currently includes only nonobstetrical chest,
abdominal, and pelvic ultrasound services, to include peripheral
vascular ultrasound services or echocardiography services in CY 2011.
While we explained in the CY 2011 PFS proposed rule (75 FR 40074) that
we would continue to review other possible expansions of the MPPR
policy to the TC and/or PC of imaging procedures or other diagnostic
tests for the future, we have not proposed to do so at this time.
Further changes to include services such as nondiagnostic radiation
oncology imaging services or echocardiography or peripheral vascular
ultrasound services would be addressed in future rulemaking.
Comment: A few commenters reported that it is often difficult for
imaging providers to understand when an encounter begins and ends and,
therefore, urged CMS to better define a single session. They explained
that it is not always easy to identify when the use of the -59 modifier
(Distinct procedural services), denoting a separate session under the
current imaging MPPR policy, is appropriate. This ambiguity leaves the
responsibility for determining whether imaging services are furnished
in a separate session to the judgment of the imaging technologist,
leading to inconsistent determinations and, therefore, variable payment
for the same services furnished in similar clinical scenarios. One
commenter specifically requested further parameters of a separate
encounter be defined to include the same exam room, a specific
timeframe, or a specific action. Another commenter noted that
distinguishing separate sessions is a particular challenge for
ultrasound imaging.
Response: In the CY 2006 PFS final rule with comment period (70 FR
70262), we indicated that a single imaging session is one encounter
where a patient could receive one or more radiological studies. If a
patient has a separate encounter on the same day for a medically
necessary reason and receives a second imaging service, this would
represent a separate session. Physicians would report the -59 modifier
to indicate multiple sessions and the MPPR would not apply. This same
policy would continue in CY 2011 under the consolidation of the imaging
families to expand the imaging MPPR under the PFS. We believe that
providers' 5 years of previous experience with this policy should allow
them to continue to appropriately distinguish separate imaging sessions
by reporting the -59 modifier, even under the expanded MPPR policy. We
may provide further subregulatory guidance to providers on this issue
in the future in view of our CY 2011 expanded imaging MPPR policy if
specific issues arise that we believe warrant further clarification
regarding the characteristics of separate imaging sessions.
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to apply the 50 percent
imaging MPPR to all of the ultrasound, CT, CTA, MRI, and MRA services
to which the current contiguous body area and modality-specific policy
applies, regardless of the specific combinations of imaging services
furnished to the patient in a single session. We believe this proposal
is consistent with our overall strategy to pay more appropriately for
services that are commonly furnished together, consistent with section
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) that
instructs the Secretary to identify multiple codes that are frequently
billed in conjunction with furnishing a single service, and review and
make appropriate adjustments to their relative values.
As stated earlier in this section, expenditures attributable to the
increase in the MPPR for multiple imaging procedures to consecutive
body parts (that is, those previously designated in the same family of
codes) are exempt from the budget neutrality provision of the PFS.
However, the reduced expenditures attributable to the MPPR for new
combinations of multiple imaging procedures that we are finalizing for
CY 2011 (the MPPR for multiple imaging procedures not involving
consecutive body parts) would be subject to budget neutrality
adjustment under the PFS. We note that this formulation for whether
reduced expenditures are exempt from budget neutrality applies both to
procedures currently subject to the imaging MPPR and to new codes that
are subject to the policy in CY 2011 and in future years. To the extent
that imaging procedures described by the new codes are furnished in
combination with other procedures that are subject to the imaging MPPR
on consecutive body areas, the reduced expenditures attributable to the
MPPR for these combinations would be exempt from the PFS budget
neutrality adjustment.
The complete list of codes subject to the CY 2011 MPPR policy for
diagnostic imaging services is included in Addendum F to this final
rule with comment period and the CY 2011 code additions to the MPPR
policy are listed in Table 17. The codes being added to the policy are
those we proposed, as well as new CY 2011 codes or newly covered codes
that are clinically similar to the imaging codes subject to the MPPR in
CY 2010. The new codes include CPT codes 74176 (Computed tomography,
abdomen and pelvis; without contrast material); 74177 (Computed
tomography, abdomen and pelvis; with contrast material(s)); and 74178
(Computed tomography, abdomen and pelvis; without contrast material in
one or both body regions, followed by contrast material(s) and further
sections in one or both body regions). The newly covered codes are CPT
codes 72159 (Magnetic resonance angiography, spinal canal and contents,
with or without contrast material) and 73225 (Magnetic resonance
angiography, upper extremity, with or without contrast material). These
codes are being added on an interim final

[[Page 73232]]

basis and are open to public comment on this final rule with comment
period. The complete list of CPT codes newly added to the diagnostic
imaging MPPR for CY 2011 is displayed in Table 17 below.

TABLE 17--CPT Code Additions to the Diagnostic Imaging MPPR Policy for
CY 2011
------------------------------------------------------------------------
Subject to
comment in CY
CPT code Short descriptor 2011 PFS final
rule
------------------------------------------------------------------------
72159......................... Mr angio spine w/o & w/ Yes.
dye.
73225......................... Mr angio upr extr w/o Yes.
& w/dye.
74176......................... Ct abd & pelvis w/o Yes.
contrast.
74177......................... Ct abdomen & pelvis w/ Yes.
contrast.
74178......................... Ct abd & pelv 1+ Yes.
section/regns.
75571......................... Ct hrt w/o dye w/ca No.
test.
75572......................... Ct hrt w/3d image..... No.
75573......................... Ct hrt w/3d image, No.
congen.
75574......................... Ct angio hrt w/3d No.
image.
------------------------------------------------------------------------

c. CY 2011 Expansion of the MPPR Policy to Therapy Services
In the July 2009 GAO report entitled, ``Medicare Physician
Payments: Fees Could Better Reflect Efficiencies Achieved when Services
are Provided Together,'' the GAO found efficiencies when multiple
physical therapy services were furnished in one session and concluded
that an MPPR policy could be appropriate for these services. In the
report, the GAO noted that officials from the AMA RUC explained that
time spent on pre-service and post-service therapy activities is spread
across the number of services in a typical session in order to avoid
duplication of the PE for the services. Nevertheless, the GAO found
that there was duplication of certain activities in the intra-service
period, and provided the example of time spent testing range of motion
or muscle flexibility that was duplicated in commonly observed code
pairs.
In the typical clinical scenario for therapy services, we believe
that therapy services are misvalued for PFS payment when multiple
services are furnished to a patient in a single session because
duplicate clinical labor and supplies are included in the PE of the
services furnished. We believe this duplication should be accounted for
under the PFS, as we currently account for efficiencies in multiple
surgical and multiple diagnostic imaging procedures furnished in a
single session. Over the past 2 years, the AMA RUC has examined several
services billed 90 percent or more of the time together as part of its
potentially misvalued service initiative and, in several cases, created
one code to describe the complete service, with a value that reflects
the expected efficiencies. Notwithstanding the AMA RUC's analyses, in
most cases it has not created one code to describe a complete therapy
service, in part because many of the core therapy CPT codes are timed
codes based on increments of treatment time.
Therefore, in the CY 2011 PFS proposed rule (75 FR 40075), we
proposed a further step to implement section 1848(c)(2)(K) of the Act
(as added by section 3134 of the ACA) that specifies that the Secretary
shall identify potentially misvalued codes by examining multiple codes
that are frequently billed in conjunction with furnishing a single
service. For CY 2011 we proposed an MPPR policy for the HCPCS codes
listed in Table 18, specifically the separately payable ``always
therapy'' services that are only paid by Medicare when furnished under
a therapy plan of care. These services are designated ``always
therapy'' services regardless of who furnishes them and always require
therapy modifiers to be reported, specifically -GP (Services rendered
under outpatient physical therapy plan of care); -GO (Services rendered
under outpatient occupational therapy plan of care); or -GN (Services
rendered under outpatient speech-language pathology plan of care). The
therapy codes are available in a file on the CMS Web site at: http://www.cms.gov/TherapyServices/. We excluded both contractor-priced and
bundled codes from Table 18 because, under our proposal, an MPPR would
not be applicable for ``always therapy'' services furnished in
combination with these codes. In the case of bundled codes that are not
separately paid, there are no explicit efficiencies in the direct PE to
be reflected in payment for the second and subsequent therapy services
furnished to the patient on the same day. In the case of contractor-
priced codes, there is no nationally established pricing that could be
uniformly adjusted to reflect the expected efficiencies when multiple
therapy services are furnished.

Table 18--Separately Payable ``Always Therapy'' Services Proposed as
Subject to the CY 2011 MPPR Policy *
------------------------------------------------------------------------
CPT/HCPCS code Short descriptor
------------------------------------------------------------------------
92506......................... Speech/hearing evaluation.
92507......................... Speech/hearing therapy.
92508......................... Speech/hearing therapy.
92526......................... Oral function therapy.
92597......................... Oral speech device eval.
92607......................... Ex for speech device rx, 1hr.
92608......................... Ex for speech device rx addl.
92609......................... Use of speech device service.
96125......................... Cognitive test by hc pro.
97001......................... Pt evaluation.
97002......................... Pt re-evaluation.
97003......................... Ot evaluation.
97004......................... Ot re-evaluation.
97010......................... Hot or cold packs therapy.
97012......................... Mechanical traction therapy.
97016......................... Vasopneumatic device therapy.
97018......................... Paraffin bath therapy.
97022......................... Whirlpool therapy.
97024......................... Diathermy eg, microwave.
97026......................... Infrared therapy.
97028......................... Ultraviolet therapy.
97032......................... Electrical stimulation.
97033......................... Electric current therapy.
97034......................... Contrast bath therapy.
97035......................... Ultrasound therapy.
97036......................... Hydrotherapy.
97110......................... Therapeutic exercises.
97112......................... Neuromuscular reeducation.
97113......................... Aquatic therapy/exercises.
97116......................... Gait training therapy.
97124......................... Massage therapy.
97140......................... Manual therapy.
97150......................... Group therapeutic procedures.
97530......................... Therapeutic activities.
97533......................... Sensory integration.
97535......................... Self care mngment training.
97537......................... Community/work reintegration.
97542......................... Wheelchair mngment training.
97750......................... Physical performance test.
97755......................... Assistive technology assess.
97760......................... Orthotic mgmt and training.
97761......................... Prosthetic training.
97762......................... C/o for orthotic/prosth use.
G0281......................... Elec stim unattend for press.

[[Page 73233]]

G0283......................... Elec stim other than wound.
G0329......................... Electromagnetic tx for ulcers.
------------------------------------------------------------------------
*Excludes contractor-priced and bundled codes.

We did not propose an MPPR policy for ``sometimes therapy''
services, specifically those services that may be furnished under a
therapy plan of care or otherwise by physicians or NPPs as medical
services. We believe that the care patterns are different for the
latter group of services that may sometimes be furnished as therapy
services, and we noted that they are less commonly furnished with
multiple services in a single session than the ``always therapy''
services. In the discussion that follows, our reference to therapy
services means those HCPCS codes designated annually as ``always
therapy'' services by CMS.
Based on CY 2009 PFS claims data, we identified over 500 therapy
service code pairs billed for the same patient in a single session. We
then reviewed a sample of the most common therapy code pairs,
specifically those high volume code pairs with more than 250,000
combined services per year, to examine the potential for duplication in
the PE. These code pairs represented more than half of the occurrences
of therapy services billed together. While we acknowledged that the PE
inputs per service for some therapy services were included in the
direct PE database based on one-half of the total PE inputs required
for two services furnished in a single session, which would account for
some duplication, this was not the case for all combinations of therapy
services. Of the high volume therapy services examined, approximately
one-fourth of the code pairs were not valued based on two services. In
addition, we noted that the CY 2009 PFS claims data for services paid
under the PFS (excluding services furnished in facility settings that
were paid at PFS rates) show that when multiple therapy services are
billed on a claim for the same date of service, the median number is
four services per day. Therefore, even for those clinical labor times
that may reflect the allocation of total time across two units of
therapy services, we believe that some elements of the current PE
inputs are duplicated based on current patterns of therapy service
delivery where most multiple service claims involve delivery of more
than two services in a session.
In the CY 2011 proposed rule (75 FR 40076), we stated that
duplicate labor activities currently included in the PE for the service
period for these high volume pairs of therapy services are as follows:
clean room/equipment; education/instruction/counseling/coordinating
home care; greet patient/provide gowning; obtain measurements, for
example, ROM/strength/edema; and post-treatment patient assistance. The
most common duplicate supply item included in the PE was the
multispecialty visit pack. Examples of duplicated and unduplicated
labor activities and supplies for two sample therapy code pairs and our
estimates of potential clinically appropriate time and quantity
reductions for multiple service sessions (which were also included in
our proposed rule) are displayed in Table 19. We note that CY 2009 PFS
claims data for these sample code pairs include over 3.4 million pairs
of CPT codes 97112 (Therapeutic procedure, 1 or more areas, each 15
minutes; neuromuscular reeducation of movement, balance, coordination,
kinesthetic sense, posture, and/or proprioception for sitting and/or
standing activities) and 97110 (Therapeutic procedure, 1 or more areas,
each 15 minutes; therapeutic exercises to develop strength and
endurance, range of motion and flexibility) furnished by the same
practitioner on the same day and over 500,000 pairs of CPT codes 97001
(Physical therapy evaluation) and 97140 (Manual therapy techniques (eg,
mobilization/manipulation, manual lymphatic drainage, manual traction),
1 or more regions, each 15 minutes).
BILLING CODE 4120-01-P

[[Page 73234]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.247

[[Page 73235]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.248

BILLING CODE 4120-01-C
In the CY 2011 PFS proposed rule (75 FR 40078), we did not remove
minutes for clinical labor tasks that were not duplicated. For example,
for CPT code pair 97001 and 97140 the following tasks were not
duplicated: post treatment patient assistance; prep and position
patient; and prepare room, equipment, and supplies. In addition, we did
not remove any supply items that would be required for only one of the
separate services because these would not be duplicated in the PE
applicable to the combination of services. We estimated no reduction
for equipment time, even though efficiencies would be expected for
equipment that is used in both services when they are furnished
together. Finally, a corresponding reduction to the indirect expenses
would be appropriate since indirect costs are allocated partially based
on direct costs. For five high volume therapy code pairs that each
occur over 2 million times in PFS claims for multiple therapy services
and account for almost half of such claims, we estimated that the
resulting reduction in the PE for the lower paying code would range
from 28 to 56 percent.
As we summarized in the CY 2011 PFS proposed rule (75 FR 40078),
given the duplicative clinical labor activities and supplies as shown
in the code combination examples, we believe it would be appropriate to
extend the MPPR policy that is currently applied to surgical services
and the TC of imaging services, to the PE component of certain therapy
services. Specifically, we proposed to apply a 50 percent payment

[[Page 73236]]

reduction to the PE component of the second and subsequent therapy
services for multiple ``always therapy'' services furnished to a single
patient in a single day. Because we believed it would be difficult to
determine the precise beginning and end of therapy sessions and we did
not believe that beneficiaries would typically have more than one
therapy session furnished in a single day, we proposed to apply the 50
percent MPPR policy to the PE component of subsequent therapy services
furnished to the same patient on the same day, rather than limiting the
proposed policy to services furnished in the same session.
We noted that many therapy services are time-based CPT codes, so
multiple units of a single code may be billed for a single session that
lasts for a longer period of time than one unit of the code. The
proposed MPPR policy would apply to multiple units of the same therapy
service, as well as to multiple different services, when furnished to
the same patient on the same day. Therefore, we proposed that full
payment would be made for the service or unit with the highest PE and
payment would be made at 50 percent of the PE component for the second
and subsequent procedures or units of the same service.
We proposed that the work and malpractice components of the therapy
service payment would not be reduced. For therapy services furnished by
an individual or group practice or ``incident to'' a physician's
service, the MPPR would apply to all ``always therapy'' services
furnished to a patient on the same day, regardless of whether the
services are furnished in one therapy discipline or multiple
disciplines, for example, physical therapy, occupational therapy, or
speech-language pathology. The MPPR policy would apply to both those
services paid under the PFS that are furnished in the office setting
and those services paid at the PFS rates that are furnished by
outpatient hospitals, home health agencies, comprehensive outpatient
rehabilitation facilities (CORFs), and other entities that are paid by
Medicare for outpatient therapy services. Table 20 provides a sample
calculation of the current and proposed CY 2011 payment for multiple
therapy services furnished in on the same day. For those services paid
under the PFS, the PFS budget neutrality provision would apply so that
the estimated reduced expenditures for therapy services would be
redistributed to increase payment for other PFS services.

TABLE 20--Sample Payment Calculation for Multiple Therapy Services Furnished to a Single Patient on the Same Day
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY
Procedure 1 Procedure 1 Procedure 2 Current total 2011 total Proposed payment calculation
Unit 1 Unit 2 payment payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Work........................... $7.00 $7.00 $11.00 $25.00 $25.00 no reduction
PE............................. $10.00 $10.00 $8.00 $28.00 $19.00 $10 + (0.5 x $10) + (0.5 x $8)
Malpractice.................... $1.00 $1.00 $1.00 $3.00 $3.00 no reduction
------------------------------------------------------------------------------------------------------------------------
Total.......................... $18.00 $18.00 $20.00 $56.00 $47.00 $18 + $7 + (0.5 x $10) + $1 + $11
+ (0.5 x $8) + $1
--------------------------------------------------------------------------------------------------------------------------------------------------------

In the CY 2011 PFS proposed rule (75 FR 40078), we stated that we
believe the proposed therapy MPPR policy would provide more appropriate
payment for therapy services that are commonly furnished together by
taking into account the duplicative clinical labor activities and
supplies in the PE that are not furnished more than once in the single
therapy session. This approach is consistent with the statutory
requirement for the Secretary to identify, review and adjust the
relative values of potentially misvalued services under the PFS as
specified by section 1848(c)(2)(K) of the Act (as added by section 3134
of the ACA). We also believe this proposed policy is responsive to
continued concerns about significant growth in therapy spending and to
MedPAC and GAO recommendations regarding the expansion of MPPR policies
under the PFS to account for additional efficiencies. We observed that
paying more appropriately for therapy services based on PE relative
values that are adjusted for the clinical scenario under which the
services are furnished would result in reduced therapy expenditures,
and beneficiaries would be able to receive more medically necessary
outpatient therapy services before reaching the therapy cap. For a
further discussion of potential alternatives to the therapy caps, we
refer readers to section III.A.2. of this final rule with comment
period.
Comment: Many commenters opposed application of the proposed MPPR
policy to therapy services. The commenters characterized the proposal
as drastic, arbitrary, and unfair, resulting in across-the-board cuts
based on flawed assumptions that would lead to therapy underpayments
that would jeopardize access to necessary care and harm patients. The
commenters requested that CMS withdraw the proposal, study the issue
further, and share the analyses with the public.
In contrast, MedPAC supported the general direction of the proposed
policy, but suggested that CMS better justify how a 50 percent
reduction would capture the duplicate inputs related to multiple
therapy services performed in a single session. MedPAC also recommended
that CMS request that the AMA RUC review the values of all outpatient
therapy codes to ensure that the practice expenses are not duplicated,
regardless of whether or not the current values of those codes assume
that two services are furnished during a single visit.
Numerous commenters requested a detailed justification for the
proposed policy's 50 percent reduction, including an explanation of the
methodology used to calculate the new payments that would result. These
commenters asked CMS to work with stakeholders to finalize a policy
that would not adversely impact access to care, particularly in rural
and other underserved areas. The commenters further urged consideration
of other payment methods and alternatives to the therapy caps that
would preserve and improve access to therapy services. The commenters
stated that between 80 to 90 percent of physical therapy services
furnished in private practices would potentially be subject to the
MPPR, concluding that the policy would result in payment decreases of
19.2 percent and 17.8 percent for physical therapy services in
facilities

[[Page 73237]]

and offices, respectively, notably more than the CMS' impact estimate
of 11 percent for the proposed rule.
The commenters provided analyses to show that the duplication of
supplies is very limited and argued that a more thorough analysis of
duplication based on expert clinical review would result in
considerably lower estimates of duplication. For example, the AMA RUC
explained that for a typical single session combination of 2 units of
CPT code 97110 (Therapeutic procedure, 1 or more areas, each 15
minutes; therapeutic exercises to develop strength and endurance, range
of motion and flexibility) and one unit of 97140 (Manual therapy
techniques (e.g., mobilization/manipulation, manual lymphatic drainage,
manual traction), 1 or more regions, each 15 minutes), a $12 PE payment
reduction from the MPPR would be applied to adjust for $3.60 in
potentially duplicated costs.
Before implementing an MPPR, the commenters urged CMS to take time
to ensure that individual services were valued correctly based upon the
resources needed to deliver them. The commenters advised CMS to conduct
a more thorough analysis, taking into consideration the fact that the
direct PE inputs for therapy services were already reduced to avoid
duplication. The commenters alleged that CMS provided incorrect
examples of duplication in the proposed rule examples by overestimating
the duplication compared to the standard time allocated by the AMA RUC
for certain activities. The commenters explained that PE for therapy
services was valued by the AMA RUC based upon three units of service,
not two units of service as stated by CMS in the proposed rule. Three
units of service are typical, and the commenters contended that no
duplication of PE exists when the typical three units of service are
delivered using typical time allotments for clinical labor activities.
The commenters submitted multiple examples of combinations of therapy
services, using the most frequently billed therapy codes and providing
valuations for each of the components of PE, such as pre-service and
post-service physical therapy assistant activities. The commenters
pointed out that in the case of single unit therapy claims, or claims
with one therapeutic procedure and one modality, there would currently
be underpayment based on how therapy services are valued. The
commenters further argued that it would not be fair to apply the MPPR
to all subsequent services when some of the code combinations are
already undervalued.
Many commenters observed that the AMA RUC has worked in good faith
to resolve any duplication in the PE inputs over the past few years and
pointed out that CMS has historically accepted over 90 percent of the
AMA RUC's recommendations. In April 2010, some commenters reported that
the AMA RUC reviewed high volume therapy code pairs that included the
most frequently billed therapy CPT code 97110, and the commenters
conveyed the AMA RUC's conclusion that there is no duplication in the
work or PE inputs for the most frequently reported therapy codes.
The commenters pointed out that single comprehensive codes for
certain bundles of component services were implemented in CY 2010, and
that additional ones would be created in the future. Therefore, the
commenters disagreed with CMS' reasoning for proposing a general MPPR
that is not code pair-specific in the context of these ongoing efforts
of the CPT Editorial Panel and the AMA RUC to revise the coding and
values for services that are commonly furnished together. Instead, the
commenters urged CMS to continue to work within the established
processes and resolve duplication, where it exists, at the code pair
level rather than with payment.
Response: We appreciate the detailed information provided by the
commenters regarding the historical AMA RUC process to value the
therapy codes and the additional examples of the practice expenses as
they apply to the many combinations of therapy services that may be
reported. We understand that the AMA RUC valued many of the therapy
services based on certain assumptions about the typical combinations of
services furnished in a therapy session. However, as the commenters
pointed out, there are numerous combinations of therapy services
observed in the PFS claims data that we posted on the CMS Web site
under supporting files for the CY 2011 PFS proposed rule that are
commonly furnished in the physician's office setting. In the context of
this large number of commonly observed combinations, we do not believe
that our usual PFS methodology of valuing the typical service
adequately accounts for the duplication in PE that occurs in the many
possible therapy service combinations. Although they are frequent, they
do not represent the typical case used by the AMA RUC in valuing the
individual component services and, thus, do not fully account for
duplications in PE. We proposed the therapy MPPR in order to pay more
appropriately for therapy services in general by adjusting for the
duplicate payment for the PE that may occur when combinations of
therapy services are furnished together.
We agree with the commenters that, when considering all claims for
therapy services paid under the PFS, the median number of services is
three. Thus, that number may have been appropriate for the AMA RUC to
use in valuing therapy services. However, the median number of four
services that we presented in the CY 2011 PFS proposed rule was based
upon all claims for multiple therapy services, and did not include
claims for a single therapy service. It was the multiple service claims
that we examined for purposes of the MPPR analysis, and it is these
claims to which the MPPR would apply. Therefore, we continue to believe
that the median number of four is the appropriate reference point when
evaluating an MPPR. We note further that when the AMA RUC valued
certain therapy services based on the assumption that a combination of
three types of therapy services would be furnished to the patient, then
in the case of multiple service claims where the median number of
services is four, some PE duplication would clearly occur for the
typical multiple service case with more than three services.
Although we continue to believe that 50 percent would generally be
an appropriate level for an MPPR for the PE component of payment for
therapy services, consistent with the current PFS MPPR policies for
imaging and surgical services and our PE overlap analysis of certain
therapy code combinations for the CY 2011 PFS proposed rule, we
acknowledge there are particular challenges associated with
establishing an MPPR for therapy services to account for the
duplication in PE. For example, the current coding structure for
therapy services relies upon timed units in many cases, and as a
result, the number of commonly observed combinations is very large. The
PE overlaps vary depending upon the specific combinations of services
furnished to the patient, which may include evaluation services,
therapeutic procedures, and therapeutic modalities. The common
occurrence of such a great variety of multiple therapy code
combinations contrasts with the relatively lesser number of
combinations and/or frequency of combinations of surgical procedures or
diagnostic imaging procedures to which the established PFS MPPR
policies apply.
As the commenters pointed out, the direct PE inputs for certain
therapy services were systematically established

[[Page 73238]]

based upon a standard AMA RUC methodology of three therapy services
furnished in a session that included two therapeutic procedures and one
therapeutic modality and that assigned certain PE inputs solely to the
two therapeutic procedures. However, the scenarios utilized by the AMA
RUC in this process are an incomplete representation of the usual
combinations of services reported when therapy services are furnished
in a practitioner's office. For example, the most common combination of
CPT codes for therapy services in CY 2009 PFS claims data consisted of
an average of 3.5 services which were comprised of some combination of
one or more units of a single therapeutic procedure CPT code and one or
more units of a single modality CPT code, rather than 3 total units of
the services. The second most common combination was a therapeutic
procedure CPT code alone, with an average of 2.8 units, while the AMA
RUC relied upon 2 therapeutic procedures in a session for its
assignment of certain PE inputs. Other commonly observed combinations
of codes included 3.4 to 4.6 therapy services, with different numbers
of therapeutic procedures and therapeutic modalities furnished to the
patient than were assumed by the AMA RUC under the scenarios that were
the basis for establishing the PE inputs for certain therapy CPT codes.
Therefore, despite the AMA RUC's consideration of multiple services for
valuation, the therapy code combinations as actually reported by
practitioners would typically have some additional duplication in their
PE. Thus, while the current PFS values for therapy services may reflect
some efficiencies in the PE for certain code combinations based on the
AMA RUC approach to valuation (to the extent we accepted the AMA RUC
recommendations), the actual efficiencies are not fully recognized in
the PE inputs for the most commonly reported therapy code combinations,
nor are they necessarily recognized in the many other common code
combinations that were not considered by the AMA RUC as the typical
case.
Based on our review of the scenarios submitted by the commenters,
we continue to believe that there is significant overlap in the PE when
many combinations of therapy services are furnished together and that
this overlap has not been adequately accounted for in the direct PE
inputs that the AMA RUC has recommended to us for the component
services. We believe the overlaps remain substantial and they can be
potentially higher than 50 percent for some combinations while lower
for others. Our analysis of five high volume therapy code pairs as
noted in the CY 2011 PFS proposed rule (75 FR 40078) suggested a
reduction in the PE for the lower paying code of 28 to 56 percent to
account for PE duplication.
In response to the commenters who projected that the impact on
physician's office payment for physical therapy services would be
greater than the 11 percent reduction we modeled for the proposed rule
(75 FR 40232), we note that an additional element of our analysis was
the continued transition to setting the PE RVUs based on the PPIS data.
The PPIS transition is expected to significantly increase payment for
the PE component of therapy services in CY 2011. While we acknowledge
that the estimated change in PE RVUs due to the proposed therapy MPPR
alone would result in a payment decrease for the specialty of physical
and occupational therapy of somewhat more than 11 percent, it is the
combined consideration of all factors affecting the CY 2011 PE RVUs
that resulted in the 11 percent decrease for physical and occupational
therapists in the proposed rule specialty impact table (75 FR 40232).
We note further that the estimated impact of all the PE RVU changes for
physical and occupational therapy based upon our proposals for CY 2011
if there were no remaining transition to the new PE RVUs using the PPIS
data would be -7 percent.
Any MPPR policy, such as the MPPR that currently applies to
surgical services and imaging procedures, is a relatively blunt payment
policy tool that improves the overall accuracy of payment when
combinations of services are furnished together but is not, by its
nature, a specific policy that precisely values each code combination.
A general MPPR is not unlike the well-established PFS pricing
methodology that relies on the typical case, where we readily
acknowledge that the clinician's resources used to furnish a specific
service to a specific patient on a specific day may be more or less
than those used in the typical case. Similarly, while we believe that
an MPPR would generally improve the accuracy of PFS payment when
multiple therapy services are furnished to a single patient in a single
session, we understand that for a specific combination of services for
a given patient, the resources required may be more or less than those
recognized for payment under the MPPR policy. In view of the
requirements of section 1848(c)(2)(K) of the Act (as added by section
3134 of the ACA) which specify that the Secretary shall identify
potentially misvalued codes by examining multiple codes that are
frequently billed in conjunction with furnishing a single service and
make RVU adjustments, we continue to believe it would be appropriate to
expand the current PFS MPPR policies to address those scenarios where
we conclude that combinations of services commonly furnished together
are systematically overvalued.
We believe the more specific valuation of common code combinations
is best conducted with input from the AMA RUC as it evaluates single
new comprehensive codes for a bundle of component services when those
new codes are established by the CPT Editorial Panel. In such cases
where a single code is used to report a comprehensive service, an MPPR
would no longer apply, which would be appropriate because the potential
for PE duplication would have been explicitly considered in determining
the PE inputs for the comprehensive service. As we stated earlier in
this section concerning the MPPR for imaging services, the MPPR is not
intended to supersede the AMA RUC process. We encourage the AMA RUC to
reexamine the values and direct PE inputs for therapy services,
including code pairs, for duplication in the PE, and to recommend
therapy services to the CPT Editorial Panel for consideration of
bundling into comprehensive codes. However, we believe it is
appropriate to use an MPPR to address the PE duplication that is
currently present within the PFS RVUs for the therapy codes when more
than one service is furnished to a patient.
After consideration of the public comments we received, we are
adopting, with modifications, our proposal to establish a MPPR policy
for ``always therapy'' services for CY 2011. However, given the
complexities involved in establishing an MPPR for the very large number
of therapy codes and combinations, rather than the proposed 50 percent
payment reduction to the PE component of the second and subsequent
``always therapy'' services billed by the same practitioner or facility
on the same date of service for the same patient, we are adopting a 25
percent MPPR for ``always therapy'' services furnished in CY 2011. We
continue to believe that a 50 percent MPPR for therapy services may be
appropriate in light of our analysis of five high volume therapy code
pairs that each occur over 2 million times in PFS claims for multiple
therapy services and account for almost half of such claims, and for
which we estimated that the resulting reduction in the PE for the lower
paying code would range from 28 to 56 percent. However, we believe a 25

[[Page 73239]]

percent MPPR represents an appropriate and conservative first step
toward eliminating payment for duplicative PE when multiple ``always
therapy'' services are furnished to the same patient by the same
therapy provider on the same date of service. We note that a 25 percent
MPPR represents half the proposed reduction, and is slightly less than
the lower range of the reduction suggested by our analysis of high
volume code pairs. During CY 2011 and future years, we will continue to
refine our analyses and consider whether further modifications to the
policy would be appropriate, including the possible adoption of a 50
percent MPPR or a different payment percentage reduction. Any further
changes to the MPPR for therapy services will be addressed in future
rulemaking, including the possible adoption of any alternative
percentage payment reduction to the 25 percent MPPR that will be in
place for CY 2011. We will also closely follow the work of the CPT
Editorial Panel and the AMA RUC with respect to the coding and
valuation for therapy services over the next few years as we assess the
potential merits of further changes to the MPPR policy. We note that
the typical reductions in total PFS payment for high utilization
therapy code combinations due to the MPPR alone would fall within the
range of 7 to 9 percent under our final policy, but this decrease will
be mitigated by the continued transition to use of the PPIS data. As
displayed in Table 101 of this final rule with comment period, we
estimate that the CY 2011 impact on the PE RVUs of the new therapy MPPR
and continued PPIS transition is a reduction in PFS payment to physical
and occupational therapists of approximately -3 percent.
The final list of CY 2011 CPT codes for ``always therapy'' services
that are subject to the therapy MPPR is displayed in Table 21 at the
end of this section.
Comment: Some commenters pointed out that CMS' analysis was based
only on data from physicians and private practice therapists, which the
commenters opposed as unrepresentative of the typical therapy session
because the data represent only 35 percent of outpatient therapy
services paid under Medicare. The commenters objected that no data from
skilled nursing facilities (SNFs), rehabilitation agencies, CORFs, and
hospital outpatient departments were considered in the analysis. The
commenters reported that application of the MPPR policy on a per-day
basis would be inconsistent with the delivery of therapy services in
provider settings where multiple sessions of the same or different
disciplines of therapy on the same day are commonly furnished to
``captive'' patients and would unfairly reduce payment for the
resources used to provide these services. The commenters believe there
is no duplication in the PE in such circumstances. Some commenters
suggested that reductions should not be applied when there is a break
in services into more than one session in the same day.
Response: With respect to payment under the PFS, according to
section 1848(c)(1)(B) of the Act, the term ``practice expense
component'' means the portion of the resources used in furnishing the
service that reflects the general categories of expenses (such as
office rent and wages of personnel, but excluding malpractice expenses)
comprising practice expenses. Under section 1848(c)(2)(C)(ii) of the
Act, we are required to determine PE RVUs based on the relative
practice expense resources involved in furnishing services. We develop
these resource-based PE RVUs by looking at the direct and indirect
physician practice resources involved in furnishing each service. To
establish the direct PE inputs for services paid under the PFS, we
consider the typical clinical scenario in which those services are
delivered and paid by Medicare. In the case of therapy services that
are paid under the PFS, the scenarios we consider are office-based (not
institutional) because these therapy services are the only ones that
are actually paid under the PFS (section 1848 of the Act) and subject
to all of the provisions of the PFS, including budget neutrality under
section 1848(c)(2)(B)(ii)(II) of the Act. Section 1834(k)(3) of the Act
then requires that we pay for all outpatient therapy services at the
applicable PFS amount. Therefore, our analyses and policy development
regarding the therapy MPPR were based solely on claims for office-based
therapy services and, given the applicable statutory payment
provisions; we do not believe it would have been appropriate for us to
consider institutional patterns of care in setting PFS rates for
therapy services.
We are required to establish the values for services paid under the
PFS (office-based services) so that therapy services are valued
appropriately in the context of all other services paid under the PFS,
and that means ensuring that therapy services are appropriately valued
for the office setting. In the case of other services paid under the
PFS that may be furnished in both facility and nonfacility settings, we
generally establish separate but related facility and nonfacility
values to differentially value the services when furnished in each of
the two types of settings. However, therapy services are only paid
under the PFS when furnished in the office setting, so we establish the
PFS values for therapy services based on patterns of care in the office
setting. This approach ensures equitable and relative treatment of all
services paid under the PFS with respect to the statutory provisions
that apply to the PFS, including year-to-year budget neutrality. In
contrast to other services paid under the PFS, the statute then
specifies that we pay for therapy services furnished in facility
settings at the applicable PFS amount (which, as discussed above, is
established based upon our resource-based methodology for services
furnished in nonfacility settings). Although the statutory payment
scheme for therapy services differs from most other services, we note
that this treatment ensures that Medicare payment is the same across
all settings for outpatient Part B therapy services.
We acknowledge the commenters' point that multiple therapy sessions
furnished to one patient by one provider (one National Provider
Identifier (NPI)) in a single day are more common in facility settings
than in the office setting. However, we continue to believe that in
these situations there would be some overlaps in the PE, including
patient education and obtaining measurements, that would be
appropriately accounted for through the therapy MPPR. Furthermore,
given the nature of therapy services and the associated coding, we
believe it would be very challenging to determine the medical necessity
of multiple therapy sessions on one date of service or the precise
beginning and ending of therapy sessions if we were to exclude from the
MPPR those therapy services furnished by the same provider to a single
patient on the same day but in different sessions, although we
acknowledge that this modification would be consistent with our
established policy for the imaging MPPR.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to apply the therapy MPPR when multiple
therapy services are billed on the same date of service for the same
patient by the same practitioner or facility under the same NPI,
regardless of whether those therapy services are furnished in separate
sessions.
Comment: Many commenters objected to applying the MPPR across
therapy disciplines because the commenters argued that physical
therapy,

[[Page 73240]]

occupational therapy, and speech-language pathology (SLP) are separate
and distinct interventions furnished independently by individually
licensed professionals, each of which is certified to provide unique
and specialized services that do not cross discipline or service lines.
Several commenters explained that each discipline involves entirely
different skills, equipment, supplies, and treatment goals, and
separate disciplines are often located in different treatment settings.
Individual plans of care, explained the commenters, are separately
maintained for each therapy discipline and contain specific goals and
treatments. Some commenters compared the proposal to claiming that
services furnished to a single patient on the same day by a
cardiologist and internal medicine specialist contain duplicative PE
inputs. The same commenters described administrative contact with the
patient in this scenario as distinct and separate, observing that
greeting and gowning the patient, cleaning, and assistant activities
are furnished independently by the second or subsequent discipline, and
cannot be shared.
The large majority of commenters argued that the proposal did not
make logical distinctions between therapy treatments or specialties or
even properly distinguish between the skills of rehabilitation
practitioners. While physical therapists and occupational therapists
report the same CPT codes, the commenters noted that the codes do not
represent the same service and the plan and approach to treatments
differ depending on the discipline.
Response: We recognize that the therapy disciplines are separately
qualified professionals who address specific impairments using separate
and unique skills. However, in the office setting which is the basis
for our valuing therapy services for payment under the PFS as discussed
previously, although we believe it would be uncommon for services to be
furnished to a single patient by different therapy disciplines and
billed by a single provider (one NPI) on the same date of service, we
continue to believe that there would be some overlap in the PE in this
circumstance. The PE overlaps that we would anticipate include greeting
the patient, obtaining vital signs, and post-visit phone calls. We do
not agree with the commenters that we should accept such multiple
discipline cases from the therapy MPPR that would otherwise apply.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to apply the therapy MPPR to all
therapy services across the disciplines billed on the same date of
service for the same patient by the same practitioner or facility under
the same NPI.
Comment: Several commenters pointed out that, unlike other therapy
services, many SLP services contain therapist work in their PE because
SLPs have no assistants. These commenters requested that the therapy
MPPR not be implemented, or at least be delayed, until the AMA RUC
completes its plan to recommend moving SLP work from PE to work. In
addition to bundled codes, the commenters also requested that add-on
codes, such as CPT code 92608 (Evaluation for prescription for speech-
generating augmentative and alternative communication device, face-to-
face with the patient; each additional 30 minutes (List separately in
addition to code for primary procedure)), be exempted from the therapy
MPPR, since the PE inputs for add-on codes explicitly take into
consideration the PE inputs for a base code that is always reported.
The commenters reported that the major SLP codes include a wide variety
of service types and are essentially bundled already, meaning that SLP
practitioners rarely bill two different services on the same day for
the same patient. The commenters expressed concern because SLP services
are furnished and valued differently than physical and occupational
therapy, yet the proposed rule contained no SLP examples to justify
including SLP codes in the MPPR or to estimate the impact on SLP
services.
Response: We note that most of the SLP codes will have been valued
with therapist work in the work component of the SLP service RVUs by CY
2011, although we do not see the continued valuation of therapist work
in the PE as an impediment to application of the MPPR to SLP services.
Since many single SLP codes represent multiple component services that
are reported using a single comprehensive code, the impact of the
therapy MPPR on PFS payment for SLP services would be minimal. For
those services that may occasionally be billed with more than one SLP
code for a session, we see no basis for treating SLP services
differently than other therapy services because we believe there would
also be PE duplication in these cases.
However, we agree with the commenters that add-on codes should not
be subject to the MPPR for therapy services because their PE inputs
already consider that the add-on code is always furnished along with a
primary service.
Therefore, after consideration of the public comments we received,
we are removing add-on therapy CPT code 92608 from the list of ``always
therapy'' services that we proposed for application of the therapy MPPR
policy. In addition, we are removing CPT code 97010 (Application of a
modality to 1 or more areas; hot or cold pack) which is a bundled code
that was inadvertently included on the proposed list. These changes are
reflected in the final list of codes subject to the therapy MPPR policy
that is displayed in Table 21 at the end of this section. This policy
parallels our treatment of the MPPR for surgical services, where
surgical add-on codes are not subject to the surgical MPPR.
Comment: Some commenters characterized the proposed therapy MPPR as
contrary to the objectives of the ACA, which the commenters believe was
designed to shift care to the most effective and efficient delivery
setting to ensure beneficiary access to cost-effective, high quality
and coordinated care. Because therapy services do not involve expensive
drugs or testing, yet they assist patients in avoiding or reducing
other medical costs, many commenters believe that physical therapy is
the most efficient and cost-effective treatment to return patients to
independent function. The commenters contended that growing Medicare
expenditures for the treatment of common musculoskeletal problems could
easily be controlled by earlier access of patients to physical therapy
services.
The commenters were concerned that lower therapy payments would
exacerbate the shortage of therapists, lead to restricted access to
therapy services, especially in rural areas, and result in patients who
are more prone to injuries and functioning at a lower level.
Undertreated functional impairments, argued the commenters, would lead
to increased spending for medication and medical costs associated with
decreased mobility, pain and falls, increased emergency room services,
longer inpatient stays, quicker returns to the hospital setting, and
earlier placement in nursing homes.
In addition, some commenters were concerned that the MPPR would
provide an incentive to schedule patients in a manner that would be
inefficient, inappropriate, and inconvenient for patients. The
commenters noted that research proves therapy is more effective for
many elderly patients with several visits on the same day, separated by
rest. The commenters indicated that patients in rural communities
prefer multiple therapy service visits to minimize lengthy commutes.

[[Page 73241]]

Response: Through the CY 2011 proposed rule and its associated
public comment period, we have invited public involvement in the
process of policy development regarding an MPPR for therapy services.
We believe the therapy MPPR policy is fully consistent with section
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) which
specifies that the Secretary shall identify potentially misvalued codes
by examining multiple codes that are frequently billed in conjunction
with furnishing a single service, and review and make appropriate
adjustments to their relative values. Therefore, we do not agree with
the commenters that the MPPR policy undermines the goals of the ACA
but, instead, we believe the policy fulfills one of our statutory
obligations by valuing more appropriately combinations of therapy
services furnished to patients and paid under the PFS. We have no
reason to believe that appropriately valuing services for payment under
the PFS by reducing payment for duplication in the resource-based PE
payment for the component services would contribute to therapist
workforce shortages or limit patients' access to medically reasonable
and necessary therapy services.
With respect to the ordering and scheduling of therapy services for
Medicare beneficiaries, we require that Medicare-covered services be
appropriate to patient needs and that a physician certifies each
patient's plan of care. We would not expect the adoption of an MPPR for
therapy services to result in therapy services being furnished on
separate days by one provider so that the provider may garner increased
therapy payment unless this pattern of care is the most clinically
appropriate for the patient. We agree with the commenters that this
unprofessional behavioral response on the part of practitioners would
be inefficient and inappropriate and could result in patient compliance
problems with the plan of care. We will continue to monitor access to
care and patterns of delivery for therapy services, with particular
attention focused on identifying any changes in the delivery of same
day therapy services that may be inappropriate.
Comment: Several commenters noted that CMS has contracted with
Computer Sciences Corporation (CSC) and RTI International to develop
outpatient therapy payment alternatives and urged CMS to place a high
priority on the development of an alternative payment approach for
therapy services rather than applying the proposed MPPR. Many
commenters supported bundled per-session codes that would vary based on
the severity of the patient and the complexity of evaluation and
treatment services, and some commenters believe this payment approach
would be more equitable than the proposed MPPR. The commenters argued
for a scientific approach to the development of alternatives to the
current payment system, which the commenters believe contrasts with the
analysis presented by CMS to support the MPPR. However, most commenters
encouraged further study and development before implementation of any
alternatives. Many commenters pledged to work with CMS in the future to
further develop a bundled service approach based on episodes of care.
Response: We appreciate the effort and useful information
contributed by stakeholders to the discussion and development of
alternatives to the therapy caps and we refer readers to section
III.A.2. of this final rule with comment period for a further
discussion of the public comments and our responses on this issue. We
look forward to the continued cooperation of stakeholders as we
continue our work in this area over the coming years. However, we do
not believe short-term alternative payment options for therapy services
are sufficiently developed to warrant immediate implementation, and the
commenters on the CY 2011 PFS proposed rule generally shared that view.
In contrast, we believe that we can implement an appropriate MPPR for
therapy services beginning in CY 2011 that would immediately provide
more appropriate payment for the PE component of therapy services when
multiple therapy services are furnished to one patient on one date of
service by one provider. Paying more appropriately for therapy services
in CY 2011 will allow patients to receive more medically necessary
therapy services before reaching the therapy cap. To the extent that
the therapy MPPR encourages the future bundling of therapy codes into a
single comprehensive service that would be specifically valued, we
support the exploration of that concept to capture the specific
efficiencies associated with certain combinations of therapy services.
Comment: Several commenters asserted that the therapy MPPR proposal
violated the Administrative Procedure Act (APA), alleging the proposal
was arbitrary and capricious. In addition, some commenters argued that
CMS did not provide sufficient information regarding the data and
analysis used to develop the policy to allow the informed public input
from qualified providers of therapy services.
Response: Consistent with the requirements of the APA, a full
description of our analysis and the rationale we used as the basis for
the proposed therapy MPPR policy was presented in the proposed rule,
the public comments on our proposal have been reviewed, and our
responses are provided in this final rule with comment period. Although
many commenters requested that we share more data to support the
proposed policy, several commenters demonstrated that they have their
own access to Medicare data by submitting reports to us along with
their comments in order to support their views or to refute the
examples we presented in the proposed rule. We note further that we
posted therapy utilization data on the CMS web site after publication
of the proposed rule to provide additional information regarding the
specific combinations and utilization of therapy services on PFS
claims. The information was posted under downloads for the CY 2011 PFS
proposed rule at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. Therefore, we believe the final MPPR for therapy
services is being adopted in compliance with the notice and comment
rulemaking process under the APA.
In summary, after consideration of the public comments we received,
we are adopting our CY 2011 proposal to apply an MPPR to the PE
component of Medicare payment for the second and subsequent outpatient
``always therapy'' services, with a modification to apply a 25 percent
reduction for CY 2011 rather than the 50 percent reduction we had
proposed. Specifically, beginning in CY 2011 we are adopting an MPPR
for ``always therapy'' services under which a 25 percent reduction will
be applied to the PE component of payment for the second and subsequent
``always therapy'' service(s) (those displayed in Table 21) that are
furnished to a single patient by a single provider on one date of
service in all settings where outpatient therapy services are paid
under Part B. This policy applies to office-based therapy services paid
under the PFS as well as to institutional therapy services paid under
Part B at the PFS rates. We note that the MPPR would apply only when
multiple therapy services are billed on the same date of service for
one patient by the same practitioner or facility under the same NPI.
This policy does not apply to add-on, bundled, or contractor-priced
``always therapy'' codes. It does, however, apply to all ``always
therapy'' services furnished on a single date of service by the same
provider to a single

[[Page 73242]]

patient, including ``always therapy'' services furnished in different
sessions or in different therapy disciplines.
For those therapy services paid under the PFS, we are required to
make a budget neutrality adjustment under section 1848(c)(2)(B)(ii)(II)
of the Act. As a result, the estimated reduced expenditures for therapy
services due to the 25 percent MPPR will be redistributed to increased
CY 2011 payments for other PFS services. We refer readers to XI.A.2. of
this final rule with comment period for further discussion of the
impact of this policy. The final list of CY 2011 ``always therapy'' CPT
codes subject to the MPPR policy for therapy services is displayed in
Table 21.

Table 21--``Always Therapy'' Services Subject To The CY 2011 MPPR
Policy*
------------------------------------------------------------------------
CPT code Short descriptor
------------------------------------------------------------------------
92506......................... Speech/hearing evaluation.
92507......................... Speech/hearing therapy.
92508......................... Speech/hearing therapy.
92526......................... Oral function therapy.
92597......................... Oral speech device eval.
92607......................... Ex for speech device rx, 1 hr.
92609......................... Use of speech device service.
96125......................... Cognitive test by hc pro.
97001......................... Pt evaluation.
97002......................... Pt re-evaluation.
97003......................... Ot evaluation.
97004......................... Ot re-evaluation.
97012......................... Mechanical traction therapy.
97016......................... Vasopneumatic device therapy.
97018......................... Paraffin bath therapy.
97022......................... Whirlpool therapy.
97024......................... Diathermy eg, microwave.
97026......................... Infrared therapy.
97028......................... Ultraviolet therapy.
97032......................... Electrical stimulation.
97033......................... Electric current therapy.
97034......................... Contrast bath therapy.
97035......................... Ultrasound therapy.
97036......................... Hydrotherapy.
97110......................... Therapeutic exercises.
97112......................... Neuromuscular reeducation.
97113......................... Aquatic therapy/exercises.
97116......................... Gait training therapy.
97124......................... Massage therapy.
97140......................... Manual therapy.
97150......................... Group therapeutic procedures.
97530......................... Therapeutic activities.
97533......................... Sensory integration.
97535......................... Self care mngment training.
97537......................... Community/work reintegration.
97542......................... Wheelchair mngment training.
97750......................... Physical performance test.
97755......................... Assistive technology assess.
97760......................... Orthotic mgmt and training.
97761......................... Prosthetic training.
97762......................... C/o for orthotic/prosth use.
G0281......................... Elec stim unattend for press.
G0283......................... Elec stim other than wound.
G0329......................... Electromagntic tx for ulcers.
------------------------------------------------------------------------
*Excludes contractor-priced, bundled, and add-on ``always therapy''
codes.

5. High Cost Supplies
a. Background
MedPAC and the AMA RUC have long recommended that CMS establish a
frequent price update process for high-cost supplies that are direct PE
inputs in the PE database for services paid under the PFS because of
their speculation that prices for these items may decrease over time as
competition increases and new technologies disseminate into medical
practice. MedPAC in particular has perennially noted that it is
important for CMS to update the prices of high-priced supplies on a
regular basis as inaccurate prices can distort PE RVUs over time,
contributing to the misvaluation of established services under the PFS.
Most of the current prices for high-cost supplies included in the
direct PE database are from 2004 or earlier. There are currently 62
unique supplies with prices of $150 or more in the proposed CY 2011 PE
database, which is available on the CMS Web site under the supporting
data files for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. Finally, we note that we do not actually pay the
supply prices included in the PE database but, instead, use them to
develop the PE RVUs according to our standard PE methodology as
described in section II.A.2. of this final rule with comment period.
Payment for a procedure that uses a supply is based upon the PE RVUs
that result from the PE methodology, and supplies are among the direct
PE inputs for procedures. Therefore, it is the relativity of high-cost
supply prices to prices for other PE items (equipment, low-cost
supplies, and clinical labor) that is important.
Accordingly, in the CY 2009 PFS proposed rule (73 FR 38582), we
proposed a process to update the prices for high-cost supplies priced
at $150 or more that are included in the PE inputs for procedures paid
under the PFS PE methodology. The CY 2009 proposed rule described a
publicly transparent process in which CMS would publish a list of the
high-cost supplies in the PFS proposed rule (65 supplies were included
in the CY 2009 PFS proposed rule), and specialty societies or other
relevant organizations would provide acceptable documentation
supporting the pricing for the supplies during the 60-day public
comment period. Furthermore, in that same proposed rule (73 FR 38582),
we provided guidance on what constitutes valid, reliable documentation
that reflects the typical price of the high-cost item in the
marketplace. We outlined examples of acceptable documentation, such as
a detailed description (including system components), sources, and
current pricing information, confirmed by copies of catalog pages,
invoices, and quotes from manufacturers, vendors, or distributors. We
indicated that documentation that does not include specific pricing
information such as phone numbers and addresses of manufacturers,
vendors, or distributors or Web site links without pricing information
would not be acceptable. We also noted that if acceptable documentation
was not received within the proposed rule's 60-day public comment
period, we would use prices from the Internet, retail vendors, and
supply catalogs to determine the appropriate cost, and that we would
use the lowest price identified by these sources (73 FR 38582).
Finally, we solicited public comments on alternatives that could be
used to update pricing information in the absence of acceptable
documentation provided by specialty societies or other interested
organizations.
In the CY 2009 PFS final rule with comment period (73 FR 69882), we
indicated that we received many comments on the proposed process and,
while some commenters expressed support, others believed the proposed
process was flawed and burdensome. Moreover, although we received some
data in response to our request for information on the 65 high-cost
supplies with prices of $150 or more, much of what we received was not
complete or did not represent typical market prices. In particular, we
expressed concern that the submitted data often represented
manufacturer list prices for the premier models of many supplies, while
we believed there were less expensive alternatives. Therefore, we were
unable to determine the most appropriate, typical supply prices for our
PFS payment methodology that prices the typical service described by a
HCPCS code. Rather than finalizing the proposed process for updating
high-cost supplies and revising the prices for the 65 supplies based on
inadequate pricing information, we stated in the CY 2009 PFS final rule
with comment period (73 FR 69882) that we would research the
possibility of using an independent contractor to assist us in
obtaining accurate pricing information. Furthermore, we informed the
public that we planned to study the limitations of available pricing
data and determine how to revise our proposed process to elicit better
data.
In the CY 2010 PFS proposed rule and final rule with comment period
(74 FR 33554 and 61776, respectively), we

[[Page 73243]]

stated that we were continuing to examine ways to obtain accurate
pricing information for high-cost supplies. We noted again in the CY
2010 PFS proposed rule that we would depend upon the cooperation of the
medical community to obtain typical prices in the marketplace, and we
provided stakeholders with another opportunity to submit public
comments on the process. In the CY 2010 PFS final rule with comment
period, we acknowledged commenters' general support for an initiative
to ensure accurate pricing of high-cost supplies. In general, the
commenters strongly preferred a transparent and public process, and we
stated that we would consider this perspective as we explore the best
way to ensure that accurate supply pricing information is used in the
PFS payment methodology.
b. Future Updates to the Prices of High-Cost Supplies
In working towards refining a process to update the prices of high-
cost supplies and consistent with our intention expressed in the CY
2009 PFS final rule with comment period (73 FR 69882), we contracted
with an independent contractor during CY 2009 to help us study the
availability of accurate pricing information. We requested that the
independent contractor, L&M Policy Research, research pricing
information for the 65 high-cost supplies listed in the CY 2009
proposed rule (73 FR 38583 through 38585) and determine what, if any,
pricing information reflecting typical market prices could be obtained
for these high-cost supplies.
We first requested that the contractor explore publicly available
sources to obtain typical market prices for these supplies. The
contractor utilized supply vendor catalogs and web sites and directly
contacted vendors, manufacturers, group purchasing organizations
(GPOs), and any other suppliers that the contractor identified in their
research in order to identify prices for each of the supplies. Where
more than one version of a supply item appeared to match a description
of a high-cost supply and/or more than one possible vendor or
manufacturer was identified, the contractor attempted to obtain prices
from the multiple sources.
Upon review of the high-cost supply list, the contractor refined
the list to 62 unique high-cost items with prices of $150 or more for
the study. The original list only consisted of 64 items but included
one item inadvertently listed twice (CMS Supply Code SD207 (suture
device for vessel closure (Perclose A-T))) and one item (CMS Supply
Code SH079 (collagen implant)) that was deleted from the PE database
after CY 2007 because it was no longer used as an input for any codes.
While the contractor was able to obtain prices for 37 of the 62 unique
supplies, the contractor was unable to obtain pricing information for
the remaining 25 supplies. Documentation of these prices, a requirement
we discussed in the CY 2009 PFS proposed rule (73 FR 38582), was only
obtained for 25 of the 36 supplies with new pricing information. For
the remainder, while the contractor was given price quotes over the
phone, the sales agents or customer service representatives declined to
provide any form of written documentation, in some cases because
company policies restricted providing pricing documentation to
prospective customers without an account. Moreover, information on
typical discounts was obtained for only seven products, and only one
discount was documented. In the case of these products, companies
disclosed the maximum available discounts, ranging from 18 percent to
45 percent. Relative to prices currently included in the PE database,
the contractor found higher prices for the majority of the medical
supplies that were researched, specifically 23 supplies with higher
prices, 8 with lower prices, and 3 with the same price. The high-cost
supplies studied by the contractor and their current database prices
are displayed in Table 22.

[[Page 73244]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.249

BILLING CODE 4120-01-P

[[Page 73245]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.250

[[Page 73246]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.251

[[Page 73247]]

[GRAPHIC] [TIFF OMITTED] TR29NO10.252

Next, we directed the contractor to access the United States
General Services Administration (GSA) medical supply schedule to
augment the results obtained through review of vendor materials and
direct contact with vendors, manufacturers, and GPOs. We note that the
GSA establishes long-term government-wide contracts with commercial
firms for many products, negotiating contracts and determining prices
to be fair and reasonable prior to placing them on schedule. Included
on the schedule are thousands of medical supplies at prices that, in
most cases, are established through competition. The GSA schedule is an
open solicitation and a business of any size, if it is stable and
financially sound, can request to be included on the schedule. GSA's
vendors usually are nationwide

[[Page 73248]]

vendors with substantial non-government sales, and products on the
schedule must be manufactured in the U.S. or in a nation with a trade
agreement with the United States. Submissions for the schedule are
received 365 days per year, vendor contracts can be of varying lengths,
and vendors can add or delete products from the schedule. Depending on
the aggregate cost estimate associated with the vendor's supply items,
the time to achieve inclusion on the schedule can vary from as short as
several months to as long as 2 years. The GSA has delegated authority
to the Department of Veterans Affairs (VA) to procure medical supplies
under the VA Federal Supply Schedules Program.
Using the GSA general search engine under the category
``Laboratory, Scientific, & Medical'' available at https://www.gsaadvantage.gov/advgsa/advantage/main/start_page.do, the
contractor obtained nine prices for items similar to the high-cost
supplies in the PE database and that are displayed in Table 20 from the
publicly available information on the Internet, including pricing for
one product for which its prior work did not yield an updated price. We
believe that additional items that are similar to the high-cost
supplies in the PE database and that may be used with the same
procedures may be on the GSA schedule but we are still working through
the crosswalk between our supplies and the way the supplies are
presented on the GSA schedule. In the proposed rule (75 FR 40081), we
stated that examples of high-cost supplies in the PE database that the
contractor located on the GSA schedule include: (1) Kit, capsule, ESO,
endoscopy w-application supplies (ESO), priced at $450 in the PE
database and $444 on the GSA schedule; and (2) tube, jejunostomy,
priced at $195 the PE database and $60 to $83 on the GSA schedule,
depending on the characteristics of the tube. We note that the price of
the ``jejunostomy'' tube that we included in the proposed rule was
incorrect. The actual price of that supply item in the PE database is
$97.50, a lower value that is still substantially higher than the price
range on the GSA schedule.
Since the GSA medical supply schedule is a source for pricing
information that is public and transparent and reflects the best
government contract price for a product, we believe it is a desirable
resource for us to use in a refined process for updating the prices of
high-cost supplies. For historical context, CMS has previously proposed
to use VA prices that result from the competitive marketplace as
comparison points to limit the Medicare prices for oxygen and certain
items of durable medical equipment and prosthetic devices (62 FR 38100
through 38107, and 64 FR 44227 through 44231) in 1997 and 1999,
respectively. These prior proposals were based on our determination
that the Medicare payment amounts for these items as durable medical
equipment or prosthetics (not as physicians' services) were not
inherently reasonable. We noted, however, that our current interest in
the GSA schedule for pricing high-cost supplies for payment of
physicians' services is not based on considerations of inherent
reasonableness, and we do not actually pay the prices in the PE
database for supplies under the PFS.
We further noted that public commenters on pricing high-cost
supplies have consistently requested that we ensure that the pricing
information used to update the prices is provided publicly. The
commenters have observed that this transparency would enable
stakeholders to evaluate and provide feedback to the agency on pricing
accuracy (74 FR 61776). We also acknowledged that our past attempts
over several years to identify typical market prices for the high-cost
supplies have been inhibited by the limited availability of public data
that meet the documentation requirements we have previously
established. Individual vendors do not always publish their product
prices or provide typical discounts. Moreover, discounts may vary
depending on suppliers and the volume of supplies purchased. In the CY
2011 PFS proposed rule (75 FR 40082), we explained that our
understanding of the GSA medical supply schedule is that the publicly
listed fair and reasonable prices on the schedule generally do not
include volume and or certain other discounts that may be subsequently
negotiated by the buyer. Consequently, we would consider the prices
available on the GSA schedule to represent the ``individual item
ceiling'' price for a single item purchase, which we believe would be
appropriate to estimate the high-cost supply prices for physicians'
office purchases. We solicited public comments regarding the high-cost
supplies in the direct PE database for the CY 2011 PFS proposed rule,
available on the CMS Web site as noted earlier in this section, and the
corresponding supplies or alternative items that could be used for the
same function that are currently on the GSA supply schedule. We
encouraged commenters to provide a detailed analysis of the current
relationships between the items in the PE database and those on the GSA
schedule.
In the CY 2011 PFS proposed rule (75 FR 40082), we described a
refined process for regularly updating prices for high-cost supplies
under the PFS and solicit comments on how we could improve on this
process. The process could occur every 2 years beginning as soon as CY
2013, although we noted that we would propose the refined process
through rulemaking before revising the prices for any high-cost supply
item based on the GSA schedule. We could also consider establishing a
different price update period depending on whether a high-cost supply
was a new supply in the PE database or had been in use for some time,
in which case we might expect that the price would have stabilized and,
therefore, could be updated less frequently. In general, we would
expect that the periodicity of updating prices for high-cost supplies
that we eventually adopted would balance the associated administrative
burden with the rate of price changes, to ensure that the associated
procedures remain appropriately valued, rather than increasingly
misvalued, over time.
We envisioned that we would base high-cost supply price inputs on
the publicly available price listed on the GSA medical supply schedule.
Since the medical community would have several years to examine the GSA
medical supply schedule before the refined process would be adopted,
and we had found no apparent limitations on vendors placing products on
the GSA schedule, beyond the schedule's interest in competitive, best
value procurements, stakeholders would have the opportunity to ensure
that any high-cost direct PE input for a PFS service that may currently
be missing from the GSA medical supply schedule would be included
before CMS needs to access the publicly available price for the item.
If a supply price were not publicly available on the GSA medical supply
schedule by the time CMS needs to access the price, we would propose to
reduce the current price input for the supply by a percentage that
would be based on the relationship between GSA prices at that time and
the existing PE database prices for similar supplies (currently an
average 23 percent reduction). We believe that this refined process
would be desirable because it is consistent with commenters' repeated
requests for the updating methodology to be transparent and
predictable.
Moreover, the VA (with responsibility delegated by the GSA)
determines whether prices are fair and reasonable by comparing the
prices and discounts that a company offers the government

[[Page 73249]]

with the prices and discounts that the company offers to commercial
customers. Therefore, using the GSA medical supply schedule as a source
for publicly available prices would also better account for product-
specific market dynamics than the alternative of an across-the-board
percentage reduction for supplies not on the GSA schedule based on
general price trends for the high-cost supplies on the schedule. That
is, if the market price of a particular supply were not to drop
according to broad trends for other high-cost supplies, suppliers would
have the opportunity to provide their price to the public on the GSA
schedule in order to preclude any reduction in Medicare payment for
procedures associated with that supply.
Finally, we reiterated our interest in receiving detailed public
comments on the refined process discussed above, including all aspects
of the price update methodology that we have presented. Moreover, we
believe a similar approach could potentially be appropriate to update
the prices for other supplies in the PE database that would not fall
under our definition of high-cost supplies, and we welcomed further
public comments on that possible extension. We also invited further
suggestions for alternative approaches to updating high-cost supply
prices, specifically those that would result in a predictable, public,
and transparent methodology that would ensure that the prices in the PE
database reflect typical market prices. These principles are
particularly important in order to ensure that the services that
utilize the high-cost supplies when provided in the physician's office
are appropriately valued under the PFS and continue to be appropriately
valued over time.
Comment: Many commenters agreed with the need for a frequent,
transparent price update process for high-cost supplies based on
publicly available sources of pricing information. MedPAC supported
CMS' description of the process update the prices of high-cost supplies
presented in the CY 2011 PFS proposed rule: ``As an initial step, it is
reasonable to use the GSA schedule as a source for the prices of high-
cost supply items and to reduce the prices of items not on the GSA
schedule by the average difference between the GSA prices and the
prices in CMS' PE database for similar supplies.''
Response: We appreciate the general affirmation by many
stakeholders of the significance of accurate pricing of high-cost
supplies relative to other PE items (equipment, low-cost supplies, and
clinical labor). We also value MedPAC's support for the update process
that we described for the prices of high-cost supplies.
Comment: Many commenters asserted that because the medical supply
prices on the GSA schedule reflect the best price for government
entities, these prices are not representative of typical prices
available to practitioners caring for Medicare beneficiaries. The
commenters suggested that physicians in private practices do not have
the requisite purchasing power to negotiate such large discounts on
their own and that the sales environments for the government and
private markets are vastly different. Therefore, the commenters argued,
because the GSA schedule is a streamlined buying process that the
government uses to buy products and services through registered vendors
at pre-negotiated prices, the schedule does not provide an accurate
reflection of prices faced by any physician practice. Some commenters
also observed that the prices on this schedule have historically been
used only by manufacturers and suppliers in the context of providing
these high-cost supplies to the VA alone, and do not reflect prices to
other non-governmental entities.
Response: We appreciate the differences in the purchasing power of
the federal government and individual practitioners. However, we have
reason to believe that prices on the GSA schedule do not reflect the
full volume discounts available to large purchasers like the Federal
government. In fact, while the GSA has delegated the authority to the
VA to procure medical supplies under the VA Federal Supply Schedules
Program, we understand that the prices that appear on the schedule do
not reflect the prices the VA itself would usually pay for a medical
supply. Instead, the VA determines the schedule prices to be fair and
reasonable prior to placing them on the schedule, and uses that
schedule price as a starting point for its own negotiations with supply
vendors for specific purchases.
While several commenters explained how vendors provide the VA
itself with discounts that are greater than those offered to other
buyers, and a few additional commenters made uncorroborated claims that
prices on the GSA supply schedule reflect discounts unavailable to
other providers, we received no evidence that the prices contained on
the schedule are atypical of medical supply prices in the private
marketplace. We agree that the prices on the GSA schedule may reflect
some discounting, but we do not believe that the prices reflect the
full discounting available to the VA itself for many purchases.
Instead, we believe that the discounting on the GSA schedule reflects
what the VA has deemed reasonable for other government buyers in the
context of prices and discounts that a vendor offers to commercial
customers.
We also believe that typical practitioners receive discounts from
vendors' listed prices for supply items for a variety of reasons,
although we acknowledge that the basis for the discounts reflected on
the GSA schedule may differ from the basis for the discounts that are
available to typical practitioners. Therefore, we do not necessarily
agree with the premise underlying many commenters' concerns that the
usefulness of the GSA schedule as a source for PFS high-cost supply
prices is necessarily undermined solely because large government buyers
benefit from some exclusive discounts.
We believe that in a relative payment system, maintaining the
relativity of discounting among the prices for supply items may be more
significant than any concern associated with the reasons different
buyers receive particular discounts. At the moment, we have no reason
to believe that the prices on the GSA schedule are atypical of the non-
government market, despite broad assertions by the commenters that the
government may receive discounts for different reasons than those
available to private purchasers. As we consider this high-cost supply
update process for the future, we would be interested in receiving
further public comments that substantiate the claims that medical
supply prices on the GSA schedule are not representative of actual
prices paid by typical practitioners caring for Medicare patients.
Comment: Some commenters expressed concern that pricing high-cost
supplies based on the GSA supply schedule could result in loss of
appropriate relativity in PE RVUs because pricing for other supplies
would be determined using other methodologies.
Response: As stated earlier in this section, we do not actually pay
the supply prices included in the PE database but instead use them to
develop the PE RVUs according to our standard PE methodology as
described in section II.A.2. of this final rule with comment period.
However, we believe that inaccuracies in the prices for high-cost
supplies that are specific to a very few PFS services may
disproportionately distort physician payment by leading to inaccurate
PE RVUs for services using those high-cost supplies. We believe that
neglecting to incorporate any discounts or typical reductions in the
market price for a

[[Page 73250]]

high-cost supply that is sold to a practitioner for use in a specific
service would result in a greater likelihood that the service would be
misvalued under a relative payment system than would similar
imprecision in the prices for lower-cost supplies that are commonly
used in many services and where price changes are typically less
extreme. Finally, we note that we also remain interested in the
possibility of using the GSA supply schedule for all PFS supply and
equipment price inputs, as we stated in the CY 2011 PFS proposed rule
(75 FR 40082).
Comment: One commenter suggested that using the GSA schedule for
supply price inputs might allow a single supplier furnishing a small
volume of a product at a divergent price to distort the PE RVU
calculations. On the other hand, MedPAC stated that the current CMS'
process of ``using price information voluntarily submitted by specialty
societies, individual practitioners, suppliers, and product developers
might not result in objective and accurate prices because each group
has a financial stake in the process.''
Another commenter recommended that if CMS were to use the GSA
schedule prices as high-cost inputs, then CMS should guarantee that
physicians may purchase supplies at the GSA schedule prices. The
commenter claimed that failure to do so would result in inherently
unfair, lower PE RVUs for certain procedures, which could ultimately
create an access to care problem for Medicare beneficiaries.
Response: We believe that our current system of accepting
voluntarily submitted invoices for supply and equipment price direct PE
inputs may be problematic for high-cost supplies because the prices for
such supplies may be particularly susceptible to distortions that
significantly influence the PE RVUs that we use for payment of the
associated services. We also believe that any attempt to account for
these distortions and more appropriately value the services must be
transparent to the stakeholders. Because the prices on the GSA supply
schedule are developed based on the interaction between parties that
have competing financial interests (the VA and supply vendors), we
believe that these prices are more likely to be representative of
competitive market prices than are prices that are voluntarily
submitted by individuals with financial stakes in the PFS payment
process. We agree that distortions--whether price overstatements or
understatements--in the values of the direct PE inputs, resulting in
misvalued services, have the potential to create financial incentives
for practitioners that are detrimental to ensuring access to medically
necessary and reasonable care for Medicare beneficiaries. Based in part
on prior analysis by MedPAC, we believe that the greater risk of
misvalued PE RVUs results from overvaluing high-cost supplies since we
believe that prices for these items may generally decrease over time as
competition increases.
As we discussed in our response to a previous comment, we do not
actually use the prices in the PE database for supplies but instead
those prices are the basis for the PE RVUs for the associated services
developed under the budget neutral PFS. Therefore, we do not agree with
the commenter that we should guarantee that physicians may purchase
supplies at the GSA schedule prices. Where our goal is for the high-
cost supply prices we use for PFS ratesetting to reflect typical market
prices for these items, especially in a relative sense, for many
reasons different supplies may not be available to individual
practitioners purchasing them at the prices in the PE database. The PFS
is not a payment system that reimburses health care practitioners based
on their individual costs, and the price available to an individual
practitioner for a supply item may be high or lower than the price in
the PE database that is used for setting the PFS PE RVUs for the
associated procedure.
Comment: One commenter claimed that no U.S. manufacturer sells
cryoablation probes through the GSA supply schedule and, therefore,
asserted that the pricing process for high-cost supplies described in
the CY 2011 PFS proposed rule would be inappropriate for that
particular supply. Other commenters reported difficulty locating
particular medical supplies on the GSA supply schedule.
Response: While we recognize that not all high-cost supplies are
currently on the GSA supply schedule, as we stated in the CY 2011 PFS
proposed rule (75 FR 40082), we believe that since we have provided the
medical community several years to examine the GSA medical supply
schedule before its use could be adopted under the PFS, stakeholders
would have the opportunity to ensure that any high-cost direct PE input
for a PFS service that may currently be missing from the GSA medical
supply schedule would be included before CMS needs to access the
publicly available price for the item. Furthermore, we have found that
the use of multiple clinically related search terms under the GSA
schedule search engine improves our ability to locate supply items that
are related to those that we currently include in the direct PE
database for the PFS. We believe that the mistaken assumption that
certain supplies are unavailable on the GSA supply schedule, resulting
from some commenters' inconclusive searches, may have influenced many
commenters' responses to the process we discussed in the CY 2011 PFS
proposed rule.
Prior to adopting use of the GSA supply schedule to update the
prices for high-cost supplies under the PFS, we believe it would be
appropriate to work with interested stakeholders to consider developing
a crosswalk between supply items included the direct PE database and
the GSA supply schedule.
Comment: One commenter contended that implementation of a process
to update high-cost supply prices based on the GSA schedule would
disadvantage all medical device companies that have chosen to provide
devices directly to the armed services or facilities for the treatment
of veterans. A few commenters speculated that many supply vendors would
resist placing their products on the GSA schedule for a variety of
reasons, including avoiding any unnecessary regulatory burden or the
scrutiny of GSA audits.
Response: We have no reason to believe that vendors who sell
directly to the VA at discounts must incorporate negotiated discounted
prices on the GSA schedule, so we do not believe that utilizing
publicly available prices as direct PE inputs would have a
disproportionately unfair impact on suppliers who sell directly to the
VA. At the same time, we also understand that not every medical supply
vendor would choose to place their products on the GSA schedule. That
is why we stated in the proposed rule (75 FR 40082) that if a supply
price were not publicly available on the GSA medical supply schedule by
the time CMS needs to access the price, we would consider proposing to
reduce the current price input in the PE database for the supply by a
percentage that would be based on the relationship between GSA prices
at that time and the existing PE database prices for similar supplies.
Vendors would need to balance their concerns about placing their
products on the GSA supply schedule with the alternative pricing policy
that would apply.
Comment: Several commenters objected to a reduction of supply price
inputs based on the relationship between GSA prices at the time the
prices are being updated and the existing PE database prices for
similar supplies. Many of the commenters stated that the 23 percent
reduction presented as an example in the CY 2011 PFS proposed rule (75
FR 40082) was

[[Page 73251]]

based on a very small sample of items and appeared arbitrary. One
commenter contended that the percentage reduction would need to be
validated for application to current pricing and argued that it would
be inappropriate for use on an item-specific basis.
Additional commenters, including the AMA RUC, pointed out the
discrepancy between the price of the ``jejunostomy tube'' supply item
listed in the chart of high-cost supplies and in the direct PE
database. These commenters were concerned that this discrepancy may
have led CMS to incorrectly calculate the average difference between
GSA prices and current prices in the direct PE database. One commenter
reasoned that it would be unfair for CMS to change the price inputs for
innovative medical devices by relying on ``speculation that prices for
these items may decrease over time as competition increases and new
technologies disseminate into medical practice.''
Response: We appreciate the commenters' concerns regarding the
example of the 23 percent reduction mentioned in the CY 2011 PFS
proposed rule. We provided that sample percentage as an example based
on a current analysis of a small sample of supplies. We appreciate
commenters correctly pointing out that we displayed an outdated price
input for the supply item ``jejunostomy tube'' in the CY 2011 PFS
proposed rule (75 FR 40080 through 40081). As we explained in the
proposed rule, we are still working through the crosswalk between our
supplies and the way the supplies are presented on the GSA schedule. We
included the 23 percent figure as a rough guide based on a comparison
of current GSA schedule and PE database prices for a small sample of
high-cost supply items.
Prior to implementing any price update based on GSA supply schedule
prices, we would conduct a thorough analysis of the validity of the GSA
pricing data in question. We believe that using such data for price
comparisons, validated, and expanded to include all applicable supply
items, may be more likely to approximate typical prices for these
supplies than any available alternative--especially failing to update
the high-cost supply price inputs with the necessary frequency. In
cases where the prices for certain high-cost supplies do not follow the
broad trends for other high-cost supplies, suppliers would have the
opportunity to provide their price to the public on the GSA schedule in
order to preclude any reduction in Medicare payment for procedures
associated with that supply.
Comment: Some commenters asserted that CMS should conduct
independent market research similar in kind to the research CMS claims
that the VA conducts in placing supply items and their associated
prices on the GSA schedule. Another commenter recommended that CMS use
a particular market research contractor to price these supplies.
Response: As we stated in the CY 2011 PFS proposed rule (75 FR
40079), we contracted with an independent contractor during CY 2009 to
help us study the availability of accurate pricing information for
high-cost supplies. We believe such research needs to be conducted with
transparency, including using publicly available sources and contacting
supply vendors directly. The contractor reported tremendous difficulty
in identifying typical market prices using these methods. We have no
reason to believe that a different contractor using similar methods
would have greater success in acquiring market pricing information
without utilizing a methodology that would be burdensome to
practitioners or supply vendors or other stakeholders. Because the
supply vendors in contact with the VA generally have a financial
incentive to cooperate with their market research directly, we believe
that the VA's methodology in this case would yield more accurate
information than information derived from market researchers who do not
have such cooperation, like the contractor working previously on behalf
of CMS.
Comment: Several commenters, including the AMA RUC, recommended
that CMS consider creating HCPCS codes to be reported by rendering
physicians for high-cost supplies when used for the care of a patient
during procedure. The supplies could then be removed from the direct PE
database and appropriate pricing for these supply HCPCS codes could be
determined by CMS on an annual basis. One commenter requested that CMS
explore whether such a methodology would be budget neutral under the
PFS, since the commenter did not support an approach that would reduce
PFS payments for cognitive services.
Response: We appreciate the commenters' suggestions, but we believe
creating separately reportable HCPCS codes for high-cost supplies and
paying separately for these items would merely shift the pricing
challenge rather than resolve it, and could compound the problem of
misvaluing services by explicitly paying for high-cost supplies at the
expense of other low-cost supplies, equipment, and clinical labor
included in the PE component of PFS payment. We do not understand how
this suggestion would help CMS price the supply items accurately, nor
how it would lead to more appropriate payment for high-cost supplies
under the relativity of the budget neutral PFS. This approach would be
required to be budget neutral under the PFS and, to the extent that our
current PE methodology pays less than the direct PE database cost for a
supply item, payment for individual high-cost supplies at prices we
establish could redistribute dollars from other PFS services to payment
for these supply items if we were to pay more for them separately.
Finally, unbundling payment for high-cost supplies from the associated
procedures would be contrary to the current public policy interest in
increasing the size of the payment bundles used for Medicare payment to
encourage efficiencies in the delivery of services.
Comment: Several commenters expressed a readiness to provide any
additional information that may help CMS in pricing high-cost supplies,
in lieu of using the GSA schedule prices for that purpose.
Response: We appreciate commenters' offers of assistance regarding
the pricing of direct PE inputs. However, based on the public comments
from stakeholders that we received on the process we proposed in the CY
2009 PFS proposed rule and the experience of the CMS' contractor who
attempted to acquire market pricing for supply items directly from
supply vendors, we believe that use of the GSA schedule would have
greater potential to provide us systematically and transparently with
typical market prices for high-cost supply items that could be updated
with an appropriate periodicity.
Comment: Some commenters expressed concern that CMS had not
presented any information about how prices for Medicare PE purposes
would actually be developed from the GSA supply schedule and had not
specified how the Agency would do so nor whether (or when) CMS intended
to make the approach available for public comment.
Response: We appreciate the commenters' concerns regarding the
practical implementation of a high-cost supply price update process
based on prices on the GSA supply schedule. In the CY 2011 PFS proposed
rule (75 FR 40082), our discussion was intended to encourage broad
stakeholder comment, including consideration of potential alternatives
to the process presented. Prior to implementing a high-cost supply
update methodology, such as the use of prices on the GSA schedule that
was the focus of our proposed rule

[[Page 73252]]

discussion, we would expect to use annual rulemaking in order to
propose a more detailed process that would be subject to modification
based upon our consideration of the public comments.
In summary, we appreciate the many public comments we received on
our discussion of a process that would use GSA schedule prices to
update the prices for high-cost supplies utilized for developing PE
RVUs under the PFS. In the context of our explicit responsibility to
review and adjust the PFS values for potentially misvalued services
under section 1848(c)(2)(K) of the Act (as added by section 3134 of the
ACA), we believe it is especially important to soon establish a
periodic and transparent process to update the cost of high-cost
supplies to reflect typical market prices so that these supply items
are appropriately considered in our ratesetting methodology. While
public commenters expressed some concerns regarding our discussion of
use of the GSA supply schedule prices in such a process, at this point
we remain optimistic that this approach has significant potential to be
used under the PFS and, based on our several year history of work in
this area, we do not see other viable alternatives at this point. We
will continue to study the issue of how to update the prices for high-
cost supplies over the upcoming months, and we encourage stakeholders
to also further consider the process we discussed in CY 2011 rulemaking
and provide their additional thoughts and perspectives to us on an
ongoing basis.

D. Geographic Practice Cost Indices (GPCIs)

1. Background
Section 1848(e)(1)(A) of the Act requires us to develop separate
Geographic Practice Cost Indices (GPCIs) to measure resource cost
differences among localities compared to the national average for each
of the three fee schedule components (that is, work, PE, and
malpractice). While requiring that the PE and malpractice GPCIs reflect
the full relative cost differences, section 1848(e)(1)(A)(iii) of the
Act requires that the physician work GPCIs reflect only one-quarter of
the relative cost differences compared to the national average. In
addition, section 1848(e)(1)(G) of the Act sets a permanent 1.5 work
GPCI floor in Alaska for services furnished beginning January 1, 2009.
Section 1848(e)(1)(C) of the Act requires us to review and, if
necessary, adjust the GPCIs not less often than every 3 years. This
section also specifies that if more than 1 year has elapsed since the
last GPCI revision, we must phase in the adjustment over 2 years,
applying only one-half of any adjustment in each year. As discussed in
the CY 2009 PFS final rule with comment period (73 FR 69740), the CY
2009 adjustment to the GPCIs reflected the fully implemented fifth
comprehensive GPCI update. CY 2010 would have typically included no
adjustments to the GPCIs. However, section 3102(a) of the ACA amended
section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for
services furnished through December 31, 2010. Additionally, section
3102(b) of the ACA added a new subparagraph (H) to section 1848(e)(1)
of the Act, which specifies that for CY 2010 and CY 2011, the employee
compensation and rent portions of the PE GPCI must reflect only one-
half of the relative cost differences for each locality compared to the
national average. The new subparagraph also includes a ``hold
harmless'' provision for CY 2010 and CY 2011 for any PFS locality that
would otherwise receive a reduction to its PE GPCI resulting from the
limited recognition of cost differences. Additionally, section
1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA)
established a 1.0 PE GPCI floor for services furnished in frontier
States effective January 1, 2011. In May 2010, we provided our Medicare
contractors with an updated CY 2010 payment file that included the 1.0
work GPCI floor and the PE GPCIs calculated according to the
methodology required by section 1848(e)(1)(H) of the Act (as added by
section 3102(b) of the ACA) for CY 2010, to be used for payment of
services furnished on or after January 1, 2010.
For the CY 2011 PFS proposed rule, we completed the sixth review of
the GPCIs and proposed new GPCIs. We noted that section 1848(e)(1)(E)
of the Act (as amended by section 3102(a) of the ACA) extends the 1.0
work GPCI floor only through December 31, 2010. Under current statute,
the 1.0 work GPCI floor will expire on January 1, 2011. Therefore, the
CY 2011 physician work GPCIs, and summarized geographic adjustment
factors (GAFs), do not reflect the 1.0 work floor. However, section
1848(e)(1)(G) of the Act (as amended by section 134(b) of the MIPPA)
set a permanent 1.5 work GPCI floor in Alaska for services furnished
beginning January 1, 2009 and, as noted above, section 1848(e)(1)(I) of
the Act (as added by section 10324(c) of the ACA) provides for a
permanent 1.0 PE GPCI floor for frontier States effective January 1,
2011. Therefore, as required by the statute, the 1.5 work GPCI floor
for Alaska and the 1.0 PE GPCI floor for frontier States will be in
effect for CY 2011. In addition to the limited recognition of certain
cost differences for the PE GPCIs, section 1848(e)(1)(H) of the Act (as
added by section 3102 (b) of the ACA) also requires us to complete an
analysis of the data sources used and cost share weights assigned to
the PE GPCIs. Implementation of the ACA provisions related to the CY
2011 PE GPCIs is discussed in more detail in the GPCI update section
below.
2. GPCI Update
As discussed in the CY 2011 PFS proposed rule (75 FR 40083), the
updated GPCI values were developed by Acumen, LLC (Acumen) under
contract to CMS. As mentioned above, there are three GPCI components
(physician work, PE, and malpractice), and all GPCIs are developed
through comparison to a national average for each component.
Additionally, each of the three GPCIs relies on its own data source(s)
and methodology for calculating its value as described below.
a. Physician Work GPCIs
The physician work GPCIs are designed to capture the relative cost
of physician labor by Medicare PFS locality. Previously, the physician
work GPCIs were developed using the median hourly earnings from the
2000 Census of workers in seven professional specialty occupation
categories which we used as a proxy for physicians' wages and
calculated to reflect one-quarter of the relative cost differences for
each locality compared to the national average. Physicians' wages are
not included in the occupation categories because Medicare payments are
a key determinant of physicians' earnings. Including physicians' wages
in the physician work GPCIs would, in effect, have made the indices
dependent upon Medicare payments.
The physician work GPCIs were updated in CYs 2001, 2003, 2005, and
2008 using professional earnings data from the 2000 Census. However,
wage and earnings data are no longer available from the Census long
form and the 2000 data are outdated. Therefore, for the proposed sixth
GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics
(BLS) Occupational Employment Statistics (OES) data as a replacement
for the 2000 Census data. The use of BLS OES data as a replacement for
the 2000 Census data is discussed in more detail in the update of the
PE GPCIs section. As noted above, the 1.0 work GPCI floor is set to
expire under current statute on December 31, 2010. Therefore, the CY
2011 proposed

[[Page 73253]]

physician work GPCIs reflected the removal of this floor.
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
(A) General Methodology for the CY 2011 GPCIs
The ACA added a new subparagraph (H) to section 1848(e)(1) of the
Act which revised the methodology for calculating the PE GPCIs for CY
2010 and CY 2011 so that the employee compensation and rent portions of
the PE GPCIs reflect only one-half of the relative cost differences for
each locality compared to the national average. Additionally, under
section 1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of
the ACA), each PFS locality is held harmless so that the PE GPCI will
not be reduced as a result of the change in methodology for PE GPCIs.
In accordance with section 1848(e)(1)(H)(ii) of the Act (as added by
section 3102(b) of the ACA), the employee compensation and rent
components of the proposed CY 2011 PE GPCIs were calculated to reflect
one-half of the cost differences for each PFS locality relative to the
national average cost. Additionally, as required by the statute,
physicians' services furnished in each PFS locality would be adjusted
by the higher of the locality's PE GPCI calculated with the limited
recognition of employee compensation and rent cost differences or the
PE GPCI calculated without the limited recognition of cost differences.
(B) Phase-In of PE GPCIs
Section 1848(e)(1)(C) of the Act requires us to phase in GPCI
adjustments over 2 years if there was more than 1 year between GPCI
adjustments. In accordance with the statute, we proposed to phase in
the updated PE GPCIs using one-half of the CY 2010 values and one-half
of the fully implemented values (as described in this section). To
apply the phase-in and hold harmless provisions of the Act, we
calculated transitional PE GPCIs based on two scenarios. Under the
first scenario, we calculated transitional CY 2011 PE GPCIs using the
full recognition of employee compensation and rent cost differences for
each locality as compared to the national average. As discussed below,
the first scenario reflects the ``hold harmless'' transitional PE GPCI
value that would apply to any PFS locality receiving a reduction to its
PE GPCI resulting from the application of the limited recognition of PE
cost differences. The CY 2011 transitional PE GPCI values with full
recognition of cost differences were calculated using one-half of the
CY 2010 PE GPCI values with full recognition of cost differences and
one-half of the updated PE GPCIs with full recognition of cost
differences. The first scenario represents the transitional PE GPCI
values prior to the limited recognition of cost differences (the pre-
ACA CY 2011 transitional values). In other words, this scenario does
not include the effects of sections 1848(e)(1)(H)(i) and (ii) of the
Act (as added by section 3102(b) of the ACA).
For the second scenario, we calculated transitional CY 2011 PE
GPCIs with the limited recognition of cost differences for the employee
compensation and rent components (as required by sections
1848(e)(1)(H)(i) and (ii) of the Act (as added by section 3102(b) of
the ACA)). The CY 2011 transitional PE GPCI values with the limited
recognition of cost differences were calculated using one-half of the
CY 2010 PE GPCIs with the limited cost differences and one-half of the
updated PE GPCIs with the limited cost differences. The hold harmless
provision under section 1848(e)(1)(H)(iii) of the Act (as added by
section 3102(b) of the ACA) was applied by selecting the greater of the
CY 2011 transitional PE GPCI value calculated with the limited
recognition of cost differences or the CY 2011 transitional PE GCPI
value calculated with full recognition of cost differences (the pre-ACA
CY 2011 transitional values). The phase-in of the CY 2011 PE GPCIs and
application of the hold harmless provision are illustrated in Table 23
below.

Table 23--Phase-In of the CY 2011 PE GPCIs
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2011 (transitional
CY 2010 Updated GPCIs year) Hold harmless
--------------------------------------------------------------------------------------------------------------------------------------------------------
File 1:
PE GPCI Without 3102(b) of ACA... Without ACA.......... Without ACA (Updated (\1/2\ of 2010) + (\1/2\ Greater of File 1 Transitional Value or File
Data). Updated GPCI). 2 Transitional Value.
File 2:
PE GPCI With 3102(b) of ACA...... With ACA............. With ACA (Updated (\1/2\ of 2010 w/ACA) +
Data). (\1/2\ Updated GPCI w/
ACA).
--------------------------------------------------------------------------------------------------------------------------------------------------------

(C) Data Analysis
Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b)
of the ACA) also requires the Secretary to ``analyze current methods of
establishing practice expense adjustments under subparagraph (A)(i) and
evaluate data that fairly and reliably establishes distinctions in the
cost of operating a medical practice in different fee schedule areas.''
Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of
the ACA) requires that such analysis shall include an evaluation of the
following:
The feasibility of using actual data or reliable survey
data developed by medical organizations on the costs of operating a
medical practice, including office rents and non-physician staff wages,
in different fee schedule areas.
The office expense portion of the practice expense
geographic adjustment, including the extent to which types of office
expenses are determined in local markets instead of national markets.
The weights assigned to each area of the categories within
the practice expense geographic adjustment.
This section also requires the Secretary to make appropriate
adjustments to the PE GPCIs no later than by January 1, 2012. To begin
to implement this statutory requirement based on our initial analysis,
we proposed to implement changes in PE data sources and cost share
weights discussed herein effective beginning in CY 2011.
In accordance with section 1848(e)(1)(H)(iv) of the Act (as added
by section 3102(b) of the ACA), we initially analyzed the current
methods and data sources used in the establishment of the PE GPCIs.
With respect to the method used, we began with a review of the GAO's
March 2005 Report entitled, ``MEDICARE PHYSICIAN FEES: Geographic
Adjustment Indices Are Valid in Design, but Data and Methods Need
Refinement'' (GAO-05-119). While we have raised concerns in the past
about some of the GAO's GPCI

[[Page 73254]]

recommendations, we noted that with respect to the PE GPCIs, the GAO
did not indicate any significant issues with the methods underlying the
PE GPCIs. Rather, the report focused on some of the data sources used
in the method. For example, the GAO stated that the wage data used for
the PE GPCIs are not current. Similarly, upon our reexamination of
public comments we had received on the PE GPCIs for previous updates,
we noted that the commenters predominately focused on either the data
sources used in the method or raised issues such as incentivizing the
provision of care in different geographic areas. However, the latter
issue (incentivizing the provision of care) is outside the scope of the
statutory requirement that the PE GPCIs reflect the relative costs of
the mix of goods and services comprising practice expenses in the
different fee schedule areas relative to the national average.
One key component of the PE GPCI method that our analysis
identified involved the office expense portion of the PE GPCIs and the
cost share weight assigned to this component. Most significantly, we
proposed that the weight for the office rent component be revised from
12.209 percent to 8.410 percent to reflect our more detailed breakout
of the types of office expenses that are determined in local markets
instead of national markets. For example, for previous GPCI updates, we
used the office expenses cost category as the cost share weight for
office rent and, therefore, all individual components previously
included in the office expenses category were adjusted for local area
cost differences by the GPCIs. As discussed in section II.E. of this
final rule with comment period, we proposed to disaggregate the broader
office expenses component into 9 new cost categories as part of the
proposed CY 2011 MEI rebasing. The disaggregation of the office
expenses category indicates that the fixed capital cost category, for
which the consumer price index (CPI) for owner's equivalent rent is the
price proxy, is the office expense category applicable to the office
rent component of the PE GPCI. Therefore, the fixed cost capital cost
category is the only component of office expenses that we proposed to
adjust for local area cost differences beginning in CY 2011. We
proposed to assign other newly defined components of the office
expenses category (for example, utilities, chemicals, paper, rubber and
plastics, telephone, postage, and moveable capital) to the medical
equipment, supplies, and other miscellaneous expenses cost component of
the PE GPCIs. As discussed later in this section, the medical
equipment, supplies, and other miscellaneous expenses component of the
PE GPCIs is assumed to have a national market and, therefore, this
component is not adjusted for local area cost differences.
The proposed expense categories for the PE GPCIs, along with their
respective cost share weights, are primarily derived from the 2006
American Medical Association (AMA) Physician Practice Information
Survey (PPIS) for self-employed physicians and selected self-employed
non-medical doctor specialties. The PPIS is the most comprehensive,
multispecialty, contemporaneous, and consistently collected PE data
source available. It was developed by medical organizations and
captures the costs of operating a medical practice, including office
rents and nonphysician staff wages. Moreover, we also examined the
feasibility of using the American Community Survey (ACS) and the Bureau
of Labor and Statistics (BLS) Occupational Employment Statistics (OES)
data for the employee compensation component of the PE GPCI. For
previous updates, the employee compensation component was based on the
2000 Decennial Census long form data. Since the Census data are
significantly outdated and the 2010 Census no longer includes
occupational wage data, we believe the ACS or BLS OES data might be
viable alternatives. While the ACS 3-year public use microsample (PUMS)
is currently available, it reflects only about 3 percent of households
and the data exhibit significant variation due to the small sample. In
particular, the ACS PUMS has fewer than 10 observations of pharmacists
in the Manhattan; Beaumont, Texas; and Southern Maine localities.
Therefore, we believe it would be premature to use the ACS data for
determining GPCI values. The 2006, 2007, and 2008 panels from the BLS
OES represent a larger sample than the ACS PUMS and more recent data
than the 2000 Census. As such, we proposed to use the BLS OES data for
updating the GPCIs. We look forward to exploring the use of the full
ACS data when they become available. Additionally, we explored other
sources of rent data (including commercial rental data and survey data)
for use in calculating the PE GPCIs. We could not identify a reliable
alternative rental data source available on a national basis with
coverage of nonmetropolitan areas.
We do not believe there is a national data source better than the
Housing and Urban Development (HUD) data for determining the relative
cost differences in office rents. Therefore, based on our review of the
available data sources, we proposed to use the 2010 apartment rental
data produced by HUD at the 50th percentile as a proxy for the relative
cost difference in physician office rents.
In the proposed rule (75 FR 40085), we indicated that we believe
our analysis of the current methods of establishing PE GPCIs and our
evaluation of data that fairly and reliably establish distinctions in
the cost of operating a medical practice in the different fee schedule
areas meet the statutory requirements of section 1848(e)(1)(H)(iv) of
the Act (as added by section 3102(b) of the ACA). A more detailed
discussion of our analysis of current methods of establishing PE GPCIs
and evaluation of data sources is included in Acumen's draft report.
Acumen's draft report and associated analysis of the sixth GPCI update,
including the PE GPCIs, was posted on the CMS Web site after display of
the CY 2011 PFS proposed rule. The draft report may be accessed from
the PFS Web site at: http://www.cms.gov/PhysicianFeeSched/ under the
``Downloads'' section of the CY 2011 PFS proposed rule Web page.
Acumen's final report and associated analysis of the sixth GPCI update
will be posted on the CMS Web site after publication of the CY 2011 PFS
final rule with comment.
(D) Determining the PE GPCI Cost Share Weights
To determine the cost share weights for the CY 2011 GPCIs, we
proposed to use the proposed 2006-based Medicare Economic Index (MEI)
as discussed in section II.E. of this final rule with comment period.
The proposed MEI was rebased and revised to reflect the weighted-
average annual price change for various inputs needed to provide
physicians' services. As discussed in detail in that section, the
proposed expense categories in the MEI, along with their respective
weights, were primarily derived from data collected in the 2006 AMA
PPIS for self-employed physicians and selected self-employed non-
medical doctor specialties.
For the cost share weight for the PE GPCIs, we used the 2006-based
MEI weight for the PE category of 51.734 percent minus the professional
liability insurance category weight of 4.295 percent. Therefore, we
proposed a cost share weight for the PE GPCIs of 47.439 percent. For
the employee compensation portion of the PE GPCIs, we used the
nonphysician employee compensation category weight of 19.153 percent.
The fixed capital category weight of 8.410, for which the CPI for

[[Page 73255]]

owner's equivalent rent is the price proxy, was used for the office
rent component. To determine the medical equipment, supplies, and other
miscellaneous expenses component, we removed professional liability
(4.295 percent), nonphysician employee compensation (19.153 percent),
and fixed capital (8.410 percent) from the PE category weight (51.734
percent). Therefore, we proposed a cost share weight for the medical
equipment, supplies, and other miscellaneous expenses component of
19.876 percent.
Furthermore, the physician compensation cost category and its
weight of 48.266 percent reflected the proposed work GPCI cost share
weight and the professional liability insurance weight of 4.295 percent
was used for the malpractice GPCI cost share weight. In the proposed
rule (75 FR 40085), we stated that we believe our analysis and
evaluation of the weights assigned to each of the categories within the
PE GPCIs meets the statutory requirements of section 1848(e)(1)(H)(iv)
of the Act (as added by section 3102(b) of the ACA).
The proposed cost share weights for the CY 2011 GPCIs are displayed
in Table 24 below.

Table 24--Cost Share Weights for CY 2011 GPCI Update
------------------------------------------------------------------------
Current Proposed
Expense category cost share cost share
weight (%) weight (%)
------------------------------------------------------------------------
Physician Work................................ 52.466 48.266
Practice Expense.............................. 43.669 47.439
--Employee Compensation................... 18.654 19.153
--Office Rent............................. 12.209 8.410
--Equipment, Supplies, Other.............. 12.806 19.876
Malpractice Insurance......................... 3.865 4.295
Total......................................... 100 100
------------------------------------------------------------------------

(E) PE GPCI Floor for Frontier States
Section 10324(c) of the ACA added a new subparagraph (I) under
section 1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for
physicians' services furnished in frontier States. In accordance with
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the
ACA), beginning in CY 2011, we applied a 1.0 PE GPCI floor for
physicians' services furnished in States determined to be frontier
States. The statute requires us to define any State as a frontier State
if at least 50 percent of the State's counties are determined to be
frontier counties, which the statute defines as counties that have a
population density less than 6 persons per square mile. However,
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the
ACA) also specifies that this provision shall not apply to States
receiving a non-labor related share adjustment under section
1886(d)(5)(H) of the Act (which excludes Alaska and Hawaii from
qualifying as a frontier State).
Consistent with the proposed FY 2011 hospital inpatient prospective
payment system (IPPS) 1.0 wage index floor for frontier States (as
required by section 10324(a) of the ACA) (75 FR 30920 through 30921),
we proposed to identify frontier counties by analyzing population data
and county definitions based upon the most recent annual population
estimates published by the U.S. Census Bureau. We divided each county's
population total by each county's reported land area (according to the
decennial census) in square miles to establish population density. We
also proposed to update this analysis from time to time, such as upon
publication of a subsequent decennial census, and if necessary, add or
remove qualifying States from the list of frontier States based on the
updated analysis.
For a State that qualifies as a frontier State, in accordance with
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the
ACA), we proposed that physicians' services furnished within that State
would receive the higher of the applicable PE GPCI value calculated
according to the standard CY 2011 methodology or a minimum value of
1.00. Furthermore, in accordance with section 1848(e)(1)(I) of the Act
(as added by section 10324(c) of the ACA), the frontier State PE GPCI
floor is not subject to budget neutrality and would only be extended to
physicians' services furnished within a frontier State.
For determining the proposed CY 2011 PFS PE GPCI values, the
frontier States are the following: Montana; Wyoming; North Dakota;
Nevada; and South Dakota (as reflected in Table 25).

Table 25--Frontier States Under Section 1848(e)(1)(I) of the Act
[as Added by Section 10324(c) of the ACA]
------------------------------------------------------------------------
Percent
State Total Frontier frontier
counties counties counties
------------------------------------------------------------------------
Montana.......................... 56 45 80
Wyoming.......................... 23 17 74
North Dakota..................... 53 36 68
Nevada........................... 17 11 65
South Dakota..................... 66 34 52
------------------------------------------------------------------------

(2) Summary of the CY 2011 PE GPCIs
The PE GPCIs include three components: employee compensation,
office rent, and medical equipment, supplies and miscellaneous expenses
as discussed below:
Employee Compensation: We used the 2006 through 2008 BLS
OES data to determine the proposed employee

[[Page 73256]]

compensation component of the PE GPCIs. The proposed employee
compensation component accounted for 40.4 percent of the total PE
GPCIs.
Office Rents: Consistent with the previous GPCI update, we
used the most recent residential apartment rental data produced by HUD
(2010) at the 50th percentile as a proxy for the relative cost
differences in physician office rents. The proposed office rent
component accounted for 17.7 percent of the PE GPCIs.
Medical Equipment, Supplies, and other Miscellaneous
Expenses: We assumed that items such as medical equipment and supplies
have a national market and that input prices do not vary among
geographic areas. As discussed in previous GPCI updates in the CY 2005
and CY 2008 PFS proposed rules, specifically the fourth GPCI update (69
FR 47503) and fifth GPCI update (72 FR 38138), respectively, some price
differences may exist, but we believe these differences are more likely
to be based on volume discounts rather than on geographic market
differences. For example, large physicians' practices may utilize more
medical equipment and supplies and therefore may or may not receive
volume discounts on some of these items. To the extent that such
discounting may exist, it is a function of purchasing volume and not
geographic location. The proposed medical equipment, supplies, and
miscellaneous expenses component was factored into the PE GPCIs with a
component index of 1.000. The proposed medical equipment, supplies, and
other miscellaneous expense component accounted for 41.9 percent of the
PE GPCIs.
c. Malpractice GPCIs
The malpractice GPCIs are calculated based on insurer rate filings
of premium data for $1 million to $3 million mature claims-made
policies (policies for claims made rather than services furnished
during the policy term). The CY 2011 malpractice GPCI update reflects
2006 and 2007 premium data.
d. Public Comments and CMS Responses on the Proposed 6th GPCI Update
We received many public comments regarding the CY 2011 proposed
GPCIs. Summaries of the comments and our responses follow.
Comment: Many commenters requested that CMS delay implementation of
the changes in underlying PE GPCI data and cost share weights until
complete findings and recommendations from the Institute of Medicine's
study of geographic adjustment factors for physician payment, the
Secretary's Medicare Geographic Payment Summit, and the MEI technical
advisory panel have been developed and considered. A few commenters
acknowledged that the BLS OES data is the best data source for updating
the GPCIs for CY 2011 but expressed concern that it provides data for
MSAs and rest of state areas and not counties. The commenters believe
that collecting data at the MSA level distorts the accuracy of the
input costs and requested that CMS delay the update until the full ACS
data can be evaluated and compared with the BLS OES data. A few
commenters requested that CMS delay the GPCI update for CY 2011 as was
done in the CY 2004 PFS final rule with comment period for the 4th GPCI
update.
Additionally, several commenters stated that a more comprehensive
analysis and evaluation of the PE GPCI is required by the ACA, further
noting that section 1848(e)(1)(H)(v) of the Act (as added by section
3102(b) of the ACA) allows CMS until January 1, 2012 to implement the
findings from the analysis of PE data. To that end, several commenters
requested a more comprehensive analysis of the occupational groups used
to determine the employee wage component of the PE GPCI to reflect the
``true costs'' incurred by physician groups in the delivery of health
care to Medicare beneficiaries. The commenters cited pharmaceutical,
accounting, legal, computer science, and management professionals as
examples of the types of nonphysician labor costs that should be
included in the determination of the employee compensation index.
Several commenters also stated that HUD rental data does not reflect
the ``actual costs'' of physician office rent and therefore should be
replaced by another data source.
Response: Section 1848(e)(1)(C) of the Act requires us to review
and update the GPCIs at least every 3 years. When updating the GPCIs we
believe we should use the best data that are currently available. As
mentioned by the commenters, the BLS OES data are more timely data than
the 2000 census data (which has been used for previous GPCI updates).
We believe that the BLS OES data, which are currently available, are an
appropriate and relevant data source for updating the work GPCIs and
employee compensation component of the PE GPCIs. Also because of the
timeliness of the data, we believe that using the BLS OES data would
result in a more accurate reflection of the geographic practice cost
differences among PFS localities than not updating the GPCIs for CY
2011.
While we believe it is appropriate to finalize updated GPCIs for CY
2011 using the most current data, we also acknowledge that there is
much ongoing analysis that may inform future GPCI changes. Therefore,
as discussed below, we are not using the revised cost share weights for
the CY 2011 GPCIs that would apply under the revised and rebased MEI
for CY 2011. We will address the GPCI cost share weights once again in
the CY 2012 PFS proposed rule, and we may make additional proposals
that would further modify the GPCI data and/or methods for CY 2012.
Additionally, we will review the complete findings and
recommendations from the Institute of Medicine's study of geographic
adjustment factors for physician payment, the Secretary's Medicare
Geographic Payment Summit, and the MEI technical advisory panel, and we
will continue to study the issues as required by section
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA).
We will once again consider the GPCIs for CY 2012 in the context of our
annual PFS rulemaking beginning in CY 2011 based on the information
available at that time. The CY 2011 GPCIs arising from the 6th GPCI
update reflect our initial review and response to the currently
available GPCI data, methods, and cost share weights. Once the full ACS
data are available, we will reassess the occupational groups used to
determine the employee compensation component of the PE GPCI and
continue to explore the use of commercial rent data as part of our
ongoing analysis of the GPCIs. We anticipate that further information,
including our review of the full ACS data, may lead to proposed
additional refinements to the GPCIs for future years. We have addressed
the CY 2011 GPCI cost share weights in response to other public
comments received on the CY 2011 PFS proposed rule that are summarized
later in this section.
With regard to the commenters who expressed concern that the BLS
OES data are not collected at the county level, we note that the 2000
Decennial Census data are only available at the county level for
approximately 10 percent of counties. For previous updates, the GAFs
for more than 90 percent of counties were developed based on MSAs or
larger geographic areas (for example, data for all rural areas in a
State were combined and used to proxy values for each rural county in a
State). Therefore, using BLS OES data and disaggregating data to the
county

[[Page 73257]]

level is not a significant departure from previous GPCI updates.
Moreover, we acknowledge that in the CY 2004 PFS proposed and final
rules (68 FR 49042 and 68 FR 63213 respectively), we updated only the
malpractice GPCI because the special tabulation of census data used for
the physician work GPCI and employee compensation portion of the PE
GPCI was not yet available. We explained that no acceptable data
sources could be found to update the work GPCIs and the employee
compensation portion of the practice expense GPCIs. Therefore, we made
no changes to the work GPCIs and PE GPCIs for CY 2004. However, in view
of the statutory requirement to update the GPCIs at least every 3
years, we do not believe it would be appropriate to finalize an update
only for malpractice GPCIs for CY 2011, while delaying the update of
the work GPCI and PE GPCI, when we currently have appropriate updated
data available to us for this purpose. As discussed previously, we will
review the GPCIs as part of the CY 2012 PFS rulemaking cycle (beginning
in CY 2011) based on the information available at that time, and we may
propose changes to the GPCIs prior to the next 3-year GPCI update.
Comment: Several commenters stated that the use of HUD rental data
is not an appropriate proxy for determining the office rent index and
suggested that CMS use data on actual physician office rents instead.
Additionally, one commenter questioned CMS' analysis of the Medical
Group Management Association's (MGMA's) survey data on rent. The
commenter raised questions as to why CMS rejected the use of MGMA
rental data due to insufficiency in sample size and representation,
despite admitting that the physician response rate on the MGMA survey
was typical for surveys of business.
Response: As we have previously explained in the CY 2005 and CY
2008 final rules with comment period (69 FR 66262 and 72 FR 66245
respectively), we recognize that apartment rents may not be a perfect
proxy for measuring the relative cost differences in physician office
rents. However, we believe the HUD rental data are the most
comprehensive and valid indicator that is available of the real estate
rental market in all areas of the country. We continue to believe that
HUD rental data remain the best data source for determining the
relative cost differences in physicians' office rent among all areas of
the country. The data are regularly updated and available nationally,
and retain consistency area-to-area and year-to-year. We would welcome
any alternative rental data source that is available nationally with
sufficient representation among PFS localities.
With regard to our review of MGMA survey data, we have concerns
with both the sample size and representativeness of the MGMA data. For
example, the responses represent only about 2,250 physician practices
nationwide and have disproportionate sample sizes by State, suggesting
very uneven response rates geographically. In addition, we also have
concerns that the MGMA data have the potential for response bias. The
MGMA's substantial reliance on its membership base suggests a nonrandom
selection into the respondent group. Some evidence for such issues in
the MGMA data arises from the very different sample sizes by State. For
example, in the MGMA data, 10 States have fewer than 10 observations
each, and California, New York, and New Jersey have fewer than 10
observations per locality. Therefore, we continue to believe the MGMA
survey data would not be a sufficient rental data source for all PFS
localities.
Comment: One commenter expressed concern that the BLS OES wage data
may result in the undervaluation of physician earnings because the data
exclude incomes of self-employed professionals.
Response: The GPCIs are not an absolute measure of physician
earnings; rather, they are a measure of the relative cost differences
for each of the three PFS components. We have no evidence to suggest
that self-employment income would have different geographic variation
than non-self-employed income. Absent such evidence, we would expect
that including wage data from self-employed professionals would result
in a geographic distribution of professional wages similar to the BLS
OES data source.
Comment: Many commenters stated that implementing PE GPCI changes
in CY 2011 would reduce payment to urban areas and, therefore, would
violate the ``hold harmless'' provision as required by the ACA.
Response: Section 1848(e)(1)(H) of the Act (as added by section
3102 (b) of the ACA) requires that we apply a limited recognition of
cost differences for the rent component and employee compensation
component of the PE GPCI as compared to the national average. This
section also includes a ``hold harmless'' provision for CY 2010 and CY
2011 for any PFS locality that would receive a reduction to its PE GPCI
resulting from the limited recognition of PE cost differences. For CY
2010 and CY 2011, we applied the limited recognition of PE cost
differences and ``hold harmless provision'' in accordance with the
statutory requirement, which is specific only to the limited
recognition of rent and employee wage cost differences. In other words,
the ``hold harmless'' (non-budget neutral) provision under section
1848(e)(1)(H)(iii) of the Act (as added by section 3102 (b) of the ACA)
does not apply to the effects of updated data incorporated into the
GPCIs as a result of our normal GPCI update process. As discussed
earlier in this section, the proposed GPCI update reflected our
preliminary review based on the best information currently available.
We anticipate that further information may lead to proposed additional
refinements to the GPCIs in future years.
Comment: One commenter recommended that CMS track the ``hold
harmless'' transitional GPCIs to determine whether certain regions of
the country are underpaid as a result of the application of the limited
recognition of PE cost differences.
Response: The ``hold harmless'' provision under section
1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of ACA) was
applied by selecting the greater of the CY 2011 transitional PE GPCI
value calculated with the limited recognition of cost differences or
the CY 2011 transitional PE GCPI value calculated with full recognition
of cost differences. Therefore, no locality is ``underpaid'' by the
application of the limited recognition of PE cost differences.
Comment: One commenter requested that CMS consider applying a 1.0
GPCI floor to non-frontier States that serve significant rural
populations. The commenter was not specific as to which GPCI (work, PE,
or malpractice) the floor should be applied.
Response: As discussed previously in this section, section
1848(e)(1)(I) of the Act (as added by section 10324(c) of the ACA)
established a permanent 1.0 PE GPCI floor only for frontier States, and
section 3102(a) of the ACA amended section 1848(e)(1)(E) of the Act to
extend the 1.0 work GPCI floor for services furnished only through
December 31, 2010. We do not otherwise have the authority to establish
GPCI floors that do not consider the differences in physicians'
resource costs among localities.
Comment: A few commenters requested that CMS release underlying
data sources, including county level GPCI values and budget neutrality
estimates, which would allow interested parties to replicate GPCI
calculations.
Response: We strive to be as transparent as possible in all of our
proposals. To that end, we have made

[[Page 73258]]

numerous files available on the CMS Web site under the downloads for
the CY 2011 PFS proposed rule to assist in the public's review of the
CY 2011 proposal. These files include: The preliminary contractor's
report on data for the 6th GPCI update; the CY 2010 through CY 2012
GPCIs, both as proposed (including the ACA provisions) and without the
ACA provisions to permit isolation of the impacts of the updated data;
and web links to the publicly available source data and copies of data
files that are not otherwise publicly available, for example county and
locality-specific RVUs from Medicare claims data and malpractice
insurance premium data. In combination, this information allows the
public to apply our methodology to replicate our calculations for the
proposed GPCIs.
Comment: Many commenters expressed concern about the proposed cost
share weights for the rent component and medical equipment, supplies,
and other miscellaneous component of the PE GPCI. The commenters stated
that the proposed cost share weights would unjustifiably shift Medicare
payment away from urban localities to rural localities. Several
commenters suggested that portions of the ``all other services''
component of the office expenses cost category, (which includes
maintenance services, storage, security and janitorial services, office
equipment, information technology systems, and medical record systems)
and the stand-alone ``other professional services'' cost category
(which includes accounting services, legal services, office management
services, continuing education, professional association memberships,
journals, and professional care expenses) are wage-related and,
therefore, should be adjusted for locality cost differences.
Additionally, a few commenters stated that the cost share weight
attributed to the rent component of the PE GPCI should vary by region
because one national cost share weight for rent penalizes areas where
office rent is a higher portion of practice expenses.
Response: Although we typically update the GPCI cost share weights
concurrently with the most recent MEI revision and rebasing, the
commenters raised many points regarding the reallocation of labor-
related costs from the medical equipment and supplies and miscellaneous
component to the employee compensation component of the PE GPCI. After
consideration of the public comments we received on this issue, we will
continue to use the current GPCI cost share weights for CY 2011. We
have asked the Institute of Medicine to evaluate the accuracy of the
geographic adjustment factors used for Medicare physician payment. The
Institute of Medicine will prepare two reports for Congress and the
Secretary of the Department of Health and Human Services. The first
report, expected in spring 2011, will include an evaluation of the
accuracy of geographic adjustment factors, and the methodology and data
used to calculate them. The second report, expected in spring 2012,
will evaluate the effects of the adjustment factors on the distribution
of the health care workforce, quality of care, population health, and
the ability to provide efficient, high-value care. For more information
on the Institute of Medicine's study on Medicare geographic adjustment
factors, we refer readers to the Institute of Medicine Web site: http://iom.edu/Activities/HealthServices/GeographicAdjustments.aspx.
We will explore further the options that were raised to us by the
commenters and the recommendations in the forthcoming Institute of
Medicine report(s). We will also continue our analysis of the cost
share weights attributed to the PE GPCI as required by section
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of the ACA),
including the possibility of assigning cost share weights to the rent
component of the PE GPCI that vary among fee schedule areas. We will
address the GPCI cost share weights again in the CY 2012 PFS proposed
rule.
Comment: MedPAC suggested an alternative method for calculating the
PE GPCI. This alternative PE GPCI method would account for variations
in the cost share of equipment and supplies across services.
Response: We appreciate MedPAC's suggestion of an alternative
method that would vary the portion of PE that is geographically
adjusted for locality differences based on the characteristics of
individual services, rather than applying a uniform percentage across
all PFS services. We recommend that MedPAC continue to analyze this or
other alternative geographic adjustment methods, including their
administrative feasibility.
Comment: A few commenters stated that the ``range of disparity''
between the highest and lowest paid PFS localities is too large and
contradicts data studies showing little to no distinction in physician
practice expenses throughout the nation. For example, the commenters
stated that the AMA's analysis of its own PPIS data concluded that
``expenses did not differ significantly by either metro location or
Census region.'' One commenter requested an explanation of the
discrepancy between the AMA's findings of no measurable practice
expense distinctions and CMS' findings that continue to show
substantial distinctions in physician practice expenses among the
Medicare payment localities. Another commenter stated that a 2007
survey conducted by the journal, Medical Economics, indicated that the
average practice expenses are highest in the Midwestern States (which
is contrary to the proposed CY 2011 GPCIs).
Response: We have reviewed the studies referenced by the commenters
and compared their findings with the GPCI values calculated for the CY
2011 PFS proposed rule. As mentioned by the commenters, both the AMA
and Medical Economics studies aggregated per-physician expenses at the
Census region level. The AMA PPIS analysis showed the Northeast as
having the lowest per-physician expenses, followed by the Midwest then
the West, with the South identified as having the highest expenses.
Although there is about a 20 percent difference in total expenses
between the Northeast and South, the study noted that the difference
was not significant after controlling for practice setting and
physician specialty. The Medical Economics survey findings showed about
a 30 percent difference in costs, with the East showing the lowest
expenses and the Midwest with the highest. Both studies demonstrated
that rural areas have the highest per-physician expenses and highly
populated areas the lowest.
To compare the variation of PE GPCI values calculated for the CY
2011 PFS proposed rule to the AMA and Medical Economics studies, we
used PE RVUs to create weighted averages of the PE GPCIs by Census
region. Additionally, because the AMA and Medical Economics data
reported total per-physician practice expenses, whereas the GPCI is a
cost index, we produced indices for each source to create comparable
measures of variation. We then normalized each index to the lowest cost
area from each data source. Consequently, the index values show the
percent difference in costs relative to the lowest cost area. For
example, the AMA study shows the Northeast as having the lowest per-
physician expenses, thus establishing an index value of 1.00 for that
area. For the AMA study, the Midwest index value is 1.07 which
signifies that costs in the Midwest are 7 percent above the Northeast
AMA values. The PE GPCI data indicate that the Midwest has the lowest
costs; and the South, with an

[[Page 73259]]

index value of 1.01, has costs that are 1 percent above the Midwest
GPCI values. When aggregated to the Census region, the PE GPCIs showed
less variation in costs than the comparison data sources (AMA PPIS and
Medical Economics). Using the PE GPCI data to calculate Census region
indices produced only a 16 percent difference in costs between the most
costly and least costly areas, equating to roughly half the variation
found in the Medical Economics survey and about 75 percent of the
variation found in the PPIS study. Table 26 compares the results on the
disparity in costs by Census region.

Table 26--Census Region Cost Indices by Data Source
----------------------------------------------------------------------------------------------------------------
PE GPCI components
Medical PE GPCI --------------------------------------
AMA economics data Office
Rent Wages supplies
----------------------------------------------------------------------------------------------------------------
Midwest........................... 1.07 1.29 1.00 1.00 1.04 1.00
South............................. 1.21 1.20 1.01 1.12 1.00 1.00
West.............................. 1.11 1.06 1.14 1.47 1.17 1.00
Northeast......................... 1.00 1.00 1.16 1.55 1.18 1.00
----------------------------------------------------------------------------------------------------------------

Additionally, the conceptual approaches to the GPCIs and the data
sources noted by the commenters are sufficiently different to make
comparisons extremely difficult. The different rank ordering in the
costs by regions, as shown in Table E4, may also reflect the different
strategies used to measure costs. Specifically, the AMA and Medical
Economics studies ordered areas based on total physicians' expenses,
whereas the GPCIs are intended to provide a local cost index that is
then applied to each PFS component; work, practice expense, and
malpractice expense. Based on our review of the AMA PPIS and Medical
Economics studies, a key factor in explaining differences with the
proposed GPCI values is differences in practice patterns across the
different areas. Specifically, rural practitioners tend to see more
patients, incurring higher expenses. However, as noted in the Medical
Economics study, higher patient loads result in higher payment. To
place this in the context of Medicare PFS payment, seeing more patients
produces more billed services, allowed charges, and payments.
Therefore, the greater number of patients seen by rural physicians is
accounted for in total RVUs to the physician, rather than through the
GPCI values.
Moreover, the very low cost ranking of the Northeast in both the
AMA PPIS and Medical Economics datasets suggests a possible influence
of economies of scale. The GPCIs are designed to capture differences in
the prices of inputs facing physicians in each region. The input prices
are used to create GPCI values as a measure of the relative cost
differences in operating a medical practice in one locality versus
another. It is likely that the AMA and Medical Economics studies are
capturing differences in the production of services, distinct from the
input prices. In particular, the geographic differences may reflect
differences in economies of scale in more and less urbanized areas.
More rural practitioners are less likely to work in large practices,
leading to higher per-physician costs, all else being equal. For
example, a two-physician practice may need the same number of front
office staff as a one-physician practice. When this expense is measured
on a per-physician basis, the single physician pays twice as much for
front office support. This type of variation can occur within
localities and may reflect the practitioner's choice to work in a small
or large physician practice. Nevertheless, there is no mechanism within
the existing GPCI approach to account for the influence of economies of
scale, despite its potentially significant impact on the effective per-
unit costs of providing care.
Comment: Several commenters recommended that CMS use data from a
reliable survey of physicians' practices, such as the AMA PPIS or the
MGMA survey, to develop the office rent index and employee compensation
index.
Response: Because of the limited sample sizes of the AMA PPIS (n =
2,137) and MGMA studies (n = 2,246), we do not believe that it would be
possible to calculate reliable indices for all Medicare PFS localities
based upon these data. As mentioned previously, in the MGMA data, 10
States have fewer than 10 observations each, and California, New York,
and New Jersey have fewer than 10 observations per locality.
In light of the comments received suggesting the use of survey data
to determine GPCI values and the typical response rates for existing
physician surveys, we are continuing to consider the possibility of
establishing a physician cost report and requiring a sufficiently large
sample of physicians in each locality to report data on actual costs
incurred. However, we believe that a physician cost report could take
years to develop and implement, and could be prohibitively expensive.
We also have some concerns about the administrative burden this
approach would place on physician's office staff. Therefore, we are
requesting specific public comments regarding the potential benefits to
be gained from establishing a physician cost report and whether this
approach is appropriate to achieve potentially greater precision in
measuring the relative cost differences in physicians' practices among
PFS localities. We are also requesting public comments on the potential
administrative burden of requiring physicians to routinely complete and
submit a cost report and whether this requirement should be mandatory
for all physician practices. Additionally, we have asked the Institute
of Medicine to look at the use of survey data in the context of their
geographic adjustment analysis. It is also our understanding that
MedPAC is considering the issue of data sources used to determine
geographic payment adjustments under the PFS.
Comment: One commenter stated that all geographic adjustment
factors should be eliminated from the Medicare PFS ``except for those
designed to achieve a specific public policy goal, for example, to
encourage physicians to practice in underserved areas.'' The commenter
requested that CMS utilize the most broadly applicable methodology
allowed by law to reduce geographic payment disparity.
Response: We are required by section 1848(b)(1)(C) and (e)(1)(A) of
the Act to develop and apply separate GPCIs to adjust for resource cost
differences among localities compared to the national average for each
of the three PFS components: work, practice expense, and malpractice
expense. The purpose of the GPCIs is not to reduce

[[Page 73260]]

geographic payment disparity; rather, the GPCIs distribute PFS payments
among areas in order to adjust for area cost differences. In general
the data show that urban areas usually are higher cost, while rural
areas are lower cost. However, there are several provisions currently
in place that have the effect of reducing geographic payment
disparities. For example, the statute requires that only one-quarter of
area cost differences in physician work be recognized, and we assign a
1.0 index to the medical equipment, supplies, and miscellaneous
component of the PE GPCI because we believe there is a national market
for these items. In addition, 34 States and 2 territories are
``Statewide'' payment localities wherein all physicians, whether urban
or rural, are paid the same. Moreover, many geographic areas are
designated as Health Professional Shortage Areas (HPSAs). Physicians in
these areas may be eligible for a 10 percent HPSA bonus payment in
addition to the amount paid under the Medicare PFS for services they
furnish. Beginning in CY 2011, general surgeons furnishing major
surgical procedures in these areas may be eligible for the HPSA
surgical incentive payment program (HSIP) that also pays 10 percent in
addition to the amount paid under the PFS as discussed in section
VI.S.2. of this final rule with comment period. For complete
information on the HPSA bonus payment program and a list of eligible
areas for both programs by zip code, we refer readers to the CMS Web
site at: http://www.cms.hhs.gov/hpsapsaphysicianbonuses/01_overview.asp. All of these factors mentioned above have the effect of
reducing geographic payment disparities under the Medicare PFS.
Comment: One commenter encouraged CMS to follow the GAO's
recommendations, as outlined in the GAO's March 2005 Report (GAO-05-
119), for improving underlying GPCI data and methods by taking the
following actions:
Transition from Census Bureau's Decennial Census data to
the annual ACS for earning and wage data.
Include physician assistant wage data to improve the
measurement of the PE GPCI.
Consider the feasibility of using a commercial rent index
or a residential rent index directly based on ACS data for determining
the rent component of the PE GPCI.
Collect malpractice premium data from all States,
accounting for at least half of the malpractice business in a State.
Standardize collection of malpractice premium data, for
example by using data from Physician Insurer's Association of America.
Response: As previously discussed, the full ACS data were not
available in time for the 6th GPCI update. We intend to explore the use
of ACS data for determining the work GPCI and the employee compensation
component of the PE GPCI, as well as evaluate its possible use as an
office rent index once the data are fully available. We also intend to
continue exploring the potential use of commercial rent data as part of
our ongoing review and refinement of the GPCIs.
Additionally, we have considered the use of physician assistant
wages in calculating the employee compensation index. However, since
physician assistants can furnish medical services and bill the Medicare
program directly, their wages are influenced by Medicare PFS payment.
Therefore, we have some concern that a circular effect could occur if
we included physician assistants among the occupational groups
comprising the employee compensation component, similar to our concern
with including physicians' salaries in the determination of the work
GPCI.
With regard to the collection of malpractice premium data, the CY
2011 malpractice GPCI update reflects 2006 and 2007 premium data which
were also used for the CY 2010 update to the malpractice RVUs. As
compared to previous malpractice RVU updates, we substantially
increased the number of States from which we were able to collect rate
filings. We were able to collect malpractice premium data from every
State except for Mississippi and Puerto Rico. Premium data were
selected from at least two companies in each State, with more selected
if necessary to reach 50 percent of the market share in that State. To
ensure consistency across States we collected premium data from State
Departments of Insurance. For States where we were not able to collect
rate fillings, we used premium information from the Medical Liability
Monitor Survey data from 2005 through 2008.
e. Summary of Final CY 2011 GPCIs
After consideration of the public comments received on the GPCIs,
we are finalizing the 6th GPCI update using the most current data, with
modifications; we are not finalizing the proposal to change the GPCI
cost share weights for CY 2011. Instead, we are continuing to use the
current GPCI cost share weights for determining the PE GPCI values and
locality GAFs in CY 2011, and we will address the cost share weights
again in the CY 2012 PFS proposed rule. As a result, the cost share
weight for the physician work GPCI (as a percentage of the total) will
be 52.5 percent (current and for CY 2011) rather than 48.3 percent (as
proposed), and the cost share weight for the PE GPCI will be 43.7
percent (current and for CY 2011) rather than 47.4 percent (as
proposed) with only a slight difference in the employee compensation
component (18.7 percent rather than 19.2 percent as proposed). However,
the cost share weight for the office rent component of the PE GPCI will
be 12.2 percent (current and for CY 2011) rather than 8.4 percent (as
proposed), and the medical equipment, supplies, and other miscellaneous
expenses component will be 12.8 percent (current and for CY 2011)
rather than 19.9 percent (as proposed). Moreover, the cost share weight
for the malpractice GPCI will be 3.9 percent (current and for CY 2011)
rather than 4.3 percent (as proposed).
Additionally, we will review the complete findings and
recommendations from the Institute of Medicine's study of geographic
adjustment factors for physician payment, the Secretary's Medicare
Geographic Payment Summit, and the MEI technical advisory panel, and
continue to study the issues as required by section 1848(e)(1)(H)(iv)
of the Act (as added by section 3102(b) of the ACA). We will once again
consider the GPCIs for CY 2012 in the context of our annual PFS
rulemaking beginning in CY 2011 based on the information available at
that time.
We are using the 2006 through 2008 panels from the BLS OES data for
updating the work GPCIs and the employee compensation component of the
PE GPCIs. We are also using the 2010 apartment rental data produced by
HUD at the 50th percentile as a proxy for the relative cost difference
in physicians' office rents and 2006 and 2007 malpractice premium data
for determining the malpractice GPCIs.
As required by section 1848(e)(1)(H)(ii) and (iii) of the Act (as
added by section 3102(b) of the ACA), the CY 2011 GPCIs reflect only
one-half of the relative cost differences for the employee compensation
and rent portions of the PE GPCI, and the ``hold harmless'' provision
ensures that no locality receives a payment reduction resulting from
the limited recognition of PE cost differences. For CY 2011, the ``hold
harmless'' provision was applied by selecting the greater of the CY
2011 transitional PE GPCI value calculated with the limited recognition
of cost differences or the CY 2011 transitional

[[Page 73261]]

PE GPCI value calculated with full recognition of cost differences.
In accordance with section 1848(e)(1)(I) of the Act (as added by
section 10324(c) of the ACA), and consistent with the final FY 2011
hospital IPPS (75 FR 5160 through 5161), we applied a 1.0 PE GPCI floor
for services furnished in frontier States. The frontier States are the
following: Montana; Wyoming; North Dakota; Nevada; and South Dakota. As
we indicated above in this section, section 1848(e)(1)(E) of the Act
(as amended by section 3102(a) of the ACA) extended the 1.0 work GPCI
floor only through December 31, 2010. Therefore, the CY 2011 physician
work GPCIs and summarized GAFs do not reflect the 1.0 work floor.
However, the permanent 1.5 work GPCI floor for Alaska (as established
by section 134(b) of the MIPPA) will remain in effect for CY 2011.
We are finalizing the CY 2011 GPCIs shown in Addendum E. The GPCIs
have been budget neutralized to ensure that nationwide, total RVUs are
not impacted by changes in locality GPCIs. The 1.0 PE GPCI floor for
frontier States and the PE GPCI ``hold harmless'' provision were
applied to the budget neutralized GPCIs.
Typically when we complete a review and update of the GPCIs, the
values shown represent the first year of the 2-year GPCI update
transition. Although the CY 2011 GPCIs have been set on that basis, we
note that we will be assessing the results of the various studies
regarding the GPCIs and cost share weights (once they are completed),
and exploring the use of the full ACS data. Based on these assessments,
we may make additional proposals that would further modify the GPCIs
for CY 2012, which would result in changes to the CY 2012 GPCIs shown
in Addendum E to this final rule with comment period. Therefore, the
final CY 2011 GPCIs may not reflect a true mid-point ``phase-in'' to
the updated GPCIs, although, as noted above, they have been set for CY
2011 on that basis. The CY 2011 updated GAFs and GPCIs may be found in
Addenda D and E of this final rule with comment period.
3. Payment Localities
The current PFS locality structure was developed and implemented in
1997. There are currently 89 localities; 34 localities are Statewide
areas. There are 52 localities in the other 18 States, with 10 States
having 2 localities, 2 States having 3 localities, 1 State having 4
localities, and 3 States having 5 or more localities. The District of
Columbia, Maryland, and Virginia suburbs, Puerto Rico, and the Virgin
Islands are additional localities that make up the remainder of the
total of 89 localities. The development of the current locality
structure is described in detail in the CY 1997 PFS proposed rule (61
FR 34615) and the subsequent final rule with comment period (61 FR
59494).
As we have previously noted in the CYs 2008 and 2009 proposed rules
(72 FR 38139 and 73 FR 38513), any changes to the locality
configuration must be made in a budget neutral manner within a State
and can lead to significant redistributions in payments. For many
years, we have not considered making changes to localities without the
support of a State medical association in order to demonstrate
consensus for the change among the professionals whose payments would
be affected (with some increasing and some decreasing). However, we
have recognized that, over time, changes in demographics or local
economic conditions may lead us to conduct a more comprehensive
examination of existing payment localities.
For the past several years, we have been involved in discussions
with physician groups and their representatives about recent shifts in
relative demographics and economic conditions, most notably within the
current California payment locality structure. We explained in the CY
2008 PFS final rule with comment period that we intended to conduct a
thorough analysis of potential approaches to reconfiguring localities
and would address this issue again in future rulemaking. For more
information, we refer readers to the CY 2008 PFS proposed rule (72 FR
38139) and subsequent final rule with comment period (72 FR 66245).
As a follow-up to the CY 2008 PFS final rule with comment period,
we contracted with Acumen to conduct a preliminary study of several
options for revising the payment localities on a nationwide basis. The
contractor's interim report was posted on the CMS Web site on August
21, 2008, and we requested comments from the public. The report
entitled, ``Review of Alternative GPCI Payment Locality Structures,''
remains accessible from the CMS PFS Web page under the heading
``Interim Study of Alternative Payment Localities under the PFS.'' The
report may also be accessed directly from the following link: http://www.cms.hhs.gov/PhysicianFeeSched/10_Interim_Study.asp#TopOfPage.
We accepted public comments on the interim report through November
3, 2008. The alternative locality configurations discussed in the
report are described briefly below in this section.
Option 1: CMS Core-Based Statistical Area (CBSA) Payment Locality
Configuration
This option uses the Office of Management and Budget (OMB's)
Metropolitan Statistical Area (MSA) designations for the payment
locality configuration. MSAs would be considered as urban CBSAs.
Micropolitan Areas (as defined by OMB) and rural areas would be
considered as non-urban (rest of State) CBSAs. This approach would be
consistent with the IPPS pre-reclassification CBSA assignments and with
the geographic payment adjustments used in other Medicare payment
systems. This option would increase the number of PFS localities from
89 to 439.
Option 2: Separate High-Cost Counties from Existing Localities
(Separate Counties)
Under this approach, higher cost counties are removed from their
existing locality structure and they would each be placed into their
own locality. This option would increase the number of PFS localities
from 89 to 214, using a 5 percent GAF differential to separate high-
cost counties.
Option 3: Separate MSAs from Statewide Localities (Separate MSAs)
This option begins with statewide localities and creates separate
localities for higher cost MSAs (rather than removing higher cost
counties from their existing locality as described in Option 2). This
option would increase the number of PFS localities from 89 to 130,
using a 5 percent GAF differential to separate high-cost MSAs.
Option 4: Group Counties Within a State Into Locality Tiers Based on
Costs (Statewide Tiers)
This option creates tiers of counties (within each State) that may
or may not be contiguous but share similar practice costs. This option
would increase the number of PFS localities from 89 to 140, using a 5
percent GAF differential to group similar counties into statewide
tiers.
As discussed in Acumen's interim report, all four studied
alternative locality configurations would increase the number of
localities and separate higher cost areas from rural ``rest of state''
areas. As a result, payments to urban areas would increase, while rural
areas would see a decrease in payment because they would no longer be
grouped with higher cost ``urbanized'' areas. A number of public
commenters

[[Page 73262]]

on the draft report expressed support for Option 3 (separate MSAs from
Statewide localities) because the commenters believed this alternative
would improve payment accuracy over the current locality configuration
and could mitigate possible payment reductions to rural areas as
compared to Option 1 (CMS CBSAs). Therefore, Acumen is conducting a
more in-depth analysis of the dollar impacts that would result from the
application of Option 3. For a detailed discussion of the public
comments on the contractor's interim locality study report, we refer
readers to the CY 2010 PFS proposed rule (74 FR 33534) and subsequent
final rule with comment period (74 FR 61757).
We note that the discussion of PFS payment localities and our
preliminary study of alternative payment locality configurations in the
CY 2011 PFS proposed rule was intended for informational purposes only.
We did not make any proposals regarding the PFS locality configurations
for CY 2011 and, therefore, public comments on the PFS locality
configurations are not within scope of the CY 2011 PFS proposed rule.
We thank the commenters for sharing their views and suggestions;
however, we are not summarizing or responding to `out of scope'
comments in this final rule with comment period.

E. PFS Update for CY 2010: Rebasing and Revising of the Medicare
Economic Index (MEI)

1. Background
The Medicare Economic Index (MEI) was originally required by
section 1842(b)(3) of the Act, which states that prevailing charge
levels beginning after June 30, 1973 may not exceed the level from the
previous year except to the extent that the Secretary finds, on the
basis of appropriate economic index data, that such higher level is
justified by year-to-year economic changes. We continued to use the MEI
as part of the statutory update formula (specified under section 1848
of the Act) when the physician fee schedule was implemented in 1992 (56
FR 59511).
Beginning July 1, 1975, and continuing through today, the MEI has
served these purposes by reflecting the weighted-average annual price
change for various inputs needed to furnish physicians' services. As
such, the index is necessarily a fixed-weight input price index, with
an adjustment for the change in economy-wide, private nonfarm business
multifactor productivity. The MEI is comprised of two broad categories:
(1) Physician's own time; and (2) physician's practice expense (PE).
The MEI was first published on June 16, 1975 (40 FR 25446), and
became effective for services furnished beginning July 1, 1975. The
original MEI had a base period of 1971. The structure of the original
MEI remained essentially unchanged from its original until the CY 1993
final rule (57 FR 55896) in which we finalized a comprehensive rebasing
and revision process with a 1989 base year. The new index was based in
part on the recommendations of a Congressionally-mandated meeting of
experts held in March 1987. The MEI was again rebased in the CY 1999
final rule (63 FR 58845), which moved the cost structure of the index
from a 1989 base to a 1996 base. The methodology for the productivity
adjustment was revised in the CY 2003 final rule (67 FR 80019) to
reflect the percentage change in the 10-year moving average of economy-
wide private nonfarm business multifactor productivity (previously the
index was adjusted by a measure of labor productivity). The current
form of the MEI was detailed in the CY 2004 PFS final rule (68 FR
63239) which updated the cost structure of the index from a base year
of 1996 to 2000.
We proposed to rebase and revise the MEI and incorporate it into
the CY 2011 PFS update. The terms ``rebasing'' and ``revising'', while
often used interchangeably, actually denote different activities.
Rebasing refers to moving the base year for the structure of costs of
an input price index, while revising relates to other types of changes
such as changing data sources, cost categories, or price proxies used
in the price index. As is always the case with a rebasing and revising
exercise, we have used the most recently available, relevant, and
appropriate information to develop the proposed MEI cost category
weights and price proxies. In the following sections of this final rule
with comment period, we detail our proposals and respond to comments
regarding the updated cost weights for the MEI expense categories, our
rationale for selecting the price proxies in the MEI, and the results
of the rebasing and revising of the MEI.
2. Use of More Current Data
The MEI was last rebased and revised in 2003 in the CY 2004 PFS
final rule with comment period (68 FR 63239). The current base year for
the MEI is 2000, which means that the cost weights in the index reflect
physicians' expenses in 2000. However, we believe it is desirable to
periodically rebase and revise the index so that the expense shares and
their associated price proxies reflect more current conditions. For the
CY 2011 PFS update, we are finalizing the proposal to rebase and revise
the MEI to reflect appropriate physicians' expenses in 2006.
Compared to the 2000-based MEI, we proposed to make several changes
to the MEI cost structure. First, we proposed to exclude the
Pharmaceutical cost category as pharmaceuticals are neither paid for
under the PFS nor are they included in the definition of ``physicians'
services'' for purposes of calculating the physician update via the SGR
system (for more details see the CY 2010 PFS final rule with comment
period (74 FR 61961 through 61962)). We also proposed to exclude the
expenses associated with separately billable supplies since these items
are not paid for under the PFS. Our primary data source, the 2006
Physician Practice Information Survey (PPIS), collected data on these
costs enabling us to accurately remove them from the index. In
addition, we proposed to include nine new cost categories that
disaggregate the costs under the broader Office Expenses cost category.
The 2000-based MEI did not break these expenses into individual cost
categories. As a result of comments received, which are described more
fully below in this section, we are modifying this proposal to instead
include ten detailed cost categories. As indicated in the CY 2011 PFS
proposed rule, we proposed to continue to adjust the MEI for economy-
wide multifactor productivity based on changes in the 10-year moving
average of private nonfarm business multifactor productivity. After
considering the comments received, we are finalizing our proposal to
continue to adjust the MEI for economy-wide multifactor productivity
based on changes in the 10-year moving average of private nonfarm
business multifactor productivity.
3. Rebasing and Revising Expense Categories in the MEI
The MEI is used in conjunction with the SGR system to update the
PFS and represents the price component of that update. The proposed
expense categories in the index, along with their respective weights,
are primarily derived from data collected in the 2006 AMA PPIS for
self-employed physicians and selected self-employed non-medical doctor
specialties. As noted, in addition to data on medical doctors, we
included data from several non-medical doctor specialties in the MEI
cost weight calculations (including optometrists, oral surgeons,
podiatrists, and chiropractors) consistent with the definition of the
term ``physician'' in section 1861(r) of the Act. In summary,

[[Page 73263]]

the term ``physician'' when used in connection with the performance of
functions or actions an individual is legally authorized to perform
means the following: (1) A doctor of medicine or osteopathy; (2) a
doctor of dental surgery or of dental medicine; (3) a doctor of
podiatric medicine; (4) a doctor of optometry; or (5) a chiropractor.
For a complete definition, please see section 1861(r) of the Act. We
weighted the expense data from the above-referenced specialties with
the self-employed physician expense data using physician counts by
specialty, the same methodology used in the AMA PPIS.
The AMA PPIS data were used to determine the expenditure weights in
the MEI for all of the major cost categories including total expenses,
physicians' earnings, physicians' benefits, employed physician payroll,
nonphysician compensation, office expenses, professional liability
insurance (PLI), medical equipment, medical supplies, and other
professional expenses. We are finalizing our proposal to further
disaggregate both non-physician compensation and office expenses into
subcategories reflecting more detailed expenses. We used several data
sources for further disaggregation of expenses including: data from the
2002 Bureau of Economic Analysis (BEA) Benchmark Input-Output table (I/
O), the 2006 Bureau of the Census Current Population Survey (CPS), the
2006 Bureau of Labor Statistics (BLS) Occupational Employment Survey
(OES), the 2006 Employment Cost for Employee Compensation Survey
(ECEC), and the 2006 Internal Revenue Service (IRS) Statistics of
Income (SOI) data. The development of each of the cost categories using
these sources is described in detail below.
a. Developing the Weights for Use in the MEI
Developing a rebased and revised MEI requires selecting a base year
and determining the appropriate expense categories. We proposed to
rebase the MEI to CY 2006. We choose CY 2006 as the base year as: 1)
this is the most recent year for which comprehensive physician expense
data are available; and (2) we believe these data represent an accurate
proxy for the physician expense distribution in CY 2011.
Table 27 lists the set of mutually exclusive and exhaustive cost
categories that make up the final rebased and revised MEI, including
the addition of the All Other Products category we are adopting in
response to public comments.

Table 27--Final 2006 MEI Cost Categories, Weights, and Price Proxies Compared to the 2000 MEI Cost Categories
and Weights
----------------------------------------------------------------------------------------------------------------
Final 2006-
Cost category cost weights 2000 Cost 2006 Price proxies
(1,2) weights
----------------------------------------------------------------------------------------------------------------
Total............................. 100.00 100.000
Physician's Compensation (Own 48.266 52.466
Time) \(3)\.
Wages and Salaries............ 43.880 42.730 AHE Total Nonfarm Private for Production &
Nonsupervisory Employees.\(5)\
Benefits (3),(4).............. 4.386 9.735 ECI-Benefits Total Nonfarm Private.\(6)\
Physician's Practice Expense...... 51.734 47.534
Nonphysician Employee 19.153 18.654
Compensation.
Nonphysician Employee Wages 13.752 13.809
and Salaries.
Prof/Tech Wages........... 6.006 5.887 ECI-Wages/Salaries: Private Professional
&Technical.
Managerial Wages.......... 1.446 3.333 ECI-Wages/Salaries: Private Managerial.
Clerical Wages............ 4.466 3.892 ECI-Wages/Salaries: Private Clerical.
Services Wages............ 1.834 0.696 ECI-Wages/Salaries: Private Service.
Nonphysician Employee Benefits 5.401 4.845 ECI-Ben: Private Blend.
\(4)\.
Office Expenses............... 20.035 12.209
Utilities................. 1.266 ............. CPI Fuel & Utilities.\(7)\
Chemicals................. 0.723 ............. PPI for Other Basic Organic Chemical
Manufacturing.\(8)\
Paper..................... 0.657 ............. PPI for Converted Paper.
Rubber & Plastics......... 0.598 ............. PPI for Rubber and Plastics.
Telephone................. 1.501 ............. CPI for Telephone Services.
Postage................... 0.898 ............. CPI for Postage.
All Other Services........ 3.582 ............. ECI Compensation Services Occupations.
All Other Products........ 0.500 ............. CPI-U All Items Less Food and Energy.
Fixed Capital............. 8.957 ............. CPI for Owner's Equivalent Rent.
Moveable Capital.......... 1.353 ............. PPI for Machinery and Equipment.
PLI........................... 4.295 3.865 CMS-Prof. Liab. Phys. Premiums.
Medical Equipment............. 1.978 2.055 PPI-Medical Instruments & Equip.
Pharmaceuticals and Medical 1.760 4.320
Materials and Supplies.
Pharmaceuticals........... ............. 2.309
Medical Materials and 1.760 2.011 PPI Surg. Appliances and Supplies/CPI(U) Med
Supplies. Supplies.

[[Page 73264]]

Other Professional Expenses... 4.513 ............. CPI-U All Items Less Food and Energy.
Other Expenses................ ............. 6.433
----------------------------------------------------------------------------------------------------------------
(1) Due to rounding, weights may not sum to 100.000 percent.
(2) Sources: 2006 Physician Practice Information Survey (PPIS), Center for Health Policy Research, American
Medical Association; 2006 Employment Cost for Employee Compensation, U.S. Department of Labor, Bureau of Labor
Statistics; 2006 Occupational Employment Statistics (OES), BLS; U.S. Department of Commerce, Bureau of
Economic Analysis 2002 Benchmark Input Output Tables, and U.S. Department of Commerce, Bureau of the Census,
2006 Current Population Survey.
(3) Includes employed physician payroll.
(4) Includes paid leave.
(5) Average Hourly Earnings (AHE)
(6) Employment Cost Index (ECI)
(7) Consumer Price Index (CPI)
(8) Producer Price Index (PPI)

The development of each of the cost categories in the final 2006
MEI is described, in detail, as follows.
b. Physician's Own Time
The component of the MEI that reflects the physician's own time is
represented by the net income portion of business receipts. The
proposed 2006 cost weight associated with the physician's own time
(otherwise referred to as the Physician Compensation cost weight) is
based on 2006 AMA PPIS data for mean physician net income (physician
compensation) for self-employed physicians and for the selected self-
employed specialties referenced previously in this rule.
We proposed to continue to add employed physician compensation to
self-employed physician compensation in order to calculate an aggregate
Physician Compensation cost weight. By including the compensation of
employed physicians in the Physician Compensation expense category,
these expenses will be adjusted by the appropriate price proxies for a
physician's own time. The proposed 2006 Physician Compensation cost
weight is 48.266 percent as compared to a 52.466 percent share in the
2000-based MEI. We split the Physician Compensation component into two
subcategories: Wages & Salaries; and Benefits. For self-employed
physician's compensation, the ratios for Wages & Salaries and Benefits
were calculated using data from the PPIS. Self-employed physician wages
& salaries accounted for 92.2 percent of physician compensation while
physician benefits accounted for the remaining 7.8 percent. For
employed physician payroll, the distribution for wages & salaries and
benefits for 2006 was 85.8 percent and 14.2 percent, respectively. This
ratio was determined by calculating a weighted average of available SOI
data for partnerships, corporations, and S-corporations specific to
physicians and outpatient care centers. Based on these methods, the
proposed 2006 Physician Wages & Salaries cost weight was 43.880 percent
and the proposed 2006 Physician Benefits cost weight was 4.386 percent.
c. Physician's Practice Expenses
To determine the remaining individual Practice Expenses cost
weights, we used mean expense data from the 2006 PPIS survey expressed
as a percentage of total expenses. The detailed explanations for the
derivation of the individual weights under Practice Expenses are listed
below.
(1) Nonphysician Employee Compensation
The cost weight for Nonphysician Employee Compensation was
developed using the 2006 AMA PPIS mean expenses for these costs. We
further divided this cost share into Wages & Salaries and Benefits
using 2006 BLS Employer Costs for Employee Compensation (ECEC) data for
the Health Care and Social Assistance (private industry) category.
Although this survey does not contain data only for offices of
physicians, data are available to help determine the shares associated
with wages & salaries and benefits for private industry health care and
social assistance services (which include offices of physicians,
hospitals, nursing homes, and offices of dentists). We believe these
data provide a reasonable estimate of the split between wages and
benefits for employees in physicians' offices. Data for 2006 in the
ECEC for Health Care and Social Assistance indicate that wages and
benefits are 71.8 percent and 28.2 percent of compensation,
respectively. The 2000-based MEI included a wage and benefit split of
74.0 percent and 26.0 percent of compensation.
We proposed to use 2006 Current Population Survey (CPS) data and
2006 BLS Occupational Employment Statistics (OES) data to develop cost
weights for wages for nonphysician occupational groups. These are the
same data sources that were used in the 2000-based MEI. We determined
total annual earnings for offices of physicians using employment data
from the CPS and mean annual earnings from the OES. To arrive at a
distribution for these separate categories, we determined annual
earnings for each of the four categories (which are Professional &
Technical workers, Managers, Clerical workers, and Service workers),
using the Standard Occupational Classification (SOC) system. We then
determined the overall share of the total for each. The resulting
proposed distribution, as well as the distribution from the 2000-based
MEI, are presented in Table 28.

TABLE 28--Percent Distribution of Nonphysician Payroll Expense by
Occupational Group: 2006 and 2000
------------------------------------------------------------------------
2006 Expenditure 2000 Expenditure
BLS Occupational Group shares shares
------------------------------------------------------------------------
Total........................... 100.000 100.000

[[Page 73265]]

Professional & Technical 43.671 42.635
Workers....................
Managers.................... 10.517 24.138
Clerical Workers............ 32.477 28.187
Service Workers............. 13.336 5.040
------------------------------------------------------------------------
Values may not sum to 100 due to rounding.

The decrease in the Managers expenditure share is directly related
to a decrease in the total number of employees in Management
occupations in physicians' offices, in particular, ``Medical and health
service managers.'' The decrease in expenditure share may also be due,
in part, to the methods used in this rebasing. That is, for the 2006-
based MEI, we are using data limited to ``Offices of physicians.'' In
the 2000-based version of the index, the only data that were available
to inform these estimates were inclusive of physician offices and
clinics (``Offices of physicians and clinics''). An examination of 2006
CPS and OES data comparing ``Outpatient care centers'' to ``Offices of
physicians'' indicates that there is a higher share of management
occupations in the ``Outpatient care centers'' than in ``Offices of
physicians''.
The increase in the Service Workers expenditures share is
attributable to a substantive increase in the number of employees in
service occupations, particularly, ``Medical assistants and other
health care support occupations''.
(2) Office Expenses
The aggregate Office Expenses cost weight was derived using the
2006 AMA PPIS and was calculated as the mean office expenses expressed
as a percentage of mean total expenses. This calculation resulted in a
20.035 percent share of total costs in 2006 compared to a 12.209
percent share in the 2000-based index. The Office Expenses cost weight
used in the 2000-based MEI was based on the AMA 1997 Socioeconomic
Monitoring System (SMS) survey, which defined office expenses as rent,
mortgage interest, depreciation on medical buildings, utilities, and
telephones. The AMA expanded the office expense question in the 2006
PPIS survey to include additional expenses, described in more detail
below in this section.
As a result, and in order to provide for a higher level of
precision in assigning appropriate price proxies to underlying costs,
we proposed to further disaggregate the Office Expenses cost category
into 9 detailed cost categories using the BEA 2002-Benchmark I/O data
for Offices of Physicians, Dentists, and Other Health Practitioners
(North American Industrial Classification System (NAICS) 621A00). In
response to comments, and as described more fully below, we are
finalizing those nine categories, as well as adding a tenth detailed
cost category.
The proposed Office Expenses cost categories and associated cost
weights were developed by matching the BEA I/O data as closely as
possible to the 2006 AMA PPIS survey, which defined office expenses as
``office (non-medical) equipment and office (nonmedical) supplies, as
well as rent, mortgage, interest, maintenance, refrigeration, storage,
security, janitorial, depreciation on medical buildings used in your
practice, utilities, or other office computer systems (including
information management systems/electronic medical record systems) and
telephone.'' In most instances, the proposed underlying detailed cost
categories and associated cost weights were chosen to be consistent
with the NAICS 3-digit classification. BEA I/O expense data is
published on a NAICS-basis. Some of the proposed underlying detailed
cost categories such as All Other Services include various 3-digit
NAICS codes for service related industries. Similar methods are used in
the other legislatively-required market baskets developed by CMS. After
we categorized the BEA I/O data, we calculated the relative share for
each category as a percentage of the total office expenses categories
within the I/O data. We then aged the 2002 weights forward to 2006 to
derive the 2006 detailed Office Expense cost weights as a percent of
total Office Expenses. The methodology we used to age the data forward
was to apply the annual price changes from each respective price proxy
to the appropriate cost categories. We repeated this practice for each
year of the interval from 2002 to 2006. We then applied the resulting
2006 distributions to the aggregate 2006 AMA Office Expenses weight of
20.035 percent to yield the detailed 2006 Office Expenses' weights as a
percent of total expenses.
In response to public comments that are detailed in the subsequent
sections of this rule, we conducted an additional review of the BEA I/O
data used to disaggregate the Office Expense cost category, comparing
the I/O's detailed categories with the questions on the AMA PPIS
survey. This review led to small revisions to the underlying Office
Expense cost weights and resulted in the inclusion of one additional
cost weight in that category: All Other Products. These products, which
were previously assumed to be captured in the Other Professional
Expenses category (as measured by the AMA PPIS survey), include a
variety of miscellaneous products, such as miscellaneous wood and
building products, that we believe respondents included in Office
Expenses as maintenance expense. Table 27 provides the revised MEI
weights.
We believe the introduction of these new, more detailed categories
for the 2006-based index allow for an increased level of precision
while maintaining appropriate levels of aggregation in the index. The
individual price proxies are described in more detail in section
II.E.4.of this final rule.
The following is a description of the types of expenses included in
each of the detailed Office Expense cost categories.
Utilities: The Utilities cost weight includes expenses
classified in the fuel, oil and gas, water and sewage, and electricity
industries. These types of industries are classified in NAICS and
include NAICS 2211 (Electric power generation, transmission, and
distribution), 2212 (Natural gas distribution), and 2213 (Water,
sewage, and other systems). The cost weight for utilities is 1.266
percent.
Chemicals: The Chemicals cost weight includes expenses
classified in the NAICS 325 (Chemical manufacturing), excluding
pharmaceuticals and biologicals. This would include, but is not limited
to, expenses such as soap and cleaning compounds, as well as
photocopier

[[Page 73266]]

toners and laser printer toners. The cost weight for chemicals is 0.723
percent.
Paper: The Paper cost weight includes expenses classified
in NAICS 322 (paper manufacturing) and NAICS 323 (printing and related
support activities). This would include expenses associated with items
such as paper, paperboard, sanitary paper products, and printing. The
cost weight for paper is 0.657 percent.
Rubber and Plastics: The Rubber and Plastics cost weight
includes expenses classified in NAICS 326 (Plastics and Rubber Products
Manufacturing). This would include, but is not limited to expenses
associated with plastic bags, plastic trash cans, and plastic plumbing
fixtures. The cost weight for Rubber and Plastics is 0.598 percent.
Telephone: The Telephone cost weight includes expenses
classified in NAICS 517 (Telecommunications) and NAICS 518 (Internet
service providers), and NAICS 515 (Cable and other subscription
programming). Telephone service, which is one component of the
Telecommunications expenses, accounts for the majority of the
expenditures in this cost category. The cost weight for Telephone
services is 1.501 percent.
Postage: The Postage cost weight includes expenses
classified in NAICS 491 (Postal services) and NAICS 492 (Courier
services). The cost weight for Postage is 0.898 percent.
All Other Services: The All Other Services cost weight
includes other service expenses including, but not limited to,
nonresidential maintenance and repair, machinery repair, janitorial,
and security services. This cost weight does not include expenses
associated with professional services such as accounting, billing,
legal, and marketing which are included in the Other Professional
Expenses cost weight derived using the AMA PPIS survey. The cost weight
for All Other Services is 3.582 percent.
All Other Products: The All Other Products cost weight,
which we are adding based upon our further review in response to public
comments, includes other miscellaneous expenses, including but not
limited to, a variety of miscellaneous building products (such as wood
and concrete). The cost weight for All Other Products is 0.500 percent.
Fixed Capital: The Fixed Capital cost weight includes
expenses for building leases, mortgage interest, and depreciation on
medical buildings. The cost weight for Fixed Capital is 8.957 percent.
Moveable Capital: The Moveable Capital cost weight
includes expenses and depreciation costs for non-medical equipment
including but not limited to, computer equipment and software and the
rental and leasing of industrial machinery equipment. The cost weight
for Moveable Capital is 1.353 percent.
(3) Professional Liability Insurance (PLI) Expense
The proposed weight for PLI expense was derived from the 2006 AMA
survey and was calculated as the mean PLI expense expressed as a
percentage of mean total expenses. This calculation resulted in a
4.295-percent share of total costs in 2006 compared to a 3.865-percent
share in the 2000-based index. The increase in the weight for PLI
reflects the current prices of premiums, as well as an update to the
level of coverage purchased by physicians in 2006 compared to 2000.
(4) Medical Equipment Expenses
The proposed weight for Medical Equipment was calculated using the
2006 AMA PPIS mean expense data expressed as a percentage of mean total
expenses. This calculation resulted in a 1.978-percent share of total
costs in 2006 compared to a 2.055-percent share in the 2000-based
index. By definition, this category includes the expenses related to
depreciation, maintenance contracts, and the leases or rental of
medical equipment used in diagnosis or treatment of patients. The
category would also include the tax-deductible portion of the purchase
price or replacement value of medical equipment, if not leased.
(5) Medical Supplies Expenses
The proposed weight for Medical Supplies was calculated using the
2006 AMA PPIS mean expense data expressed as a percentage of mean total
expenses. This calculation resulted in a 1.760-percent share of total
costs in 2006 compared to a 2.011-percent share in the 2000-based
index. By definition, this category includes the expenses related to
medical supplies such as sterile gloves, needles, bandages, specimen
containers, and catheters. Additionally, we proposed to exclude the
expenses related to separately billable supplies as these expenses are
not paid for under the PFS. The Medical Supply cost category does not
include expenses related to drugs.
(6) Other Professional Expenses
The proposed weight for Other Professional expenses was calculated
using the 2006 AMA PPIS mean expense data expressed as a percentage of
mean total expenses. This calculation resulted in a 4.513-percent share
of total costs in 2006. By definition, this category includes the
expenses related to tax-deductible expenses for any other professional
expenses not reported in another category from the PPIS. These expenses
would include fees related to legal, marketing, accounting, billing,
office management services, professional association memberships,
maintenance of certification or licensure, journals and continuing
education, professional car upkeep and depreciation, and any other
general expenses or other professional expenses not reported elsewhere
on the PPIS.
In summary, we are finalizing the proposed 2006-based MEI cost
categories and respective cost weights for all categories except for
the underlying detailed Office Expense cost categories and cost
weights. In response to public comments, we reexamined the BEA I/O data
and compared it again with the specific types of costs sought by the
AMA PPIS survey question on Office Expenses. Although we are finalizing
the proposed Office Expense cost weight of 20.035 percent, our re-
evaluation resulted in slight changes to the underlying detail of the
Office Expense cost categories and cost weights. Specifically, we are
finalizing the nine proposed detailed cost categories and adding one
additional detailed cost category, All Other Products. The final
detailed cost categories and cost weights for the underlying Office
Expense cost categories are shown in Table 27.
Table 29 shows a comparison of the proposed MEI Office Expense cost
categories and weights to the final MEI Office Expense cost categories
and weights. In addition to adding the subcategory All Other Products,
the final Office Expenses' category weights were updated in response to
public comments to reflect the removal of automobile-related expenses,
which were in effect being double-counted, from the Movable Capital
category. Further examination of the AMA's PPIS questions showed that
automobile costs, such as those associated with leasing and
depreciation, were captured in the question related to other
professional expenses and are, thus accounted for in Other Professional
Expenses (with a final cost weight of 4.513 percent). Notably, that
cost weight is not impacted as, again, those costs were captured there
in the survey.

[[Page 73267]]

Table 29--Comparison of Proposed Office Expense Cost Categories and Cost
Weights to the Final Office Expense Cost Categories and Cost Weights
------------------------------------------------------------------------
2006 2006
Final Proposed
Cost categories weight weight
(%) (%)
------------------------------------------------------------------------
Office Expenses................................... 20.035 20.035
Utilities..................................... 1.266 1.139
Chemicals..................................... 0.723 0.679
Paper......................................... 0.657 0.616
Rubber & Plastics............................. 0.598 0.563
Telephone..................................... 1.501 1.415
Postage....................................... 0.898 0.661
All Other Services............................ 3.582 4.718
All Other Products............................ 0.500 .........
Fixed Capital................................. 8.957 8.410
Moveable Capital.............................. 1.353 1.834
------------------------------------------------------------------------

4. Selection of Price Proxies for Use in the MEI
After the 2006 cost weights for the rebased and revised MEI were
developed, we reviewed all of the price proxies to evaluate their
appropriateness. As was the case in the development of the 2000-based
MEI (68 FR 63239), most of the proxy measures we considered are based
on BLS data and are grouped into one of the following five categories:
Producer Price Indices (PPIs): PPIs measure price changes
for goods sold in markets other than retail markets. These fixed-weight
indexes are a measure of price change at the intermediate or final
stage of production. They are the preferred proxies for physician
purchases as these prices appropriately reflect the product's first
commercial transaction.
Consumer Price Indices (CPIs): CPIs measure changes in the
prices of final goods and services bought by consumers. Like the PPIs,
they are fixed-weight indexes. Since they may not represent the price
changes faced by producers, CPIs are used if there are no appropriate
PPIs or if the particular expenditure category is likely to contain
purchases made at the final point of sale.
Average Hourly Earnings (AHEs): AHEs are available for
production and nonsupervisory workers for specific industries, as well
as for the nonfarm business economy. They are calculated by dividing
gross payrolls for wages & salaries by total hours. The series reflects
shifts in employment mix and, thus, is representative of actual changes
in hourly earnings for industries or for the nonfarm business economy.
ECIs for Wages & Salaries: These ECIs measure the rate of
change in employee wage rates per hour worked. These fixed-weight
indexes are not affected by employment shifts among industries or
occupations and thus, measure only the pure rate of change in wages.
ECIs for Employee Benefits: These ECIs measure the rate of
change in employer costs of employee benefits, such as the employer's
share of Social Security taxes, pension and other retirement plans,
insurance benefits (life, health, disability, and accident), and paid
leave. Like ECIs for wages & salaries, the ECIs for employee benefits
are not affected by employment shifts among industries or occupations.
When choosing wage and price proxies for each expense category, we
evaluate the strengths and weaknesses of each proxy variable using the
following four criteria:
Relevance: The price proxy should appropriately represent
price changes for specific goods or services within the expense
category. Relevance may encompass judgments about relative efficiency
of the market generating the price and wage increases.
Reliability: If the potential proxy demonstrates a high
sampling variability, or inexplicable erratic patterns over time, its
viability as an appropriate price proxy is greatly diminished. Notably,
low sampling variability can conflict with relevance--since the more
specifically a price variable is defined (in terms of service,
commodity, or geographic area), the higher the possibility of high
sampling variability. A well-established time series is also preferred.
Timeliness of actual published data: For greater
granularity and the need to be as timely as possible, we prefer monthly
and quarterly data to annual data.
Public availability: For transparency, we prefer to use
data sources that are publicly available.
The BLS price proxy categories previously described meet the
criteria of relevance, reliability, timeliness, and public
availability. Below we discuss the price and wage proxies for the
rebased and revised MEI (as shown in Table E4), along with a summary of
the public comments we received on our proposals and our responses to
those comments.
a. Cost (Expense) Categories in the MEI
(1) Physician's Own Time (Physician Compensation)
For the revised and rebased MEI, we proposed to continue to use the
AHE for production and non-supervisory employees for the private
nonfarm economy as the proxy for the Physician Wages & Salaries
component (BLS series code: CEU0500000008).
The AHE for the private nonfarm economy reflects general earnings
including the impacts of supply, demand, and economy-wide productivity
for the average worker in the economy. As such, use of this proxy is
consistent with the original intent of the Congress for the change in
the MEI to follow reflect changes in expenses of practice and general
earnings levels.\1\ The current 2000-based MEI uses the ECI for Total
Benefits (BLS series code: CIU2030000000000I) for total private
industry as the price proxy for Physician Benefits. We proposed to
continue using the same proxy for the 2006-based MEI and received no
public comment on this particular aspect of the index. This means that
both the wage and benefit proxies for physician earnings are derived
from the private nonfarm business sector and are computed on a per-hour
basis.
---------------------------------------------------------------------------

\1\ U.S. Senate, Committee on Finance, Social Security
Amendments of 1972. ``Report of the Committee on Finance United
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.
---------------------------------------------------------------------------

(2) Nonphysician Employee Compensation
For the 2006-based MEI, we proposed to use the same ECI private
series for each occupational group as in the 2000-based MEI. In
particular, we proposed to use the ECI for Professional and Technical
Workers, the ECI for Managerial Services, the ECI for Administrative
Support Services, and the ECI for Service Occupations.
As described in the CY 2008 PFS proposed rule (72 FR 38190), as a
result of the discontinuation of the White Collar Benefit ECI for
private workers, we proposed to continue to use a composite ECI benefit
index. We are continuing to use the composite ECI for non-physician
employees in the proposed rebased and revised MEI; however, we proposed
to rebase the weights within that blend in order to reflect the more
recent 2006 data. Table 30 lists the four ECI series and corresponding
weights used to construct the 2006 composite benefit index.

[[Page 73268]]

Table 30--CMS Composite Price Index for Nonphysician Employee Benefits
------------------------------------------------------------------------
2006
ECI series weight
(%)
------------------------------------------------------------------------
Benefits, Private, Professional & Related...................... 44
Benefits, Private, Management, Business, Financial............. 11
Benefits, Private, Office & Administrative Support............. 32
Benefits, Private, Service Occupations......................... 13
------------------------------------------------------------------------

(3) Utilities
For the 2006-based MEI, we proposed to use the CPI for Fuel and
Utilities (BLS series code CUUR0000SAH2) to measure the price
growth of this cost category. This cost category was not broken out
separately in the 2000-based MEI.
(4) Chemicals
For the 2006-based MEI, we proposed to use the PPI for Other Basic
Organic Chemical Manufacturing (BLS series code PCU32519-
32519) to measure the price changes of this cost category. We are using
this industry-based PPI because BEA's 2002 benchmark I/O data show that
the majority of the office of physicians' chemical expenses are
attributable to Other Basic Organic Chemical Manufacturing (NAICS
32519). This cost category was not broken out separately in the 2000-
based MEI.
(5) Paper
For the 2006-based MEI, we proposed to use the PPI for Converted
Paper and Paperboard (BLS series code WPU0915) to measure the
price growth of this cost category. This cost category was not broken
out separately in the 2000-based MEI.
(6) Rubber and Plastics
For the 2006-based MEI, we proposed to use the PPI for Rubber and
Plastic Products (BLS series code WPU07) to measure the price
growth of this cost category. This cost category was not broken out
separately in the 2000-based MEI.
(7) Telephone
For the 2006-based MEI, we proposed to use the CPI for Telephone
Services (BLS series code CUUR0000SEED) to measure the price
growth of this cost category. This cost category was not broken out
separately in the 2000-based MEI.
(8) Postage
For the 2006-based MEI, we proposed to use the CPI for Postage (BLS
series code CUUR0000SEEC01) to measure the price growth of
this cost category. This cost category was not broken out separately in
the 2000-based MEI.
(9) All Other Services
For the 2006-based MEI, we proposed to use the ECI for Compensation
for Service Occupations (private industry) (BLS series code
CIU2010000300000I) to measure the price growth of this cost
category. This cost category was not broken out separately in the 2000-
based MEI.
(10) All Other Products
As noted previously, we are adding this category in this final rule
with comment period in response to public comments. This category
includes a variety of miscellaneous expenses such as miscellaneous
building products; thus, we will use the CPI-U for All Items Less Food
and Energy as a proxy for price changes. This cost category was not
broken out separately in the 2000-based MEI.
(11) Fixed Capital
For the 2006-based MEI, we proposed to use the CPI for Owner's
Equivalent Rent (BLS series code CUUS0000SEHC) to measure the
price growth of this cost category. This price index represents about
50 percent of the CPI for Housing, which was used in the 2000-based MEI
to proxy total Office Expenses.
(12) Moveable Capital
For the 2006-based MEI, we proposed to use the PPI for Machinery
and Equipment (series code WPU11) to measure the price growth
of this cost category. This cost category was not broken out separately
in the 2000-based MEI.
(13) Professional Liability Insurance (PLI)
Each year, we solicit PLI premium data for physicians from a sample
of commercial carriers. This information is not collected through a
survey form, but instead is requested directly from, and provided by
(on a voluntary basis), several national commercial carriers. As we
require for our other price proxies, the professional liability price
proxy is intended to reflect the pure price change associated with this
particular cost category. Thus, it does not include changes in the mix
or level of liability coverage. To accomplish this result, we obtain
premium information from a sample of commercial carriers for a fixed
level of coverage, currently $1 million per occurrence and a $3 million
annual limit. This information is collected for every State by
physician specialty and risk class. Finally, the State-level,
physician-specialty data are aggregated by effective premium date to
compute a national total, using counts of physicians by State and
specialty as provided in the AMA publication, Physician Characteristics
and Distribution in the U.S.
The resulting data provide a quarterly time series, indexed to a
base year consistent with the MEI, and reflect the national trend in
the average professional liability premium for a given level of
coverage, generally $1 million/$3 million of claims-made mature
policies. From this series, quarterly and annual percent changes in PLI
are estimated for inclusion in the MEI.
The most comprehensive data on professional liability costs are
held by the State insurance commissioners, but these data are available
only with a substantial time lag and hence, the data currently
incorporated into the MEI are much timelier. We believe that, given the
limited data available on professional liability premiums, the
information and methodology described above produces an adequate proxy
of the PLI price trends facing physicians.
(14) Medical Equipment
The Medical Equipment cost category includes depreciation, leases,
and rent on medical equipment. We proposed to use the PPI for Medical
Instruments and Equipment (BLS series code: WPU156201) as the price
proxy for this category, consistent with the price proxy used in the
2000-based MEI and other CMS input price indexes.
(15) Medical Materials and Supplies
As was used in the 2000-based MEI, we proposed to use a blended
index comprised of a 50/50 blend of the PPI Surgical Appliances (BLS
series code: WPU156301) and the CPI-U for Medical Equipment and
Supplies (BLS series code: CUUR0000SEMG). We believe physicians
purchase the types of supplies contained within these proxies,
including such items as bandages, dressings, catheters, intravenous
(I.V.) equipment, syringes, and other general disposable medical
supplies, via wholesale purchase, as well as at the retail level.
Consequently, we proposed to combine the two aforementioned indexes to
reflect those modes of purchase.

[[Page 73269]]

(16) Other Professional Expenses
This category includes the residual subcategory of other
professional expenses such as accounting services, legal services,
office management services, continuing education, professional
association memberships, journals, professional car expenses, and other
general expenses and other professional expenses not captured
elsewhere. Given this heterogeneous mix of goods and services, we are
finalizing our proposal to use the CPI-U for All Items Less Food and
Energy. In summary, we are finalizing the proposed 2006-based MEI price
proxies with one modification. Since an additional cost category, All
Other Products, was added to the office expense disaggregation, we are
also finalizing the decision to use the CPI for All Items Less Food and
Energy as the price proxy for that category.
(b) Productivity Adjustment to the MEI
The MEI has been adjusted for changes in productivity since its
inception. In the CY 2003 PFS final rule (67 FR 80019), we implemented
a change in the way the MEI was adjusted to account for those changes
in productivity. The MEI used for the 2003 physician payment update
incorporated changes in the 10-year moving average of private nonfarm
business multifactor productivity that were applied to the entire
index. Previously, the index incorporated changes in productivity by
adjusting the labor portions of the index by changes in the 10-year
moving average of economy-wide private nonfarm business labor
productivity.
We proposed to continue to use the current method for adjusting the
full MEI for multifactor productivity in the rebased and revised MEI,
and are finalizing that proposal.
As described in the CY 2003 PFS final rule, we believe this
adjustment is appropriate because it explicitly reflects the
productivity gains associated with all inputs (both labor and non-
labor). We believe that using the 10-year moving average percent change
in private nonfarm business multifactor productivity is appropriate for
deriving a stable measure that helps alleviate the influence that a
peak (or a trough) of a business cycle may have on the measure. The
adjustment will be based on the latest available historical e private
nonfarm business multifactor productivity data as measured and
published by BLS.
5. Results of Rebasing
Table 31 illustrates the results of updating the MEI cost weights
for Physician Compensation, Practice Expenses (excluding PLI), and PLI
from a 2000-based cost distribution to a 2006-based cost distribution,
including all the proposed and finalized revisions as specified in this
final rule.

Table 31--Percent Distribution of Selected Physician Expenses Used To
Calibrate RVUs: CYs 2006 and 2000
------------------------------------------------------------------------
CY 2006 CY 2000
weight weight
(%) (%)
------------------------------------------------------------------------
Physician Compensation (Own Time)................. 48.266 52.466
Practice Expenses (less PLI)...................... 47.439 43.669
PLI............................................... 4.295 3.865
------------------------------------------------------------------------

The rebased and revised MEI has several differences as compared to
the 2000-based MEI; these changes have been discussed in detail in
prior sections of this rule. Table E8 shows the average calendar year
percent change for CY 2004 to CY 2011 for both the 2000- and 2006-based
MEIs. The 2006-based MEI annual percent changes differ from the 2000-
based MEI annual percent changes by 0.0 to 0.8 percentage point. For
CYs 2007 through 2011, the annual percent change in the rebased and
revised MEI was within 0.3 percentage point of the percent change in
the 2000-based MEI. In the earlier years, there were larger differences
between the annual percent change in the rebased and revised MEI and
the 2000-based MEI. The majority of these differences can be attributed
to the lower benefit cost weight, as measured by the 2006 AMA data, and
the exclusion of the Pharmaceuticals cost category. The remaining
differences are attributable to the higher cost weight for PLI, as
measured by the 2006 AMA data.

Table 32--Annual Percent Changes in the 2000-based and Revised 2006-
based MEI
------------------------------------------------------------------------
Current
Update year \(A)\ Final 2006- 2000-based
based MEI MEI
------------------------------------------------------------------------
CY 2004....................................... 2.3 2.6
CY 2005....................................... 1.8 2.6
CY 2006....................................... 1.8 2.4
CY 2007....................................... 1.6 1.9
CY 2008....................................... 1.9 1.8
CY 2009....................................... 1.6 1.6
CY 2010....................................... 1.5 1.2
CY 2011\(B)\.................................. 0.4 0.3
Average Change for CYs 2004- 2011............. 1.6 1.8
------------------------------------------------------------------------
\(A)\ Update year based on historical data through the second quarter of
the prior calendar year. For example, the 2010 update is based on
historical data through the second quarter 2009.
\(B)\ Based on historical data through the 2nd quarter 2010.

As shown in Table 33, the percent change of the rebased and revised
MEI for the CY 2011 PFS final rule is an increase of 0.4 percent, one
tenth of a percentage point higher than the 2000-based MEI for the same
period. The proposed rule included an estimated increase of 0.3 percent
for 2011 based on projected data from IHS Global Insight, Inc. The 0.4
percent increase was calculated based on historical data through the
second quarter of 2010, including revised data from the BLS on the 10-
year moving average of BLS private nonfarm business multifactor
productivity published on October 6, 2010 (http://www.bls.gov/news.release/pdf/prod3.pdf). The 0.1 percentage point difference in the
MEI update factor from the 0.3-percent estimate indicated in the
proposed rule to our current figure of 0.4 percent is primarily related
to the incorporation of more recent historical data for private nonfarm
business multifactor productivity.

Table 33--Annual Percent Change in the 2000-based and Revised 2006-based
MEI for CY 2011
------------------------------------------------------------------------
2006-based 2000-based
MEI MEI
------------------------------------------------------------------------
CY 2011....................................... 0.4 0.3
------------------------------------------------------------------------

[[Page 73270]]

Table 34--Annual Percent Change in the Revised and Rebased MEI CY 2011,
All Categories \1\
------------------------------------------------------------------------
CY 2011
Cost categories 2006 weight percent
\2\ (%) change
------------------------------------------------------------------------
MEI Total, productivity adjusted.............. 100.000 0.4
Productivity: 10[dash]year moving average of N/A 1.2
MFP..........................................
MEI Total, without productivity adjustment.... 100.000 1.6
Physician Compensation (Own Time) \3\..... 48.266 2.4
Wages and Salaries.................... 43.880 2.5
Benefits.............................. 4.386 1.7
Physician's Practice Expenses............. 51.734 0.7
Nonphysician Employee Compensation.... 19.153 1.5
Nonphysician Employee Wages....... 13.752 1.4
Prof/Tech Wages............... 6.006 1.2
Managerial Wages.............. 1.446 1.2
Clerical Wages................ 4.466 1.7
Services Wages................ 1.834 1.7
Nonphysician Employee Benefits.... 5.401 1.6
Other Practice Expenses............... 26.308 0.1
Office Expenses................... 20.035 0.6
Utilities..................... 1.266 -3.1
Chemicals..................... 0.723 -2.5
Paper......................... 0.657 -0.3
Rubber & Plastics............. 0.598 -0.3
Telephone..................... 1.501 0.8
Postage....................... 0.898 4.7
All Other Services............ 3.582 1.8
All Other Products............ 0.500 1.4
Fixed Capital................. 8.957 0.6
Moveable Capital.............. 1.353 0.1
PLI \4\............................... 4.295 -2.9
Medical Equipment..................... 1.978 0.5
Medical Materials and Supplies........ 1.760 0.4
Other Professional Expenses........... 4.513 1.4
------------------------------------------------------------------------
\1\ The estimates are based upon the latest available Bureau of Labor
Statistics data on the 10-year moving average of BLS private nonfarm
business multifactor productivity published on October 6, 2010 (http://www.bls.gov/news.release/pdf/prod3.pdf).
\2\ The weights shown for the MEI components are the 2006 base-year
weights, which may not sum to subtotals or totals because of rounding.
The MEI is a fixed-weight, Laspeyres input price index whose category
weights indicate the distribution of expenditures among the inputs to
physicians' services for CY 2006. To determine the MEI level for a
given year, the price proxy level for each component is multiplied by
its 2006 weight. The sum of these products (weights multiplied by the
price index levels) yields the composite MEI level for a given year.
The annual percent change in the MEI levels is an estimate of price
change over time for a fixed market basket of inputs to physicians'
services.
\3\ The measures of Productivity, Average Hourly Earnings, Employment
Cost Indexes, as well as the various Producer and Consumer Price
Indexes can be found on the Bureau of Labor Statistics (BLS) Web site
at http://stats.bls.gov.
\4\ Derived from a CMS survey of several major commercial insurers.
\N/A\ Productivity is factored into the MEI as a subtraction from the
total index growth rate; therefore, no explicit weight exists for
productivity in the MEI.

6. Medicare Economic Index Technical Advisory Panel
In the CY 2011 PFS proposed rule, we notified the public of our
intent to convene a Medicare Economic Index Technical Advisory Panel
(MEI TAP) to study all aspects of the MEI including its cost
categories, their associated cost weights and price proxies, and the
adjustment of the index by an economy-wide measure of multi-factor
productivity. We will be convening the MEI TAP. More details regarding
this issue can be found in the next section of this rule.
7. Summary of Comments and the Associated Responses
a. Timing of Rebasing and Revising the MEI
Comment: Many commenters support the rebasing and revising of the
MEI using CY 2006 as a base year and the incorporation of practice cost
changes reflected in the 2006 AMA PPIS. Many of these commenters also
indicated their support for the upcoming MEI technical advisory panel,
but stressed that CMS should not delay moving forward with rebasing and
revising the MEI for CY 2011. Several people wrote that they believe
that the rebasing, along with the addition of new product categories,
will result in a more accurate distribution of expenses among physician
compensation, practice expense, and professional liability. The
commenters believe that the proposal to rebase to 2006 will make the
MEI more representative of current conditions in the health care
marketplace and, in particular, more reflective of the higher burden of
practice expenses in relation to physician compensation in modern
physician practices. The commenters agree that the use of more current
data and the expansion of the categories used in determining the MEI
update are a technical improvement over the 2000-based MEI and urge CMS
to proceed accordingly.
Response: We agree with the commenters that the 2006-based MEI
reflects a more current estimate of the cost distribution associated
with furnishing physicians' services. Therefore we are finalizing our
proposals (with minor modifications described above) to rebase and
revise the MEI, and are proceeding with implementation of the 2006-
based MEI for CY 2011.
Comment: Many commenters indicated CMS should postpone
implementation of the rebased and revised MEI until the MEI technical
advisory panel can conduct a comprehensive review of all aspects of the
index. These commenters believe that it is premature to finalize
proposals

[[Page 73271]]

that will significantly change the MEI prior to receiving
recommendations from the technical advisory panel and therefore
strongly support convening the technical advisory panel first and
rebasing and revising the MEI afterwards.
Response: We agree with the commenters that the MEI technical
advisory panel should move forward (discussed in more detail below).
However, we do not find any compelling technical reason to postpone
finalizing the proposed changes to the index. We believe rebasing and
revising the index for CY 2011 to reapportion the work, practice
expense, and malpractice weights will allow the MEI to appropriately
reflect more recent data. For these reasons we disagree with the
commenters that support delaying the rebasing of the MEI until the
technical panel has had a chance to convene and make further
recommendations. Should we concur with recommendations from the
technical advisory panel that would result in technical improvements to
the MEI, we would propose any changes in a future rulemaking exercise.
Comment: One commenter questioned the need for changes in the MEI
in 2011, particularly since there is no statutory timeframe for these
changes and the most recent changes in practice expenses from the PPIS
survey are in the first year of a 4-year phase-in.
Response: The current MEI reflects the physician practice cost
structure for 2000. Based on both our own analysis and supporting
public comments, it is evident that this cost structure has changed
from 2000 to 2006. Accordingly, we believe it is technically
appropriate to update to a more recent base year for use in CY 2011.
Comment: A commenter suggested that when rebasing is done in the
future, CMS should propose phasing in the changes, perhaps over 2
years, in order to mitigate negative consequences.
Response: We do not believe it would be appropriate to phase in
changes to the MEI associated with rebasing and revising the index.
These periodic efforts are done to ensure that the MEI is reflecting
the latest available information and echoes current cost distributions
associated with furnishing physicians' services. Our approach is
consistent across all of the Medicare market baskets in this regard and
is likewise consistent with how technical improvements are incorporated
into other published price indexes, such as the CPI or PPI.
Comment: Some commenters asked CMS to delay rebasing the MEI until
the summit on geographic practice costs and the IOM studies have been
completed.
Response: We believe that it is technically appropriate to update
the MEI to reflect the more current cost structure as determined by
using the 2006 AMA PPIS data. We note that the MEI is constructed
independent of the GPCIs. While the GPCI weights have historically been
linked to the MEI cost weights, we do not believe it would be
appropriate to postpone rebasing the MEI in anticipation of the
summit's or the IOM's findings.
b. PPIS Data
Comment: Many commenters stated they, like CMS, are unaware of
another more robust or more current source of available data on
physician practice costs than the PPIS. Other commenters noted that CMS
and the AMA have supported using PPIS data to update the practice
expense per hour (PE/HR) calculations beginning in CY 2010. The
commenters believe that if the data were sufficient to adjust PE/HR,
then they are sufficient to update the MEI. Other commenters indicate
they support periodic updates to the index, recognizing the
difficulties associated with updating the MEI's cost categories and
weights on an annual basis.
Response: We agree with the commenters that the PPIS is the most
up-to-date and comprehensive data source available on physician
practice costs. We also believe that the estimates derived from the
PPIS are current, valid, and appropriate for use in rebasing and
revising the MEI. Likewise, we concur that a variety of data-related
issues would make updating the MEI on an annual basis difficult and
believe that periodic revisions such as the one we are adopting in this
final rule with comment period are more appropriate.
Comment: A few commenters expressed general concerns over using
data from the PPIS. One commenter specifically notes that the MEI
changes are allegedly being proposed to reflect changes in medical
practice based on research using PE data. The commenter has reviewed
some of the research, including the research process and questioned the
research data itself. Their concerns over the raw data source include
issues related to sample design, sample geographic distribution, and
sample size sufficiency. They questioned the choice of the data
collection firm used by AMA.
Response: We conducted an extensive review of the PPIS data and
continue to believe it appropriately reflects the cost distributions of
physicians. We note that we rely upon the physician community to
complete the AMA surveys as accurately as possible since unlike other
provider types (such as hospitals and skilled nursing facilities)
physicians are not required to submit annual Medicare cost report data.
Comment: Some commenters indicated that CMS did not make clear why
the rebased MEI would be based on PPIS data from 2006. Several
expressed concerns that the use of 4-year old data is questionable as
data this old would not reflect physician expenses in 2011 (and that
more up-to-date data on physician costs is surely available).
Response: As stated in the CY 2011 PFS proposed rule (75 FR 40088),
we chose to rebase the MEI to 2006 in order to incorporate the 2006 AMA
PPIS data. We believe the 2006 AMA PPIS data is the most up-to-date,
complete, statistically valid data source available. We welcome any
recommendations for more up-to-date data sources available on physician
expenses. We would also note that the 2006 data from the PPIS are used
to provide the cost structure that is used in the MEI. The increase in
the CY 2011 MEI ultimately reflects the input price inflation, adjusted
for productivity, that physicians face based on a 2006 distribution of
costs. It does not, nor is it intended to, reflect physician input cost
levels for 2011.
Comment: Some commenters noted that in the interest of
transparency, CMS should publish on its Web site all data from the PPIS
that were used in rebasing the MEI.
Response: We understand the commenter's request for transparency.
Unfortunately, we are unable to publish the detailed micro level data
from the AMA PPIS survey as it is proprietary information. We would
suggest the commenter contact the AMA with their request.
c. Office Expenses
Comment: Several commenters appreciated the intent of the new
subcategories found in Office Expenses to include more medical office-
specific data and believe it will improve the index.
Response: We agree with the commenters and believe that having
greater detail under the Office Expense cost category in the MEI
provides a technical improvement.
Comment: Several commenters questioned the CMS proposal to create
detailed categories under the broader Office Expense cost category.
Some of the commenters had specific concerns about the particular
subcategories. Examples included the following:
The Chemicals and Rubber & Plastics categories (all
derived from the BEA) might not be relevant (or

[[Page 73272]]

meaningful) to today's physicians' practice.
Computers, computer expenses, billing, and scheduling
technology and electronic medical records are high-cost, non-optional
office expenses for medical practices that are not adequately captured
and would represent more appropriate categories.
CMS references data on the Office Expenses' components
derived from the BEA, but the agency provided no rationale to justify
the changes in Office Expenses, nor did it provide a detailed
accounting methodology or solicit advice on new inputs to the index.
Response: We proposed to disaggregate the Office Expense cost
category into more detailed cost categories as a result of a change to
the question in the 2006 AMA PPIS survey that captured these types of
costs. In addition, in rulemaking for the CY 2008 Physician Fee
Schedule, we received a comment from the industry about our use of the
CPI for Housing to proxy Office Expenses (72 FR 66376). At that time,
we notified the public of our intent to explore the feasibility of
breaking the Office Expenses category into more descriptive cost
categories during the next rebasing.
In order to appropriately represent the information collected by
the PPIS and to increase the level of precision of our price proxies,
we proposed to disaggregate the Office Expense cost category and its
associated weight into more detailed components and to proxy those
costs with the most technically appropriate price proxies. Moreover, we
believe it would be technically inappropriate to proxy the Office
Expense cost category, which now includes a much broader range of
expenses, by one price proxy, namely the CPI for Housing. For these
reasons, we developed our proposals and solicited public comments.
We disagree with the commenters' assertion that the Chemicals and
Rubber & Plastics categories are not relevant to today's physician
practice (and note that the commenters did not provide additional
information or data to support the claim that the proposed categories
are not relevant). The information we relied on came directly from the
BEAs' Benchmark I/O files for Offices of Physicians, Dentists, and
Other Health Practitioners. The Chemicals cost category includes
expenses for items such as soaps and cleaning compounds, as well as
photocopier toners and laser printer toners. The Rubber and Plastics
category includes expenses for items such as plastic plumbing fixtures,
plastic bags, and plastic trash cans. Although we will continue to
explore further additional disaggregation of expenses, we believe that
the aforementioned costs are associated with, and relevant to,
furnishing physicians' services.
As indicated previously, and in response to the comment, we
conducted an additional review of the BEA I/O data used to disaggregate
the Office Expense cost category, comparing the detailed underlying
expenses with the questions on the AMA PPIS survey. This review led us
to make small revisions to the underlying Office Expense cost weights,
including the addition of another cost weight for the new subcategory,
All Other Products. These products were initially assumed to be
captured in Other Professional Expenses as measured by the AMA PPIS
survey, but were determined to have been reported as Office Expenses.
All Other Products would include a variety of miscellaneous products
such as miscellaneous wood and apparel products. Table E4 provides the
revised MEI weights. Also, as part of this additional analysis on the
Office Expense categories, we determined that automobile-related
expenses were captured in the PPIS question associated with Other
Professional Expenses (and that its associated weight reflected
respondents including those costs when answering that question). As a
result, we removed automobile-related NAICS-based industry spending
from the BEA I/O data that was being used to distribute expenses across
the various Office Expense subcategories. As this spending was included
in the Movable Capital subcategory for the proposed rule, the weight
associated with that subcategory will be 1.353 rather than the 1.834 we
proposed.
We disagree with the commenters' statements that the MEI does not
adequately capture high-level or high-cost technology expenses (and
briefly note that Movable Capital includes only non-medical movable
equipment). The Office Expense cost weight (20.035 percent) was
calculated using the 2006 PPIS data, which specifically requested
health information technology equipment and other nonmedical office
equipment to be included in the Office Expense category as follows:

Provide [your] share (dollar amount) of the specialty or
department level's share (dollar amount) of the practice's total
(dollar amount) for] 2006 office expenses, including office (non-
medical) equipment and office (non-medical) supplies, as well as
rent, mortgage interest, maintenance, refrigeration, storage,
security, janitorial, depreciation on medical buildings used in your
practice, utilities, or other office computer systems (including
information management systems/electronic medical record systems)
and telephone.

Given that the expenses related to information management systems
and electronic medical record systems were included as ``office
expenses'' in the 2006 PPIS, the 20.035 percent weight would include
these costs. Unfortunately, given the data limitations, it remains
difficult to determine a percentage associated specifically with
computer equipment, computer-related depreciation, and computer-related
leasing. For this rebasing, the costs we classified as Moveable Capital
are comprised of the expenses paid by Office of Physicians industry to
the following industries based on NAICS classification:

------------------------------------------------------------------------

------------------------------------------------------------------------
33329A............................ Other industrial machinery
manufacturing.
33331A............................ Vending, commercial, industrial, and
office machinery manufacturing.
333414............................ Heating equipment, except warm air
furnaces.
333415............................ Air conditioning, refrigeration, and
warm air heating equipment
manufacturing.
33399A............................ Other general purpose machinery
manufacturing.
33411A............................ Computer terminals and other
computer peripheral equipment
manufacturing.
334210............................ Telephone apparatus manufacturing.
334220............................ Broadcast and wireless
communications equipment.
334290............................ Other communications equipment
manufacturing.
334300............................ Audio and video equipment
manufacturing.
334418............................ Printed circuit assembly (electronic
assembly) manufacturing.
334613............................ Magnetic and optical recording media
manufacturing.
335120............................ Lighting fixture manufacturing.
337110............................ Wood kitchen cabinet and countertop
manufacturing.
337215............................ Showcase, partition, shelving, and
locker manufacturing.
532400............................ Commercial and industrial machinery
and equipment rental and leasing.
------------------------------------------------------------------------

[[Page 73273]]

We believe technology-related expense are captured in the MEI and
that the PPI for Machinery and Equipment is an appropriate price proxy
to estimate price changes. However, we will actively monitor the data
moving forward to ensure these types of expenses are adequately
reflected in the MEI.
Finally, we would note that the descriptions of the methodologies
used to construct the subcategories under Office Expenses were both
detailed and consistent with those provided in the recent proposed
rules relating to the rebasing of other CMS market baskets. However, in
response to the comment we hope the additional information provided
here is helpful.
Comment: One commenter found it most problematic that the CMS
proposal related to Office Expenses would reduce the weight of rent
within physician practice expenses. Currently, rent comprises 12.2
percent of the practice expense GPCI. Under the proposed rule, rent
would be reduced to 8.4 percent. The commenter also noted that their
attempt to validate the proposal, using BEA 2002 Benchmark I/O use
files for NAICS 621A00 as described in the proposed rule were not
successful.
Response: We proposed to disaggregate the Office Expense cost
weight in the 2006-based MEI in order to recognize and take advantage
of the expansion of the AMA PPIS survey question to include additional
expenses not included in the 2000-based survey. Consistent with the
methodology used for other CMS market baskets, we relied upon the BEA
I/O data to disaggregate the Office Expense cost category, which we
described in the proposed rule. This methodology required a series of
calculations including classifying costs as office expenses consistent
with AMA PPIS survey. As noted elsewhere, and based on public comment,
we have refined our methodology, as well as added additional detail in
this final rule which we believe will be helpful in validating our
estimates. The new methodology has resulted in a cost weight of 8.957
percent for Fixed Capital. Comments related to weights specifically
associated with the PE GPCIs are found in section II.D. of this final
rule with comment period.
Comment: A commenter stated that it appeared that utility costs
have been included twice in the MEI calculation. The HUD data used by
CMS as a source for the rent data includes utilities. However,
utilities have been included a second time as a new component of the
``Office Expense'' category of ``Other Practice Expenses'' and it does
not appear that the ``Fixed Capital'' (rent) component has been scaled
down as a result. This error should be corrected, a new proposed rule
published, and a new comment period opened.
Response: We disagree with the commenter's assertions that
utilities expenses in the MEI are double counted. The Utilities cost
weight in the MEI was derived using the BEA I/O data for NAICS 621A
(Offices of Physicians, Offices of Dentist, and Offices of Other
Practitioners). The BEA I/O data provide information regarding
physicians' purchases from other industries. Expenses classified in the
Utilities cost weight, such as NAICS 22110 (Electric power generation,
transmission, and distribution), were not included in the Fixed Capital
cost weight; therefore, we did not include utility costs twice in the
MEI calculation. The HUD data referenced by the commenter is used in
conjunction with the GPCI rent update and is independent of the
development of the cost weight for Utilities in the MEI.
d. Purpose of the MEI
Comment: Several commenters requested that CMS address the problem
that the ``market basket'' of inputs, whose prices are measured in the
MEI, is outdated and, despite periodic rebasing, has not been
comprehensively revised since it was originally developed in 1973. They
indicated that the MEI does not reflect the inputs involved in 21st
century medical practice and claim that the costs associated with
complying with an array of government-imposed regulatory requirements,
including increasing staffing levels, costs related to Medicare
prescription drug plans and formulary compliance, compliance with rules
governing referrals and interactions with other providers, and others,
are not accounted for in the index. They also indicate that the MEI has
not been adjusted for modern practice costs such as computers, copiers,
and new medical technology.
Response: We disagree with the commenters' statement that the MEI
only measures changes in specific types of practice costs that existed
in 1973. Since 1973, the MEI has been rebased four times. For each of
those updates, the MEI methodology and data sources were thoroughly
reviewed and evaluated to ensure that the index accurately reflected
the cost distributions encountered by physicians. The revisions have
included changes to the structure of the index, the price proxies used,
the data sources used to develop the weights, the productivity
adjustment, and, as proposed in the CY 2011 PFS proposed rule,
disaggregating categories within the Office Expenses category into more
detail.
We also note that the MEI is a price index, not a cost index.
Changes in physician costs are a function of changes in prices and
changes in quantities. Examples of changes in quantities include
purchasing more moveable equipment (such as health information
technology), hiring additional office staff, or changing the mix of
staff. The MEI was established in accordance with section 1842(b)(3) of
the Act, which states the growth of prevailing charge levels is to be
limited to growth in an ``appropriate economic index''. The relevant
Senate Finance Committee report \2\ provides slightly more detail on
such an index, stating that:
---------------------------------------------------------------------------

\2\ U.S. Senate, Committee on Finance, Social Security
Amendments of 1972. ''Report of the Committee on Finance United
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 190.

[I]t is necessary to move in the direction of an approach to
reasonable charge reimbursement that ties recognition of fee
increases to appropriate economic indexes so that the program will
not merely recognize whatever increases in charges are established
in a locality but would limit recognition of charge increases to
rates that economic data indicate would be fair to all concerned and
---------------------------------------------------------------------------
follow rather than lead any inflationary trends.

Thus, in accordance with Congressional intent that the index
reflect and follow inflationary trends, and since its inception in
1973, the MEI has been constructed as a fixed-weight price index that
measures the inflationary trends of goods and services associated with
furnishing physicians' services. The data sources that are used to
construct the weights have been updated regularly to include the modern
inputs required by physicians in running their respective practices.
The MEI then appropriately apportions the various costs into their
respective categories and calculates the associated weights. It is this
distribution of costs, and not the level of costs, that the MEI
appropriately incorporates. Based on this distribution, the MEI
measures the weighted input price inflation, adjusted by productivity,
faced by physicians. The MEI is then incorporated into the SGR formula
to derive the final PFS update. Having an accurate and contemporary
distribution of input costs is critical to producing an accurate
measure of price inflation and is the major reason we are moving
forward to rebase and revise the MEI for CY 2011.
Finally, to date, we have not received any proposals from the
public on how the MEI should be revised and still meet

[[Page 73274]]

its statutory requirements. We will continue to evaluate the validity
and relevance of the index to ensure that it meets statutory
requirements while adequately reflecting the evolution of the expense
distribution associated with furnishing physicians' services.
Comment: A commenter asserted that the time gap between the two
surveys, the PPIS and the SMS, may not be directly comparable, but a
comparison of the two indicates that medical practice costs increased
79 percent from 2000 to 2006. However, the MEI only increased 18
percent from 2000 to 2006. The commenter notes that every other
available measure of physician expense growth shows faster growth than
the MEI.
Response: The MEI is strictly a fixed-weight price index expressly
designed to measure the change in price of a fixed basket of goods.
Changes in physician costs are a function of changes in prices and
changes in quantities. As other commenters have noted to CMS, and CMS
agrees, cost increases are only reflected in the MEI's weights to the
extent the relative cost of an input changes over time. Comparing the
MEI (reflecting price changes) to other cost metrics (that reflect both
price changes, as well as changes in volume and mix) is inappropriate
given the MEI's definition and purpose.
Comment: A commenter noted that the proposed revisions to the MEI
do not do anything to improve the adequacy of the MEI. The commenter
also noted that in the proposed rule, CMS estimated the 2011 MEI at
just 0.3 percent, and the addition of the new components that CMS has
proposed based on BEA data does nothing to increase it.
Response: The rebased and revised MEI is intended to more
accurately reflect the cost structure of furnishing physicians'
services, as well as measure the input price inflation encountered by
physicians. Accordingly, we disagree with the commenter and believe
that the 2006-based MEI offers numerous technical improvements. These
improvements include updating the base year to reflect more current
cost distributions, updating price proxies, and adding more detailed
cost categories.
Comment: A commenter stated that the MEI is used to annually update
medical practice costs in the SGR calculation. Virtually all physician
groups signed on to a January 2009 letter arguing that the MEI's price
inputs as currently structured do not accurately reflect current
medical practice costs. No action has been taken to remedy the
situation.
Response: We disagree with the commenter's claim the MEI annually
updates the medical practice cost in the SGR. The purpose of the MEI in
the SGR is to measure price increases related to the furnishing of
physician services. It is not intended to measure cost increases, but
rather to reflect the cost structure associated with furnishing
physicians' services, and then subsequently measure the weighted price
increases associated with that cost structure. We would also like to
note that the MEI is currently part of the statutorily prescribed
formula for physician payment updates and that revisions to the MEI are
adopted through the notice and comment rulemaking process.
e. Technical Panel
Comment: Many commenters expressed their support for the convening
of a Medicare Economic Index Technical Advisory Panel (MEI TAP).
Response: We agree that the MEI TAP should be convened and will be
moving forward accordingly. This process includes announcing the
panel's creation through an official CMS communication such as a
Federal Register announcement. This announcement will provide details
on the expected number of panel members, provide an opportunity for the
public to nominate members, and inform the public of the objectives and
scope of the panel's activities.
We will be asking this group of independent experts to evaluate
only technical aspects of the MEI, including the index's inputs, input
weights, price-measurement proxies, and the productivity adjustment.
Any formal recommendations made by the MEI TAP will be carefully
considered by CMS. Suggested modifications that we believe would result
in technical improvements to the MEI would appear in subsequent PFS
proposed rules and be subject to public comment and the overall
rulemaking process.
Comment: Several commenters provided many suggestions on technical
issues that they believe should be considered by the technical advisory
panel. The commenters generally requested that the panel perform a
thorough review of all aspects and elements of the MEI.
Response: We appreciate the constructive comments on potential
topics for the MEI technical advisory panel, which will be asked to
fully evaluate the index. As noted above, the panel will be evaluating
all technical aspects of the MEI including the cost categories, their
associated weights and price proxies, and the productivity adjustment.
Comment: A commenter stated that any recommendations that are made
by the panel should be published with an opportunity for comment before
they are finalized.
Response: Any substantive recommendations from the technical
advisory panel that CMS believes will result in technical improvements
to the MEI will be subject to the rulemaking process, including giving
the opportunity to the public to review and comment.
Comment: Some commenters request that CMS reach out to the medical
community to ensure that the panel's work is accurate and complete.
Others indicated that pending the recommendations of the technical
advisory panel, CMS should: (1) Include physicians and other
stakeholders in the MEI revision process, so that the impact of any
recommended changes can be studied prior to implementation; and (2)
clearly state their rationale for proposed changes.
Response: As mentioned previously, we will be reaching out to the
public for suggestions as to the composition of an independent expert
panel that will assist us in ensuring that the MEI is constructed
accurately and completely, and fulfills its purpose to appropriately
reflect the inflationary pressures faced by physicians in furnishing
services. CMS will also present to the public any future proposed
revisions to the MEI through notice and comment rulemaking, during
which we will clearly state the rationale for any proposed changes and
consider public comment before finalizing changes to the index.
Comment: One commenter believes that one of the possible options
for resolving the SGR problem involves replacing the SGR update formula
with the MEI. The commenter noted that input from the MEI technical
panel should better position the MEI as a viable alternative to the SGR
update formula.
Response: We welcome any technical comments the public has on the
composition of the MEI, including the inputs, input weights, price-
measurement proxies, and productivity adjustment. Any recommendations
from the MEI TAP will be evaluated and considered for possible future
rulemaking. However, we note that replacement of, or adjustments to,
the SGR is outside the scope of the MEI TAP.

[[Page 73275]]

f. Other
Comment: Several commenters agreed with CMS' proposal to remove
pharmaceuticals and separately billable medical supplies, since these
are not paid under the PFS. Even though this change lessens the weight
given to the practice expense component of the index, it made sense to
the commenters given the separate line-item payments for these goods.
Further, incident-to drugs are now paid based on average sales price
(ASP) and, since last-year's changes, are no longer a factor in the SGR
formula and the determination of the PFS conversion factor.
Response: We agree with the commenters on the appropriateness of
removing drugs and separately billable supplies from the MEI since they
are not paid under the PFS and are no longer included as costs in the
SGR formula.
Comment: A commenter disagreed with the continued use of the AHE
wage data for the total nonfarm business economy as a price proxy for
physician income rather than using BLS data specific to all
professional and technical workers.
Response: We disagree with the commenter's suggestion. We believe
that the use of the average hourly earnings data for the total nonfarm
business economy, which captures skill mix shifts in the labor force,
is the most appropriate index for use as the price proxy for physician
income in the MEI. The AHE for the nonfarm business economy reflects
general earnings including the impacts of supply, demand, and economy-
wide productivity for the average worker in the economy. Its use is
consistent with the Congress's original intent that the index be based
on changes in expenses of practice and general earnings levels.\3\ It
is also consistent with our use of the BLS private nonfarm business
multifactor productivity measure to adjust the index as economy-wide
wage increases reflect economy-wide productivity increases. Therefore,
we are finalizing our proposal to continue to use average hourly
earnings for the total private nonfarm economy as a price proxy for
physician income in the 2006-based MEI.
---------------------------------------------------------------------------

\3\ U.S. Senate, Committee on Finance, Social Security
Amendments of 1972, ``Report of the Committee on Finance United
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.
---------------------------------------------------------------------------

Comment: A commenter stated that although CMS has expanded the
designation of the data underlying some of the GPCI and MEI constructs
over the designations of previous years, the descriptions used are
sometimes either inconsistent or contradictory. For example, CMS noted
that ``for the proposed sixth GPCI update, we used the 2006 through
2008 Bureau of Labor Statistics (BLS) Occupational Employment
Statistics (OES) data as a replacement for the 2000 Census data.'' (75
FR 40083). In contrast, CMS used ``2006 Occupational Employment
Statistics (OES), BLS'' for the proposed 2006 MEI expense weights. (75
FR 40089, note (2)). The commenter believes it is impossible to discern
from the proposed rule whether inconsistent data sets were used or
whether there is simply a misprint.
Response: Because the MEI and GPCIs serve different purposes and
are not interdependent, we may use data from different years and, in
some instances, different sources. Both the MEI and the GPCI use the
OES. However, because the MEI is based to 2006 it is appropriate to use
the 2006 BLS Occupational Employment Statistics data to disaggregate
the nonphysician wages cost weight into more detailed occupational cost
weights.
For the proposed sixth GPCI update, CMS proposed to use OES data
for 2006 through 2008. The rationale for choosing this data for the
proposed GPCI update was provided in the CY 2011 PFS proposed rule (75
FR 40084).
8. Adjustments to the RVU Shares To Match the Proposed Rebased MEI
Weights
As described in the previous section, CMS proposed to rebase the
MEI for CY 2011 based on the most current data and establish new
weights for physician work, PE, and malpractice under the MEI. As
stated in the previous section, the MEI was rebased to a CY 1996 base
year beginning with the CY 1999 MEI (63 FR 58845), and to a CY 2000
base year beginning with the CY 2004 MEI (68 FR 63239). For both the CY
1999 and CY 2004 rebasing, we made adjustments to ensure that estimates
of aggregate PFS payments for work, PE, and malpractice were in
proportion to the weights for these categories in the rebased MEI (63
FR 58829 and 69 FR 1095).
Consistent with past practice when the MEI has been rebased, we
proposed to make adjustments to ensure that estimates of aggregate CY
2011 PFS payments for work, PE, and malpractice are in proportion to
the weights for these categories in the rebased CY 2011 MEI.
As explained in the CY 2011 PFS proposed rule (75 FR 40095), to
match the proportions for work, PE, and malpractice in the rebased CY
2011 MEI would necessitate increasing the proportion of aggregate CY
2011 PFS payments for PE and malpractice and decreasing the proportion
for work. This could be accomplished by applying adjustments directly
to the work, PE, and malpractice RVUs. However, as stated in the
proposed rule (75 FR 40095), we are cognizant of the public comments
made during prior rulemaking on issues related to scaling the work
RVUs. Many commenters have indicated a preference for the work RVUs to
remain stable over time and for any necessary adjustments that would
otherwise be made broadly to the work RVUs to be accomplished in an
alternative manner. For example, in past 5-Year Reviews of the work
RVUs, many commenters cited stability in the work RVUs, among other
reasons, in their requests that any required budget neutrality
adjustments not be made directly to the work RVUs. Given these prior
comments, for CY 2011, we proposed to make the necessary MEI rebasing
adjustments without adjusting the work RVUs. Instead, we proposed to
increase the PE RVUs and the malpractice RVUs. Furthermore, as noted in
the proposed rule (75 FR 40096), section 1848(c)(2)(B)(ii)(II) of the
Act requires that changes to RVUs cannot cause the amount of
expenditures for a year to differ by more than $20 million from what
expenditures would have been in the absence of the changes. Therefore,
as required by section 1848(c)(2)(B)(ii) of the Act, we proposed to
make an adjustment to the CY 2011 conversion factor to ensure that the
adjustments to the PE RVUs and the malpractice RVUs would not cause an
increase in CY 2011 PFS expenditures.
Comment: A number of commenters expressed support for the use of
the most current and accurate data as inputs to ``formulas used by the
Agency, whether the formula for the SGR, for practice expense inputs,
malpractice expense inputs, or in this case to calculating the Medicare
Economic Index.'' These commenters supported the proposal to rebase and
revise the MEI using the AMA PPIS data and the corresponding
adjustments to the work, PE, and MP RVUs. Some commenters noted
particularly that since the AMA PPIS has been deemed appropriate for
the purpose of the PE RVU update process begun in CY 2010, using this
same data source to inform the MEI costs and weights in CY 2011 is also
appropriate because it will ensure that all of the major cost-based
components of the fee schedule methodology will now be tied to cost
data collected in the same year (2006). Furthermore, a number of
commenters supported the

[[Page 73276]]

proposed policy to adjust the RVU shares on the basis that the changes
appear to have a modest positive impact on many of the services that
were negatively affected by the implementation of the AMA PPIS data in
CY 2010. These services were typically ones that are more heavily
weighted to PE than work. In contrast, numerous commenters expressed
dissatisfaction with the proposed policy on the premise that it
``penalizes health care work that is not technology-intensive,'' that
is, services that are typically more heavily weighted to physician work
than PE, ``when in fact it is the technology-intensive health expenses
that are actually driving up costs.'' A few of these commenters
suggested that CMS insulate certain services that are work-intensive
from the effects of the MEI rebasing.
Response: We believe that using the most current and accurate data
whenever practicable to update the PFS is a key principle for the
payment system. We agree with the commenters that using the AMA PPIS
data to rebase and revise the MEI in CY 2011 promotes consistency
within the PFS. In using the AMA PPIS information to rebase and revise
the MEI, the result is that the most current data drive the work RVU
share down compared to the PE RVU and malpractice RVU shares. Since the
PFS is both resource-based, relative, and budget neutral, if the data
show that physicians' resources (that is, costs) have shifted
proportionately more to PE and malpractice, the proportion for work
must come down. We have tried to accommodate the preferences of
previous commenters to preserve the stability of work RVUs by proposing
to make the necessary MEI rebasing adjustments without adjusting the
work RVUs. However, given the PFS budget neutrality requirement, we
cannot implement some commenters' suggestion to insulate certain
services that are work-intensive from the effects of the MEI rebasing
without violating the inherent relativity of the system. That is, in
order to insulate certain services from the effects of the MEI rebasing
while adjusting the RVU shares to match the proportions for work, PE,
and malpractice in the rebased MEI in a budget neutral manner as
discussed previously, the individual work RVUs for those certain
services would need to be increased. However, if we were to increase
the work RVUs for those certain services, the services would no longer
be appropriately valued relative to the other services under the PFS.
Comment: Of the many commenters who supported CMS' proposal to
adjust the RVU shares to match the proportions for work, PE, and
malpractice in the rebased CY 2011 MEI, the vast majority also favored
adjusting the RVU shares upward for PE and malpractice while making a
corresponding adjustment to the conversion factor for budget neutrality
without modifying the RVUs for work. These commenters stated that
stability in the work RVUs was desirable. However, some commenters also
expressed concern that CMS proposed an additional downward adjustment
to the conversion factor when, under current law, the effect of the SGR
update formula in December of 2010 and CY 2011 would reduce PFS
payments significantly. These commenters generally opposed the MEI
rebasing and the adjustment to the RVUs to match the MEI weights;
however, if CMS were to proceed with the policy, the commenters
suggested that, at the very least the adjustments be phased in over 2
or 4 years. A few commenters suggested replacing the SGR update formula
entirely with the MEI.
Response: We are sympathetic to the commenters' concern that an
additional downward adjustment to the conversion factor on top of the
negative effect of the statutory SGR-based update is inopportune.
However, as we explained in the proposed rule (75 FR 40095) and
discussed previously in this section, rather than applying adjustments
directly to the work, PE, and malpractice RVUs in order to match the
rebased MEI weights for those categories, we believe that it is
appropriate for the work RVUs to remain stable over time. The only way
we can make the adjustments without affecting the work RVUs is to also
make an adjustment to the conversion factor. We note that we did not
receive a public comment suggesting that we make the downward
adjustment to the work RVUs instead of the conversion factor in order
to meet the requirements of section 1848(c)(2)(B)(ii) of the Act for
budget neutrality. In response to the commenters that suggested
replacing the SGR update with the MEI, we assume the commenters are
making a general suggestion for a change in the current law, which is
outside the purview of CMS.
Comment: Many commenters addressed CMS' proposal to convene a
technical advisory panel to review all aspects of the MEI. In light of
this proposal, the majority of commenters urged CMS to delay
implementation of the MEI rebasing and any other MEI changes, including
the proposed adjustment to the RVU shares, until the advice of the
technical advisory panel is reviewed by CMS and recommendations for
change, if any, are considered. Additionally, while the commenters
generally supported convening an MEI technical advisory panel, some
commenters, including MedPAC, advised that CMS should go ahead and
implement the rebased and revised MEI and the proposed adjustment to
the RVU shares in CY 2011. These commenters noted that if the
recommendations of the advisory panel indicated that the MEI should be
adjusted, CMS could propose future changes accordingly.
Response: We acknowledge the overwhelming support from commenters
for the MEI technical advisory panel and refer readers to section
II.E.6 of this final rule with comment period for a more detailed
discussion of our plans to convene the panel. We note that a more
detailed summary of the public comments and our responses is included
in that section.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to make MEI rebasing adjustments to the
PFS work and PE RVUs and to adjust the conversion factor to maintain
budget neutrality. In light of the substantial support in general for
us to make adjustments to match the proportions of the work, PE, and
malpractice RVU shares to the categories in the revised and rebased CY
2011 MEI and our decision, as described in section II.E.5 of this final
rule, to proceed with rebasing the MEI for CY 2011, we are finalizing
our proposal to adjust the RVU shares for CY 2011 to align the RVU
shares with the rebased MEI weights. Specifically, we will not be
making an adjustment directly to the work RVUs. Instead, we are
increasing the PE RVUs by an adjustment factor of 1.181 and the
malpractice RVUs by an adjustment factor of 1.358. The RVUs in Addendum
B to this final rule with comment period reflect the application of
these adjustment factors. We note that an application of the 1.358
adjustment factor to the malpractice RVUs for services with malpractice
RVUs of 0.01 will, due to rounding, result in malpractice RVUs of 0.01.
Furthermore, section 1848(c)(2)(B)(ii)(II) of the Act requires that
changes to RVUs cannot cause the amount of expenditures for a year to
differ by more than $20 million from what expenditures would have been
in the absence of the changes. Therefore, as required by section
1848(c)(2)(B)(ii) of the Act, we are making an adjustment of 0.9181 to
the CY 2011 conversion factor to ensure that the 1.181 adjustment to
the PE RVUs and the 1.358 adjustment

[[Page 73277]]

to the malpractice RVUs do not cause an increase in CY 2011 PFS
expenditures.

F. Allowed Expenditures for Physicians' Services and the Sustainable
Growth Rate

1. Medicare Sustainable Growth Rate (SGR)
The SGR is an annual growth rate that applies to physicians'
services paid by Medicare. The use of the SGR is intended to control
growth in aggregate Medicare expenditures for physicians' services.
Payments for services are not withheld if the percentage increase in
actual expenditures exceeds the SGR. Rather, the PFS update, as
specified in section 1848(d)(4) of the Act, is adjusted based on a
comparison of allowed expenditures (determined using the SGR) and
actual expenditures. If actual expenditures exceed allowed
expenditures, the update is reduced. If actual expenditures are less
than allowed expenditures, the update is increased.
Section 1848(f)(2) of the Act specifies that the SGR for a year
(beginning with CY 2001) is equal to the product of the following four
factors:
(1) The estimated change in fees for physicians' services;
(2) The estimated change in the average number of Medicare fee-for-
service beneficiaries;
(3) The estimated projected growth in real GDP per capita; and
(4) The estimated change in expenditures due to changes in statute
or regulations.
In general, section 1848(f)(3) of the Act requires us to publish
SGRs for 3 different time periods, no later than November 1 of each
year, using the best data available as of September 1 of each year.
Under section 1848(f)(3)(C)(i) of the Act, the SGR is estimated and
subsequently revised twice (beginning with the FY and CY 2000 SGRs)
based on later data. (The Act also provides for adjustments to be made
to the SGRs for FY 1998 and FY 1999. See the February 28, 2003 Federal
Register (68 FR 9567) for a discussion of these SGRs.) Under section
1848(f)(3)(C)(ii) of the Act, there are no further revisions to the SGR
once it has been estimated and subsequently revised in each of the 2
years following the preliminary estimate. In this final rule with
comment, we are making our preliminary estimate of the CY 2011 SGR, a
revision to the CY 2010 SGR, and our final revision to the CY 2009 SGR.
2. Physicians' Services
Section 1848(f)(4)(A) of the Act defines the scope of physicians'
services covered by the SGR. The statute indicates that ``the term
physicians' services includes other items and services (such as
clinical diagnostic laboratory tests and radiology services), specified
by the Secretary, that are commonly performed or furnished by a
physician or in a physician's office, but does not include services
furnished to a Medicare+Choice plan enrollee.''
We published a definition of physicians' services for use in the
SGR in the November 1, 2001 Federal Register (66 FR 55316). We defined
physicians' services to include many of the medical and other health
services listed in section 1861(s) of the Act. As discussed in the CY
2010 PFS final rule with comment period (74 FR 61961), the statute
provides the Secretary with clear discretion to decide whether
physician-administered drugs should be included or excluded from the
definition of ``physicians' services.'' Accordingly, we removed
physician-administered drugs from the definition of ``physicians'
services'' in section 1848(f)(4)(A) of the Act for purposes of
computing the SGR and the levels of allowed expenditures and actual
expenditures beginning with CY 2010, and for all subsequent years.
Furthermore, in order to effectuate fully the Secretary's policy
decision to remove drugs from the definition of ``physicians'
services,'' we removed physician-administered drugs from the
calculation of allowed and actual expenditures for all prior years.
Additionally, payment was made under the PFS for several new
benefit categories in CY 2010 including pulmonary rehabilitation (PR),
cardiac rehabilitation (CR), intensive cardiac rehabilitation (ICR),
and kidney disease education (KDE) services. We note further that
section 101 of the MIPPA added a new benefit category for ``additional
preventive services'' effective January 1, 2009. Although we neglected
to identify and add these additional benefit categories when describing
the scope of physicians' services for purposes of the SGR in course of
rulemaking for CY 2010 and CY 2009, respectively, we did include
payments for these services in calculating target and actual PFS
expenditures beginning in CY 2009 for additional preventive services
and beginning in CY 2010 for PR, CR, ICR, and KDE services.
Section 4103 of the ACA added a new benefit category for
``personalized prevention plan services'' (which include the annual
wellness visit). Payment for these services will be made under the PFS,
and payments for these services will be included in calculating target
and actual PFS expenditures, beginning January 1, 2011.
Thus, for purposes of determining allowed expenditures, actual
expenditures for all years, and SGRs beginning with CY 2010 and for all
subsequent years, we are specifying that physicians' services include
the following medical and other health services if bills for the items
and services are processed and paid by Medicare carriers (and those
paid through intermediaries where specified) or the equivalent services
processed by the Medicare Administrative Contractors (MACs):
Physicians' services.
Services and supplies furnished incident to physicians'
services, except for the expenditures for drugs and biologicals which
are not usually self-administered by the patient.
Outpatient physical therapy services and outpatient
occupational therapy services.
Services of PAs, certified registered nurse anesthetists,
certified nurse midwives, clinical psychologists, clinical social
workers, NPs, and certified nurse specialists.
Screening tests for prostate cancer, colorectal cancer,
and glaucoma.
Screening mammography, screening pap smears, and screening
pelvic exams.
Diabetes outpatient self-management training (DSMT)
services.
MNT services.
Diagnostic x-ray tests, diagnostic laboratory tests, and
other diagnostic tests (including outpatient diagnostic laboratory
tests paid through intermediaries).
X-ray, radium, and radioactive isotope therapy.
Surgical dressings, splints, casts, and other devices used
for the reduction of fractures and dislocations.
Bone mass measurements.
An initial preventive physical exam.
Cardiovascular screening blood tests.
Diabetes screening tests.
Telehealth services.
Physician work and resources to establish and document the
need for a power mobility device.
Additional preventive services.
Pulmonary rehabilitation.
Cardiac rehabilitation.
Intensive cardiac rehabilitation.
Kidney disease education services.
Personalized prevention plan services.
3. Preliminary Estimate of the SGR for 2011
Our preliminary estimate of the CY 2011 SGR is -13.4 percent. We
first estimated the CY 2011 SGR in March

[[Page 73278]]

2010, and we made the estimate available to the MedPAC and on our Web
site. Table 35 shows the March 2010 estimate and our current estimates
of the factors included in the CY 2011 SGR. The majority of the
difference between the March estimate and our current estimate of the
CY 2011 SGR is explained by adjustments to reflect several intervening
legislative changes that occurred after our March estimate was
prepared.

Table 35--CY 2011 SGR Calculation
----------------------------------------------------------------------------------------------------------------
Statutory factors March estimate Current estimate
----------------------------------------------------------------------------------------------------------------
Fees.................................... 0.2 percent (1.002)........ 0.2 percent (1.002)
Enrollment.............................. 3.1 percent (1.031)........ 2.4 percent (1.024)
Real Per Capita GDP..................... 0.8 percent (1.008)........ 0.7 percent (1.007)
Law and Regulation...................... -4.4 percent (0.956)....... -16.2 percent (0.838)
-----------------------------------------------------------------------
Total............................... -0.4 percent (0.996)....... -13.4 percent (0.866)
----------------------------------------------------------------------------------------------------------------
Note: Consistent with section 1848(f)(2) of the Act, the statutory factors are multiplied, not added, to produce
the total (that is, 1.002 x 1.024 x 1.007 x 0.838 = 0.866). A more detailed explanation of each figure is
provided in section II.F.6.a. of this final rule with comment period.

4. Revised Sustainable Growth Rate for CY 2010
Our current estimate of the CY 2010 SGR is 8.3 percent. Table 36
shows our preliminary estimate of the CY 2010 SGR that was published in
the CY 2010 PFS final rule with comment period (74 FR 61965) and our
current estimate. The majority of the difference between the
preliminary estimate and our current estimate of the CY 2010 SGR is
explained by adjustments to reflect several intervening legislative
changes that have occurred since publication of the CY 2010 final rule
with comment period.

Table 36--CY 2010 SGR Calculation
----------------------------------------------------------------------------------------------------------------
Estimate from CY 2010 final
Statutory factors rule Current estimate
----------------------------------------------------------------------------------------------------------------
Fees.................................... 0.9 percent (1.009)........ 0.9 percent (1.009)
Enrollment.............................. 1.2 percent (1.012)........ 1.6 percent (1.016)
Real Per Capita GDP..................... 0.7 percent (1.007)........ 0.7 percent (1.007)
Law and Regulation...................... -11.3 percent (0.887)...... 4.9 percent (1.049)
-----------------------------------------------------------------------
Total............................... -8.8 percent (0.912)....... 8.3 percent (1.083)
----------------------------------------------------------------------------------------------------------------
Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with
comment period.

5. Final Sustainable Growth Rate for CY 2009
The SGR for CY 2009 is 6.4 percent. Table 37 shows our preliminary
estimate of the CY 2009 SGR from the CY 2009 PFS final rule with
comment period (73 FR 69904), our revised estimate from the CY 2010 PFS
final rule with comment period (74 FR 61966), and the final figures
determined using the best available data as of September 1, 2010.

Table 37--CY 2009 SGR Calculation
----------------------------------------------------------------------------------------------------------------
Estimate from CY Estimate from CY
Statutory factors 2009 final rule 2010 final rule Final
----------------------------------------------------------------------------------------------------------------
Fees.............................. 2.1 percent (1.021). 1.8 percent (1.018). 1.8 percent (1.018)
Enrollment........................ -0.2 percent (0.998) -0.8 percent (0.992) -0.6 percent (0.994)
Real Per Capita GDP............... 1.2 percent (1.012). 0.9 percent (1.009). 1.0 percent (1.010)
Law and Regulation................ 4.2 percent (1.042). 4.1 percent (1.041). 4.1 percent (1.041)
-----------------------------------------------------------------------------
Total......................... 7.4 percent (1.074). 6.1 percent (1.061). 6.4 percent (1.064)
----------------------------------------------------------------------------------------------------------------
Note: A more detailed explanation of each figure is provided in section II.F.6.b. of this final rule with
comment period.

6. Calculation of CYs 2011, 2010, and 2009 Sustainable Growth Rates
a. Detail on the CY 2011 SGR
All of the figures used to determine the CY 2011 SGR are estimates
that will be revised based on subsequent data. Any differences between
these estimates and the actual measurement of these figures will be
included in future revisions of the SGR and allowed expenditures and
incorporated into subsequent PFS updates.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying
Legislative Adjustments) for CY 2011
This factor is calculated as a weighted-average of the CY 2011
changes in fees for the different types of services included in the
definition of physicians' services for the SGR. Medical and other
health services paid using the PFS are estimated to account for
approximately 89.4 percent of total allowed charges included in the SGR
in CY 2011 and are updated using the MEI. The MEI for CY 2011 is 0.4
percent. Diagnostic laboratory tests are estimated to represent
approximately 10.6 percent of Medicare allowed charges included in the
SGR for CY 2011. Medicare payments for these tests are updated by the
Consumer Price Index for Urban Areas (CPI-U), which is 1.1 percent for
CY 2011. However, section 3401 of the ACA reduces the CPI-U update
applied to clinical laboratory tests by a productivity adjustment, but
does not allow this adjustment to cause the

[[Page 73279]]

update to be negative. The applicable productivity adjustment for CY
2011 is 1.2 percent. Adjusting the CPI-U update by the productivity
adjustment results in a -0.1 percent (1.1 percent-1.2 percent) update
for CY 2011. However, since section 3401 of the ACA does not allow the
productivity adjustment to result in a negative CLFS update, the result
is that the CLFS update for CY 2011 is 0.0 percent. Additionally,
section 3401 of the ACA reduces the update applied to clinical
laboratory tests by 1.75 percent for CYs 2011 through 2015. Therefore,
for CY 2011, diagnostic laboratory tests will receive an update of -
1.75 percent. Additionally, as discussed in the CY 2010 PFS final rule
with comment period (74 FR 61961), we removed physician-administered
drugs from the definition of ``physicians' services'' in section
1848(f)(4)(A) of the Act for purposes of computing the SGR and the
levels of allowed expenditures and actual expenditures beginning with
CY 2010, and for all subsequent years. Therefore, drugs represent 0.0
percent of Medicare allowed charges included in the SGR in CY 2011.
Table 38 shows the weighted-average of the MEI and laboratory price
changes for CY 2010.

Table 38--Weighted-Average of the MEI and Laboratory Price Changes for
CY 2011
------------------------------------------------------------------------
Weight Update
------------------------------------------------------------------------
Physician............................... 0.894 0.4
Laboratory.............................. 0.106 -1.8
Weighted-average........................ 1.000 0.2
------------------------------------------------------------------------

We estimate that the weighted-average increase in fees for
physicians' services in CY 2011 under the SGR (before applying any
legislative adjustments) will be 0.2 percent.
(2) Factor 2--The Percentage Change in the Average Number of Part B
Enrollees From CY 2010 to CY 2011
This factor is our estimate of the percent change in the average
number of fee-for-service enrollees from CY 2010 to CY 2011. Services
provided to Medicare Advantage (MA) plan enrollees are outside the
scope of the SGR and are excluded from this estimate. We estimate that
the average number of Medicare Part B fee-for-service enrollees will
increase by 2.4 percent from CY 2010 to CY 2011. Table 39 illustrates
how this figure was determined.

Table 39--Average Number of Medicare Part B Fee-for-Service Enrollees
From CY 2010 to CY 2011
[Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
2010 2011
------------------------------------------------------------------------
Overall....................... 43.932 million... 45.010 million
Medicare Advantage (MA)....... 11.683 million... 11.998 million
Net........................... 32.249 million... 33.012 million
Percent Increase.............. ................. 2.4 percent
------------------------------------------------------------------------

An important factor affecting fee-for-service enrollment is
beneficiary enrollment in MA plans. Because it is difficult to estimate
the size of the MA enrollee population before the start of a CY, at
this time we do not know how actual enrollment in MA plans will compare
to current estimates. For this reason, the estimate may change
substantially as actual Medicare fee-for-service enrollment for CY 2011
becomes known.
(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth
in 2011
We estimate that the growth in real GDP per capita from CY 2010 to
CY 2011 will be 0.7 percent (based on the 10-year average GDP over the
10 years of 2002 through 2011). Our past experience indicates that
there have also been changes in estimates of real per capita GDP growth
made before the year begins and the actual change in GDP computed after
the year is complete. Thus, it is possible that this figure will change
as actual information on economic performance becomes available to us
in CY 2011.
(4) Factor 4--Percentage Change in Expenditures for Physicians'
Services Resulting From Changes in Statute or Regulations in CY 2011
Compared With CY 2010
The statutory and regulatory provisions that will affect
expenditures in CY 2011 relative to CY 2010 are estimated to have an
impact on expenditures of -16.2 percent. These include the Department
of Defense Appropriations Act (DODAA), the Temporary Extension Act
(TEA), and the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act (PACMBPRA) which provided for
physician updates.
Furthermore, the ACA contained provisions regarding the policy on
equipment utilization for imaging services, the multiple procedure
payment reduction policy for imaging services, and the annual wellness
visit providing personalized prevention plan services.
b. Detail on the CY 2010 SGR
A more detailed discussion of our revised estimates of the four
elements of the CY 2010 SGR follows.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying
Legislative Adjustments) for CY 2010
This factor was calculated as a weighted-average of the CY 2010
changes in fees that apply for the different types of services included
in the definition of physicians' services for the SGR in CY 2010.
We estimate that services paid using the PFS account for
approximately 91.1 percent of total allowed charges included in the SGR
in CY 2010. These services were updated using the CY 2010 MEI of 1.2
percent. We estimate that diagnostic laboratory tests represent
approximately 8.9 percent of total allowed charges included in the SGR
in CY 2010. Medicare payments for these tests are updated by the CPI-U,
which is -1.4 percent for CY 2010. However, section 145 of the MIPPA,
as modified

[[Page 73280]]

by section 3401 of the ACA, reduced the update applied to clinical
laboratory tests by 0.5 percent for CY 2009 and CY 2010. Therefore, for
CY 2010, diagnostic laboratory tests received an update of -1.9
percent. Since we removed physician-administered drugs from the
definition of ``physicians' services'' for purposes of computing the
SGR and the levels of allowed expenditures and actual expenditures
beginning with CY 2010, and for all subsequent years, drugs represent
0.0 percent of Medicare allowed charges included in the SGR in CY 2010.
Table 40 shows the weighted-average of the MEI, laboratory, and
drug price changes for CY 2010.

Table 40--Weighted-Average of the MEI, Laboratory, and Drug Price
Changes for CY 2010
------------------------------------------------------------------------
Weight Update
------------------------------------------------------------------------
Physician............................... 0.911 1.2
Laboratory.............................. 0.089 -1.9
Drugs................................... 0.000 0.0
Weighted-average........................ 1.000 0.9
------------------------------------------------------------------------

After considering the elements described in Table 40, we estimate
that the weighted-average increase in fees for physicians' services in
CY 2010 under the SGR (before applying any legislative adjustments)
will be 0.9 percent. Our estimate of this factor in the CY 2010 PFS
final rule with comment period was 0.9 percent (74 FR 61966).
(2) Factor 2--The Percentage Change in the Average Number of Part B
Enrollees From CY 2009 to CY 2010
We estimate that the average number of Medicare Part B fee-for-
service enrollees (excluding beneficiaries enrolled in Medicare
Advantage plans) increased by 1.6 percent in CY 2010. Table 41
illustrates how we determined this figure.

Table 41--Average Number of Medicare Part B Fee-for-Service Enrollees
From CY 2009 to CY 2010
[Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
2009 2010
------------------------------------------------------------------------
Overall....................... 42.846 million... 43.932 million
Medicare Advantage (MA)....... 11.098 million... 11.683 million
Net........................... 31.748 million... 32.249 million
Percent Increase.............. ................. 1.6 percent
------------------------------------------------------------------------

Our estimate of the 1.6 percent change in the number of fee-for-
service enrollees, net of Medicare Advantage enrollment for CY 2010
compared to CY 2009, is a larger change than our original estimate of
1.2 percent in the CY 2010 PFS final rule with comment period (74 FR
61967). While our current projection based on data from 8 months of CY
2010 differs from our original estimate of 1.2 percent when we had no
actual data, it is still possible that our final estimate of this
figure will be different once we have complete information on CY 2010
fee-for-service enrollment.
(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth
in CY 2010
We estimate that the growth in real GDP per capita will be 0.7
percent for CY 2010 (based on the 10-year average GDP over the 10 years
of CY 2001 through CY 2010). Our past experience indicates that there
have also been differences between our estimates of real per capita GDP
growth made prior to the year's end and the actual change in this
factor. Thus, it is possible that this figure will change further as
complete actual information on CY 2010 economic performance becomes
available to us in CY 2011.
(4) Factor 4--Percentage Change in Expenditures for Physicians'
Services Resulting From Changes in Statute or Regulations in CY 2010
Compared With CY 2009
The statutory and regulatory provisions that will affect
expenditures in CY 2010 relative to CY 2009 are estimated to have an
impact on expenditures of 4.9 percent. These include the DODAA, TEA,
and PACMBPRA which provided for physician updates. Also included are
the MIPPA provisions regarding the physician update, Physician Quality
Reporting Initiative (PQRI) and e-prescribing bonuses, the work GPCIs,
and payment provisions related to certain pathology services.
Additionally, the ACA contained provisions regarding the work GPCIs,
the policy on equipment utilization for imaging services, coverage of
preventive services, and a physician enrollment requirement.
c. Detail on the CY 2009 SGR
A more detailed discussion of our final revised estimates of the
four elements of the CY 2009 SGR follows.
(1) Factor 1--Changes in Fees for Physicians' Services (Before Applying
Legislative Adjustments) for CY 2009
This factor was calculated as a weighted-average of the CY 2009
changes in fees that apply for the different types of services included
in the definition of physicians' services for the SGR in CY 2009. As we
stated in the CY 2010 PFS final rule with comment period (74 FR 61965),
although we removed drugs from the calculation of allowed and actual
expenditures under sections 1848(d)(3)(C) and 1848(d)(4) of the Act
retrospectively to the 1996/1997 base year, we determined that we were
only authorized to remove drugs from the calculation of the SGR
beginning with CY 2010. Therefore, we did not remove drugs from the SGR
calculations for previous years, including CY 2009. Consistent with
this determination, the revisions to our estimate of the CY 2009 SGR
will be limited to revisions to reflect later data available as of
September 1, 2010, that were not available when we published our
previous estimates.
Services paid using the PFS accounted for approximately 82.3
percent of total Medicare-allowed charges included in the SGR for CY

[[Page 73281]]

2009 and are updated using the MEI. The MEI for CY 2009 was 1.6
percent. Diagnostic laboratory tests represented approximately 8.0
percent of total CY 2009 Medicare allowed charges included in the SGR
and were updated by the CPI-U, which was 5.0 percent for CY 2009.
However, section 145 of the MIPPA, as modified by section 3401 of the
ACA, reduced the update applied to clinical laboratory tests by 0.5
percent for CYs 2009 and 2010. Therefore, for CY 2009, diagnostic
laboratory tests received an update of 4.5 percent. Drugs represented
approximately 9.7 percent of total Medicare-allowed charges included in
the SGR for CY 2009. We estimate a weighted-average change in fees for
drugs included in the SGR of 1.6 percent for CY 2009. Table 42 shows
the weighted-average of the MEI, laboratory, and drug price changes for
CY 2009.

Table 42--Weighted-Average of the MEI, Laboratory, and Drug Price
Changes for CY 2009
------------------------------------------------------------------------
Weight Update
------------------------------------------------------------------------
Physician............................... 0.823 1.6
Laboratory.............................. 0.080 4.5
Drugs................................... 0.097 1.6
Weighted-average........................ 1.000 1.8
------------------------------------------------------------------------

After considering the elements described in Table 42, we estimate
that the weighted-average increase in fees for physicians' services in
CY 2009 under the SGR (before applying any legislative adjustments) was
1.8 percent. This figure is a final one based on complete data for CY
2009.
(2) Factor 2--The Percentage Change in the Average Number of Part B
Enrollees From CY 2008 to CY 2009
We estimate the change in the number of fee-for-service enrollees
(excluding beneficiaries enrolled in MA plans) from CY 2009 to CY 2010
was -0.6 percent. Our calculation of this factor is based on complete
data from CY 2009. Table 43 illustrates the calculation of this factor.

Table 43--Average Number of Medicare Part B From CY 2008 to CY 2009
[Excluding beneficiaries enrolled in MA plans]
------------------------------------------------------------------------
2008 2009
------------------------------------------------------------------------
Overall....................... 41.958 million.. 42.846 million
Medicare Advantage (MA)....... 10.008 million.. 11.098 million
Net........................... 31.950 million.. 31.748 million
Percent Change................ ................ -0.6 percent
------------------------------------------------------------------------

(3) Factor 3--Estimated Real Gross Domestic Product Per Capita Growth
in CY 2009
We estimate that the growth in real per capita GDP was 1.0 percent
in CY 2009 (based on the 10-year average GDP over the 10 years of CY
2000 through CY 2009). This figure is a final one based on complete
data for CY 2009.
(4) Factor 4--Percentage Change in Expenditures for Physicians'
Services Resulting From Changes in Statute or Regulations in CY 2009
Compared With CY 2008
Our final estimate for the net impact on expenditures from the
statutory and regulatory provisions that affect expenditures in CY 2009
relative to CY 2008 is 4.1 percent. These include the DRA provision
regarding payments for imaging services, the Medicare, Medicaid, and
SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA) provision
regarding the PQRI bonuses payable in CY 2009, and the MIPPA provisions
regarding the physician update, mental health services, and the change
in application of budget neutrality to the CF.

G. The Update Adjustment Factor (UAF)

Section 1848(d) of the Act provides that the PFS update is equal to
the product of the MEI and the UAF. The UAF is applied to make actual
and target expenditures (referred to in the statute as ``allowed
expenditures'') equal. As discussed previously, allowed expenditures
are equal to actual expenditures in a base period updated each year by
the SGR. The SGR sets the annual rate of growth in allowed expenditures
and is determined by a formula specified in section 1848(f) of the Act.
1. Calculation Under Current Law
Under section 1848(d)(4)(B) of the Act, the UAF for a year
beginning with CY 2001 is equal to the sum of the following--
Prior Year Adjustment Component. An amount determined by--
+ Computing the difference (which may be positive or negative)
between the amount of the allowed expenditures for physicians' services
for the prior year (the year prior to the year for which the update is
being determined) and the amount of the actual expenditures for those
services for that year;
+ Dividing that difference by the amount of the actual expenditures
for those services for that year; and
+ Multiplying that quotient by 0.75.
Cumulative Adjustment Component. An amount determined by--
+ Computing the difference (which may be positive or negative)
between the amount of the allowed expenditures for physicians' services
from April 1, 1996, through the end of the prior year and the amount of
the actual expenditures for those services during that period;
+ Dividing that difference by actual expenditures for those
services for the prior year as increased by the SGR for the year for
which the UAF is to be determined; and
+ Multiplying that quotient by 0.33.
Section 1848(d)(4)(E) of the Act requires the Secretary to
recalculate allowed expenditures consistent with section 1848(f)(3) of
the Act. As discussed previously, section 1848(f)(3) specifies that the
SGR (and, in turn, allowed expenditures) for the upcoming CY (CY 2011
in this case), the current

[[Page 73282]]

CY (that is, CY 2010) and the preceding CY (that is, CY 2009) are to be
determined on the basis of the best data available as of September 1 of
the current year. Allowed expenditures for a year generally are
estimated initially and subsequently revised twice. The second revision
occurs after the CY has ended (that is, we are making the second
revision to CY 2009 allowed expenditures in this final rule with
comment).
Table 44 shows the historical SGRs corresponding to each period
through CY 2011.

Table 44--Annual and Cumulative Allowed and Actual Expenditures for Physicians' Services From April 1, 1996 through the End of the Current Calendar Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Cumulative
Annual allowed Annual actual allowed actual
Period expenditures ($ expenditures ($ expenditures ($ expenditures ($ FY/CY SGR (%)
in billions) in billions) in billions) in billions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
4/1/96-3/31/97......................................... \1\ $46.8 $46.8 $46.8 $46.8 N/A
4/1/97-3/31/98......................................... 48.3 47.0 95.2 93.9 FY 1998=3.2
4/1/98-3/31/99......................................... 50.4 47.8 145.6 141.7 FY 1999=4.2
1/1/99-3/31/99......................................... 12.7 12.4 \(2)\ 141.7 FY 1999=4.2
4/1/99-12/31/99........................................ 40.3 37.0 \(3)\ 178.8 FY 2000=6.9
1/1/99-12/31/99........................................ 53.0 49.5 185.8 178.8 FY 1999/2000
1/1/00-12/31/00........................................ 56.8 54.1 242.7 232.9 CY 2000=7.3
1/1/01-12/31/01........................................ 59.4 61.2 302.1 294.2 CY 2001=4.5
1/1/02-12/31/02........................................ 64.3 64.6 366.4 358.7 CY 2002=8.3
1/1/03-12/31/03........................................ 69.0 70.2 435.4 429.0 CY 2003=7.3
1/1/04-12/31/04........................................ 73.6 78.3 509.0 507.2 CY 2004=6.6
1/1/05-12/31/05........................................ 76.7 83.5 585.7 590.7 CY 2005=4.2
1/1/06-12/31/06........................................ 77.8 84.6 663.5 675.3 CY 2006=1.5
1/1/07-12/31/07........................................ 80.5 84.5 744.0 759.8 CY 2007=3.5
1/1/08-12/31/08........................................ 84.2 86.7 828.2 846.4 CY 2008=4.5
1/1/09-12/31/09........................................ 89.6 90.6 917.8 937.0 CY 2009=6.4
1/1/10-12/31/10........................................ 97.0 92.9 1,014.7 1,029.9 CY 2010=8.3
1/1/11-12/31/11........................................ 84.0 NA 1,098.7 NA CY 2011=-13.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\(1)\ Allowed expenditures in the first year (April 1, 1996-March 31, 1997) are equal to actual expenditures. All subsequent figures are equal to
quarterly allowed expenditure figures increased by the applicable SGR. Cumulative allowed expenditures are equal to the sum of annual allowed
expenditures. We provide more detailed quarterly allowed and actual expenditure data on our Web site at the following address: http://www.cms.hhs.gov/SustainableGRatesConFact/ SustainableGRatesConFact/. We expect to update the web site with the most current information later this month.
\(2)\ Allowed expenditures for the first quarter of 1999 are based on the FY 1999 SGR.
\(3)\ Allowed expenditures for the last three quarters of 1999 are based on the FY 2000 SGR.

Consistent with section 1848(d)(4)(E) of the Act, Table 44 includes
our second revision of allowed expenditures for CY 2009, a
recalculation of allowed expenditures for CY 2010, and our initial
estimate of allowed expenditures for CY 2011. To determine the UAF for
CY 2011, the statute requires that we use allowed and actual
expenditures from April 1, 1996 through December 31, 2010 and the CY
2011 SGR. Consistent with section 1848(d)(4)(E) of the Act, we will be
making revisions to the CY 2010 and CY 2011 SGRs and CY 2010 and CY
2011 allowed expenditures. Because we have incomplete actual
expenditure data for CY 2010, we are using an estimate for this period.
Any difference between current estimates and final figures will be
taken into account in determining the UAF for future years.
We are using figures from Table 44 in the following statutory
formula:
[GRAPHIC] [TIFF OMITTED] TR29NO10.231

UAF11 = Update Adjustment Factor for CY 2011 = -2.9 percent
Target10 = Allowed Expenditures for CY 2010 = $97.0 billion
Actual10 = Estimated Actual Expenditures for CY 2010 = $92.9
billion
Target 4/96-12/10 = Allowed Expenditures from 4/1/1996-12/
31/2010 = $1,014.7 billion
Actual 4/96-12/10 = Estimated Actual Expenditures from 4/1/
1996-12/31/2010 = $1,029.9 billion
SGR11 = -13.4 percent (0.866)
[GRAPHIC] [TIFF OMITTED] TR29NO10.232

Section 1848(d)(4)(D) of the Act indicates that the UAF determined
under section 1848(d)(4)(B) of the Act for a year may not be less than
-0.07 or greater than 0.03. Since -0.029 is between -0.07 and 0.03, the
UAF for CY 2010 will be -0.029.
Section 1848(d)(4)(A)(ii) of the Act indicates that 1.0 should be
added to the UAF determined under section 1848(d)(4)(B) of the Act.
Thus, adding

[[Page 73283]]

1.0 to -0.029 makes the UAF equal to 0.971.

H. Physician and Anesthesia Fee Schedule Conversion Factors for CY 2011

The CY 2011 PFS CF is $25.5217. The CY 2011 national average
anesthesia CF is $15.8085.
1. Physician Fee Schedule Update and Conversion Factor
a. CY 2011 PFS Update
The formula for calculating the PFS update is set forth in section
1848(d)(4)(A) of the Act. In general, the PFS update is determined by
multiplying the CF for the previous year by the percentage increase in
the MEI times the UAF, which is calculated as specified under section
1848(d)(4)(B) of the Act.
b. CY 2011 PFS Conversion Factor
Generally, the PFS CF for a year is calculated in accordance with
section 1848(d)(1)(A) of the Act by multiplying the previous year's CF
by the PFS update.
We note section 101 of the MIEA-TRHCA provided a 1-year increase in
the CY 2008 CF and specified that the CF for CY 2009 must be computed
as if the 1-year increase had never applied. Section 101 of the MMSEA
provided a 6-month increase in the CY 2009 CF, from January 1, 2009,
through June 30, 2009, and specified that the CF for the remaining
portion of CY 2009 and the CFs for CY 2010 and subsequent years must be
computed as if the 6-month increase had never applied. Section 131 of
the MIPPA extended the increase in the CY 2009 CF that applied during
the first half of the year to the entire year, provided for a 1.1
percent increase to the CY 2010 CF, and specified that the CFs for CY
2011 and subsequent years must be computed as if the increases for CYs
2008, 2009, and 2010 had never applied. Section 1011(a) of the DODAA
and section 5 of the TEA specified a zero percent update for CY 2010,
effective January 1, 2010 through May 31, 2010. Subsequently, section
101(a)(2) of the PACMBPRA provided for a 2.2 percent update to the CF,
effective from June 1, 2010 to November 30, 2010. Therefore, under
current law, the CF in effect in December 2010 is $28.3868.
In addition, when calculating the PFS CF for a year, section
1848(c)(2)(B)(ii)(II) of the Act requires that increases or decreases
in RVUs may not cause the amount of expenditures for the year to differ
more than $20 million from what it would have been in the absence of
these changes. If this threshold is exceeded, we must make adjustments
to preserve budget neutrality. We estimate that CY 2011 RVU changes
would result in a decrease in Medicare physician expenditures of more
than $20 million. Accordingly, we are increasing the CF by 1.0045 to
offset this estimated decrease in Medicare physician expenditures due
to the CY 2011 RVU changes. Furthermore, as discussed in section II.E.6
of this final rule with comment period, we are decreasing the CF by
0.9181 in order to offset the increase in Medicare physician payments
due to the CY 2011 rescaling of the RVUs so that the proportions of
total payments for the work, PE, and malpractice RVUs match the
proportions in the final revised and rebased MEI for CY 2011.
Accordingly, we calculate the CY 2011 PFS CF to be $25.5217. This final
rule with comment period announces a reduction to payment rates for
physicians' services in CY 2011 under the SGR formula. These payment
rates are currently scheduled to be reduced under the SGR system on
December 1, 2010, and then again on January 1, 2011. The total
reduction in MPFS rates between November 2010 and January 2011 under
the SGR system will be 24.9 percent. By law, we are required to make
these reductions in accordance with section 1848(d) and (f) of the Act,
and these reductions can only be averted by an Act of Congress. While
Congress has provided temporary relief from these reductions every year
since 2003, a long-term solution is critical. We are committed to
permanently reforming the Medicare payment formula.
We illustrate the calculation of the CY 2011 PFS CF in Table 45.

Table 45--Calculation of the CY 2011 PFS CF
------------------------------------------------------------------------

------------------------------------------------------------------------
December 2010 Conversion Factor.... ...................... $28.3868
CY 2011 Medicare Economic Index.... 0.4 percent (1.0040) ...........
CY 2011 Update Adjustment Factor... -2.9 percent (0.9710) ...........
CY 2011 RVU Budget Neutrality 0.5 percent (1.0045) ...........
Adjustment.
CY 2011 Rescaling to Match MEI -8.2 percent (0.9181) ...........
Weights Budget Neutrality
Adjustment.
CY 2011 Conversion Factor.......... ...................... $25.5217
------------------------------------------------------------------------

We note payment for services under the PFS will be calculated as
follows:
Payment = [(RVU work x GPCI work) + (RVU PE x GPCI PE) + (RVU
malpractice x GPCI malpractice)] x CF.
2. Anesthesia Conversion Factor
We calculate the anesthesia CF as indicated in Table 45. Anesthesia
services do not have RVUs like other PFS services. Therefore, we
account for any necessary RVU adjustments through an adjustment to the
anesthesia CF to simulate changes to RVUs. More specifically, if there
is an adjustment to the work, PE, or malpractice RVUs, these
adjustments are applied to the respective shares of the anesthesia CF
as these shares are proxies for the work, PE, and malpractice RVUs for
anesthesia services. Furthermore, as discussed in section II.E.6 of
this final rule with comment period, we are rescaling the RVUs so that
the proportions of total payments for the work, PE, and malpractice
RVUs match the proportions in the final revised and rebased MEI for CY
2011. Accordingly, we are adjusting the anesthesia CF to reflect the
RVUs adjustments being made to all other physician fee schedule
services to match the revised and rebased MEI weights.
As explained previously, in order to calculate the CY 2011 PFS CF,
the statute requires us to calculate the CFs for CYs 2009, 2010, and
2011 as if the various legislative changes to the CFs for those years
had not occurred. Accordingly, under current law, the anesthesia CF in
effect in December 2010 is $16.6058. We illustrate the calculation of
the CY 2011 anesthesia CF in Table 46.

Table 46--Calculation of the CY 2011 Anesthesia Conversion Factor
------------------------------------------------------------------------

------------------------------------------------------------------------
December 2010 Anesthesia Conversion ...................... $16.6058
Factor.
CY 2011 Medicare Economic Index.... 0.4 percent (1.0040) ...........

[[Page 73284]]

CY 2011 Update Adjustment Factor... -2.9 percent (0.9710) ...........
CY 2011 Anesthesia Adjustment...... -2.3 percent (0.97651) ...........
CY 2011 Anesthesia Conversion ...................... $15.8085
Factor.
------------------------------------------------------------------------

III. Code-Specific Issues for the PFS

A. Therapy Services

1. Outpatient Therapy Caps for CY 2011
Section 1833(g) of the Act applies an annual, per beneficiary
combined cap on expenses incurred for outpatient physical therapy and
speech-language pathology services under Medicare Part B. A similar
separate cap for outpatient occupational therapy services under
Medicare Part B also applies. The caps apply to expenses incurred for
therapy services furnished in outpatient settings, other than in an
outpatient hospital setting which is described under section
1833(a)(8)(B) of the Act. The caps were in effect during 1999, from
September 1, 2003 through December 7, 2003, and continuously beginning
January 1, 2006. The caps are a permanent provision, that is, there is
no end date specified in the statute for therapy caps. Beginning
January 1, 2006, the DRA provided for exceptions to the therapy caps
until December 31, 2006. The exceptions process for therapy caps has
been extended through December 31, 2009 pursuant to three subsequent
amendments (in MEIA-TRHCA, MMSEA, and MIPPA).
Section 1833(g)(5) of the Act (as amended by section 3103 of the
ACA) extended the exceptions process for therapy caps through December
31, 2010. The annual change in the therapy cap is computed by
multiplying the cap amount for CY 2010, which is $1,860, by the MEI for
CY 2011, and rounding to the nearest $10. This amount is added to the
CY 2010 cap to obtain the CY 2011 cap. Since the MEI for CY 2011 is 0.4
percent, the therapy cap amount for CY 2011 is $1870.
The agency's authority to provide for exceptions to therapy caps
(independent of the outpatient hospital exception) will expire on
December 31, 2010, unless the Congress acts to extend it. If the
current exceptions process expires, the caps will be applicable in
accordance with the statute, except for services furnished and billed
by outpatient hospital departments.
Comment: The commenters unanimously requested repeal of the therapy
caps, while characterizing caps as arbitrary and medically unfounded
and the combination of cap amounts for PT and SLP services as
groundless. A number of commenters argued that therapy caps restrict
provision of medically necessary services to beneficiaries. Several
commenters reported that patients are discharged for care prior to
recovery due to payment restrictions and this leads to increased
medical costs for Medicare.
Response: Therapy caps are mandated by statute. We have no
authority to repeal the caps, or to restructure the grouping of therapy
disciplines to which the caps apply. However, we understand the
concerns of the commenters, and we are actively exploring alternatives
to therapy caps to inform the discussions about approaches to identify
and pay for those therapy services that are necessary for patients to
attain the best outcomes with the most efficient use of resources.
2. Alternatives to Therapy Caps
a. Background
In section 4541 of the Balanced Budget Act of 1997 (Pub. L. 105-33)
(BBA), the Congress enacted the financial limitations on outpatient
therapy services (the ``therapy caps'' discussed above for physical
therapy, occupational therapy, and speech-language pathology). At the
same time, the Congress requested that the Secretary submit a Report to
Congress that included recommendations on the establishment of a
revised coverage policy for outpatient physical therapy services and
outpatient occupational therapy services under the statute. The
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) placed
the first of a series of moratoria on implementation of the limits. In
addition, it required focused medical review of claims and revised the
report requirements in section 4541(d)(2) of the BBA to request a
report that included recommendations on the following: (A) The
establishment of a mechanism for assuring appropriate utilization of
outpatient physical therapy services, outpatient occupational therapy
services, and speech-language pathology services; and (B) the
establishment of an alternative payment policy for such services based
on classification of individuals by diagnostic category, functional
status, prior use of services (in both inpatient and outpatient
settings), and such other criteria as the Secretary determines
appropriate, in place of the limits. In 1999, therapy services were not
defined, but services documented as therapy were billed and reported
when furnished by a variety of individuals in many different settings.
These services were not identified in a way that would allow analysis
of utilization or development of alternative payment policies. Since
that time, we have clarified the definition of therapy services and
applied the qualifications of therapists consistently to outpatient
settings, which have facilitated analysis of therapy services.
We have studied therapy services with the assistance of a number of
contractors over the past 11 years. Reports of these projects are
available on the CMS Web site at http://www.cms.gov/TherapyServices/.
On November 9, 2004, we delivered the Report to Congress, Number
137953, ``Medicare Financial Limitations on Outpatient Therapy
Services'' that referenced two utilization analyses. We periodically
updated the utilization analyses and posted other contracted reports on
the CMS web site in order to further respond to the requirements of the
BBRA. Subsequent reports highlighted the expected effects of limiting
services in various ways and presented plans to collect data about
patient condition using available tools. The general belief was that if
patient condition could be reliably described, that approach would
ensure appropriate payment for appropriately utilized services.
Over the past decade, significant progress has been made in
identifying the outpatient therapy services that are billed to
Medicare, the demographics of the beneficiaries who utilize those
services, the types of services, the HCPCS codes used to bill the
services, the allowed and paid amounts of the services, and the
settings, geographic locations, and provider or supplier types where
services are furnished.
Some of the information that is necessary to ensure appropriate
utilization and develop objective and equitable payment alternatives to
therapy caps based on patient condition has proven difficult to
develop. The influence of prior use of inpatient services on outpatient
use of therapy services was not accessible due to systems issues and
differences in the policies, billing, and reporting practices for
inpatient and outpatient therapy

[[Page 73285]]

services. The weakness of the ICD-9-CM diagnostic codes in describing
the condition of the rehabilitation patient obscured analyses of claims
to assess the need for therapy services. The primary diagnosis on the
claim is a poor predictor for the type and duration of therapy services
required, which complicates assignment of patient cohorts for analysis.
Although changes to the guidance in the Medicare Benefit Policy Manual
(Pub. 100-02) on documentation of therapy services in 2005 improved the
consistency of records and facilitated chart review, it became
increasingly obvious that neither claims analysis nor chart review
could serve as a reliable and valid method to determine a patient's
need for services or to form the basis for equitable payment. We
concluded that in order to develop alternative payment approaches to
the therapy caps, we needed a method to identify patients with similar
risk-adjusted conditions (cohorts) and then we would identify the
therapy services that are necessary for the patients to attain the best
outcomes with the most efficient use of resources.
While we studied therapy utilization, a number of proprietary tools
were developed by researchers in the professional community to assess
the outcomes of therapy. Some tool sponsors collected sufficient
information to predict with good reliability the amount or length of
treatment that would result in the best expected outcomes. We
encouraged the use of these proprietary tools in manual instructions,
but proprietary tools do not serve our purposes because modification of
proprietary tools may only be done by the tool sponsor. There now are
some versions of the tools in the public domain and they are being
utilized widely to identify patient conditions and, by some insurers,
to pay for efficient and effective treatment. Examples of such tools
include the National Outcomes Measurement System (NOMS) by the American
Speech-Language Hearing Association and Patient Inquiry by Focus On
Therapeutic Outcomes, Inc. (FOTO).
In 2006, Focus on Therapeutic Outcomes, Inc. delivered to CMS a
report titled, ``Pay for Performance for Physical Therapy and
Occupational Therapy,'' which is also available on the CMS Web site at
http://www.cms.gov/TherapyServices. The purpose of this project was to
simulate a pay-for-performance implementation, designed to align
financial incentives with the achievement of better clinical outcomes
from services that were delivered efficiently. The project, funded by
HHS/CMS Grant 18-P-93066/9-01, demonstrated the predictive validity of
the risk-adjusted pay-for-performance model and the feasibility of
reducing payments without affecting services to beneficiaries who need
them.
b. Current Activities
The Tax Relief and Health Care Act of 2006 (TRHCA) extended the
therapy cap exceptions process through December 31, 2007 and provided
funds used for two CMS projects related to developing alternative
payment approaches for therapy services that are based on beneficiary
needs. A 5-year project titled ``Development of Outpatient Therapy
Alternatives'' (DOTPA), awarded to RTI International, was initiated in
order to develop a comprehensive and uniform therapy-related data
collection instrument, assess its feasibility, and determine the subset
of the measures that we could routinely and reliably collect in support
of payment alternatives. While DOTPA will identify measurement items
relevant to payment, the project will not deliver a standardized
measurement tool. We may either develop a tool or allow other tools to
be used for payment purposes when they include those items that
identify the following: (1) Beneficiary need; and (2) outcomes (that is
effectiveness of therapy services). In addition to therapy caps, the
DOTPA project considers our interest in value-based purchasing by
identifying components of value, including beneficiary need and the
effectiveness of therapy services. The DOTPA project reports are
available on the contractor's Web site at http://optherapy.rti.org/.
The data collection design and instrument development have been
completed, and a Paperwork Reduction Act (PRA) package was submitted
for approval of the data collection forms by the Office of Management
and Budget (OMB). The Federal Register notice for the second round of
public comment on this package was published on April 23, 2010 (75 FR
21296). The PRA package has been approved; the contractor is recruiting
potential participants in the data collection, developing training
materials for participants, and updating the project web site. We did
not seek public comments on the DOTPA project in the proposed rule.
The TRCHA also funded the 2-year project contracted to Computer
Sciences Corporation (CSC) entitled ``Short Term Alternatives for
Therapy Services'' (STATS). STATS has provided recommendations
regarding alternative payment approaches to therapy caps that could be
considered before completion of the DOTPA project. The STATS project
draws upon the analytical and clinical expertise of contractors and
stakeholders to consider policies, measurement tools, and claims data
that are currently available to provide further information about
patient condition and the outcomes of therapy services. The final
report, received September 13, 2010, included recommended actions we
could take within 2 or 3 calendar years to replace the current cap
limits on therapy services with a policy that pays appropriately for
necessary therapy services.
c. Potential Short-Term Approaches to Therapy Caps
On June 30, 2009, we received a draft of the CSC report titled
``STATS Outpatient Therapy Practice Guidelines,'' a summary of expert
workgroup discussions, and several short-term payment alternatives for
consideration. CSC discussed options based on the assumption that
short-term policy changes should facilitate the development of adequate
function and/or outcomes reporting tools. In the longterm, CSC
recommended that payment be based on function or quality measurements
that adequately perform risk adjustment for episode-based payment
purposes.
Based on the draft report, additional stakeholder input, and
subsequent communications with the contractor, in the CY 2011 PFS
proposed rule (75 FR 40097 through 40099) we discussed several
potential alternatives to the therapy caps that could lead to more
appropriate payment for medically necessary and effective therapy
services that are furnished efficiently. We solicited public comments
on the proposed rule regarding all aspects of these alternatives,
including the potential associated benefits or problems, clinical
concerns, practitioner administrative burden, consistency with other
Medicare and private payer payment policies, and claims processing
considerations. We did not propose either short-term or long-term
payment alternatives to the therapy caps. However, we referred readers
to section II.C.4.(c) of the proposed rule for our CY 2011 proposal to
expand the MPPR policy to ``always therapy'' services furnished in a
single session in order to pay more appropriately for therapy services,
taking into consideration the expected efficiencies when services are
furnished together. While we did not propose the adoption of an MPPR
policy for therapy services specifically as an alternative to the
therapy caps, we acknowledged that by paying more appropriately for
combinations of

[[Page 73286]]

therapy services that are commonly furnished in a single session,
practitioners would be able to furnish more medically necessary therapy
services to a given beneficiary before surpassing the caps. We noted
that the proposed MPPR policy would have the potential to reduce the
number of beneficiaries impacted by the therapy caps in a given year.
Comment: Many commenters stated that use of the financial cap on
therapy services as a rationale for the proposed MPPR was unacceptable
and not a sound basis for such a significant policy proposal. Quite a
few commenters contrasted the cap alternatives research with the MPPR
which, in the commenters' opinion, did not reflect a similar level of
analysis. Instead of implementing the proposed MPPR, a large majority
of the commenters urged CMS to place a high priority in resources and
funding for research to identify alternatives to the cap that would
ensure patients receive medically necessary therapy services.
While the commenters agreed that more therapy could be furnished to
a beneficiary before surpassing the caps if the payments were reduced,
the commenters believe that other, more serious access problems would
result from arbitrary payment reductions under an MPPR. Many commenters
were concerned that the proposed MPPR policy might restrict access to
therapy services for patients with more severe problems, especially
neurological problems and complex medical conditions. Less payment,
explained the commenters, would force therapists to spend less time
with patients, incentivize cutting corners, and encourage greater fraud
and abuse. The commenters argued that the shortage of therapists,
particularly physical therapists, would be exacerbated and access to
therapy services would be severely jeopardized.
Response: We appreciate the effort and resources contributed by
stakeholders to the discussion and development of alternatives to
therapy caps. We look forward to the continued cooperation of
stakeholders as we continue our work in this area over the coming
years. We refer readers to section II.C.4.(c) of this final rule with
comment period for a detailed discussion of the public comments and our
responses regarding the proposed therapy MPPR.
The three specific short-term options that we discussed in the CY
2011 PFS proposed rule would not have required statutory changes when
CSC originally delivered them. In CY 2011, some would require extension
of the therapy cap exceptions process. Some would require moderate
reporting changes that would yield more detailed information about
patient function and progress to inform future payment approaches and
facilitate the medical review of services above the therapy caps at the
present time. Others require new coding and bundled per-session payment
that would be a first step toward episode-based payment. They are not
necessarily independent of each other.
Under each of these alternatives, administrative simplification
with respect to current policies, such as HCPCS code edits and ``ICD-9-
CM to HCPCS code'' crosswalk edits that serve to limit utilization
without regard to the patient's clinical presentation, could be pursued
in the context of these options.
The first option would modify the current therapy caps exceptions
process to capture additional clinical information regarding therapy
patient severity and complexity in order to facilitate medical review.
This approach would complement the DOTPA project, which is identifying
items to measure patient condition and outcomes. We believe the first
option may have the greatest potential for rapid implementation that
could yield useful information in the short-term. In the CY 2011 PFS
proposed rule (75 FR 40097), we indicated that we were especially
interested in detailed public comments on this option that could inform
a potential proposal to adopt such an alternative through future
rulemaking. The second option would involve introducing additional
claims edits regarding medical necessity, in order to reduce
overutilization. The third option would be to adopt a per-session
bundled payment that would vary based on patient characteristics and
the complexity of evaluation and treatment services furnished in the
session. Each option would require significant provider and contractor
education, and all would necessitate major claims processing systems
changes. Moreover, some of the options may affect beneficiaries by
changing the type or amount of services covered by Medicare or the
beneficiary's cost sharing obligations.
Comment: Many commenters agreed that a long term solution to the
therapy caps is desirable. Generally, the commenters supported an
evidence-based payment system grounded in accurate, comprehensive
analysis of the clinical characteristics of the wide range of therapy
patients in diverse settings and the concept of bundled payment for
episodes of care based on clinical characteristics of patients. Many
commenters urged CMS to place a high priority in resources and funding
for research to identify alternatives to the cap that would ensure
patients receive medically necessary therapy services. The commenters
asserted that such research would be a key factor in identifying
clinically appropriate ways to control spending. Those who commented on
this issue commended CMS for proposing alternatives that reflect in-
depth analytical work, expressing appreciation to CMS and its
contractor for the opportunity to participate on task forces and
pledging continued assistance in trials of alternatives. The commenters
also commend CMS for recommending better clinical information be
included in payment decisions.
MedPAC and some other commenters supported all three alternatives
as reasonable steps consistent with the end goals of value for
purchases based on the care needs of beneficiaries. Many commenters
supported the first option or the third option, and very few supported
the second option. Regardless of the alternative chosen, commenters
consistently recommended further study and analysis, with a national
demonstration or pilot project to test any alternative prior to
implementation.
Response: We continue to believe that the advice and assistance of
stakeholders, including clinicians and practice administrators, are
essential to the development of policies that are appropriate,
realistic, and effective in allowing necessary therapy care while
limiting overutilization. We appreciate the time and effort provided by
the dedicated professionals involved in the STATS workgroups and DOTPA
technical advisory panels.
Comment: A commenter suggested that diagnoses cannot be used to
predict medical necessity. The same commenter argued that if the
patient were assessed using self-reported functional status measures
that are risk-adjusted using many variables, it would be possible to
predict outcomes, identify ineffective treatment, and reduce gaming
without relying on clinician-generated estimates known to be biased and
fraught with poor reliability and validity.
Several other commenters stated that clinicians' judgment is
essential to accurate outcomes assessment, and these commenters
provided examples of clinical judgments believed essential to
appropriate care planning.
Response: None of the alternatives discussed in the proposed rule
would require a measurement tool scored by either a clinician or the
patient. We note the disagreement among the commenters on this point.

[[Page 73287]]

Comment: While generally supportive of the development of
alternatives to therapy caps, many commenters expressed concern that
there were insufficient data and details of the options discussed in
the proposed rule to develop a rational payment system based on the
options at this time. Several commenters suggested that sophisticated
multivariate statistical methods with a long list of clinically
appropriate risk-adjustment variables would be required. Another
commenter recommended using risk-adjustment models built on large
aggregate datasets to develop efficiency and effectiveness projections
on which payments could be based.
Response: We agree that the alternatives presented were not fully
developed and that statistically sound methods of evaluation of the
fully developed alternatives would be appropriate. We made no specific
proposal to adopt an alternative beginning in CY 2011, but instead
presented three potential options in order to gather additional public
input on the overall concepts and the details to inform our future
developmental work in this area. We will continue to review and
consider all the information provided to us and acknowledge that, in
the context of any future proposal, we would need to provide further
detail as part of notice and comment rulemaking in order for the public
to provide meaningful comment prior to the adoption of changes to
therapy payment.
Comment: Many commenters complained that therapy payments have
decreased relative to inflation over the past 10 years. The commenters
described the practitioner's struggle to provide appropriate care and
noted their fear of alternatives that could result in fewer resources
with which to treat beneficiaries. Some commenters stated that Medicaid
payments also decreased, leaving them with less flexibility to provide
covered services to Medicare beneficiaries. Several commenters warned
that those who bill therapy services will find ``creative'' ways to
manage patients in the future, leading to reduced quality of care, or
that therapists will be laid off, leading to access problems for
beneficiaries.
Some commenters recommended that CMS take time to consider the
potential alternatives to therapy caps from all angles related to cost,
including the costs of different health outcomes. Several commenters
reported that outpatient physical therapy saves Medicare spending by
preventing more expensive procedures and surgeries.
Response: Achieving appropriate payment for quality services that
quickly lead to good health outcomes is among the major goals of our
payment policy. It is also our goal to limit overutilization of
services, and to discourage the provision of services that are not
medically reasonable and necessary or represent an abuse of Medicare
funds. To that end, we will continue to develop policies aimed at
paying for those therapy services that meet patients' needs. The clear
challenge is to identify those needs and the services required.
Comment: One commenter was concerned that underlying therapy
utilization data are flawed due to inconsistent coverage and payment
policies that also negatively affect good clinical practice by
restricting the therapist's clinical judgment. The commenter provided
detailed examples to illustrate inconsistencies in forms and billing
rules between Part A and B providers and suppliers which in the
aggregate, the commenter argued, impede CMS' ability to analyze claims
data for comparison purposes. Differences due to National Correct
Coding Initiative (NCCI) and Medically Unlikely Edit (MUE) policies and
most particularly local coverage determinations (LCDs) were also
identified by the commenter as creating significant variations among
contractors. The commenter was particularly concerned about
requirements for specific ICD-9-CM and CPT code combinations, which
limit therapy diagnoses or require specific diagnoses as primary.
Response: We develop national and local policies and guidelines as
needed to interpret statutory requirements and to limit, whenever
possible, abusive behaviors while encouraging high quality care and
good outcomes for beneficiaries. Since no one method is entirely
effective in curbing incorrect or fraudulent billing practices, a
number of approaches have been adopted. We attempt to coordinate these
policies and we recognize that it is sometimes difficult for providers
and suppliers to stay informed about changes, especially when they
treat beneficiaries whose services are impacted by different payment
policies. We will continue to work cooperatively with interested
stakeholders, as we did with the STATS project, to identify and resolve
concerns or conflicts regarding our policies. We intend that any claims
data collected in a pilot study would be unencumbered by conflicts that
have been identified.
Comment: Many commenters stated that the options are identified as
alternatives to the cap exceptions process, which expires December 31,
2010.
Response: The short-term alternatives discussed are potential
alternatives to the therapy caps, and while it may be possible to
implement some as modifications to the exceptions process, we recognize
that Congress would have to act to extend the authority for a therapy
cap exceptions process or to otherwise provide for certain alternatives
to therapy caps.
Option (1): Revise therapy caps exceptions process by requiring the
reporting of new patient function-related Level II HCPCS codes and
severity modifiers.
This option would require that clinicians submit beneficiary
function-related nonpayable HCPCS codes to replace the -KX modifier
(Specific required documentation on file). Codes would not be submitted
on every claim, but at episode onset and at periodic intervals (for
example, progress report intervals of 12 sessions or 30 days--whichever
is less). Codes would be submitted for all patients in order for the
claims to be paid and not only those claims approaching or surpassing
the therapy caps. The current -KX modifier is not useful to identify
claims exceeding therapy caps, because it is used for services both
before and after the caps are exceeded, and it must be used on the
entire claim for facilities. New codes also would not identify claims
above the cap, but they would perform the same function as the current
-KX modifier to signal that documentation in the medical record
supported medical necessity that should lead to an exception to the
therapy caps. The codes would also provide more information for medical
review.
Six Level II HCPCS G-codes representing functions addressed in the
plan of care and 5 (or 7) modifiers representing severity/complexity
would be utilized to report information on the claim. Examples of six
new function-related G-codes:
GXXXU--Impairments to body functions and/or structures--
current.
GXXXV--Impairments to body functions and/or structures--
goal.
GXXXW--Activity limitations and/or participation
restrictions--current.
GXXXX--Activity limitations and/or participation
restrictions--goal.
GXXXY--Environmental barriers--current.
GXXXZ--Environmental barriers--goal.
Two potential severity/complexity scales have been suggested that
would require the adoption of 5 or 7 new severity modifiers,
respectively. Under one scenario, modifiers based on the

[[Page 73288]]

International Classification of Function would identify severity as
follows:
None (0 to 4 percent).
MILD (5 to 24 percent).
MODERATE (25 to 49 percent).
SEVERE (50 to 95 percent).
COMPLETE (96 to 100 percent).
Alternatively, a proportional severity/complexity scale would use 7
modifiers to describe impairments, limitations, or barriers--
0 percent;
1 to 19 percent;
20 to 39 percent;
40 to 59 percent;
50 to 79 percent;
80 to 99 percent; or
100 percent.
Implementation of this general approach might require 6 months to 2
years to modify claims processing for the current therapy caps and
exceptions processing of claims, and to develop, pilot test, and refine
coding before applying the approach nationally. While therapists
initially would need to learn the new codes and update their billing
systems, ultimately their reporting burden might be reduced because the
-KX modifier would not be required on each claim line for patients with
expenditures approaching or exceeding the therapy caps. This option
could potentially result in a small reduction in outpatient therapy
expenditures due to increased Medicare contractor scrutiny of episodes
where functional severity scores did not change over time, or to other
atypical reporting patterns associated with the new codes.
In the longterm, these codes and modifiers could be mapped to
reliable and validated measurement tools (either currently available
tools in the public domain or newly developed tools from items on the
DOTPA instrument or the Continuity Assessment Record and Evaluation
(CARE) tool). If statistically robust patient condition information
were collected from claims data, it may be possible to develop Medicare
payment approaches for outpatient therapy services that could pay
appropriately and similarly for efficient and effective services
furnished to beneficiaries with similar conditions who have good
potential to benefit from the services furnished. At a minimum, the new
codes could allow contractors to more easily identify and limit the
claims for beneficiaries who show no improvement over reasonable
periods of time.
Comment: Most commenters supported the concept of Option (1)
although often not without concerns about the details of
implementation. The commenters generally endorsed the concept of
describing patients' goals in terms of activity participation and
environmental barriers, in addition to impairments based on the World
Health Organization's (WHO's) International Classification of
Functioning, Disability and Health (ICF). Some supported Option (1) as
the best of the three options as it could begin providing a national
overview of functional status and severity of patients which would be
essential if CMS were to pursue future episode-based payment. The
majority of commenters agreed with the concept of developing an
infrastructure to work toward payment reform based on episodes of care,
patient characteristics, functional status, rehabilitation complexity,
severity, and outcomes. Many commenters supported Option (1) as the
first step in a plan to move toward Option (3) that would introduce
per-session codes to bundle payment, as described in detail below, and
ultimately episode-based payments, although a few suggested the
severity codes could be used, after adequate testing and definition, to
inform appropriate payment. Some commenters recommended developing
Option (1) and suggested that further development should include:
definition of terms (including the ICD-10 diagnosis codes in 2013),
input from therapists, field testing, and data analysis to ensure that
payment appropriately reflects patient complexity and risk before
application of the codes to individual therapy disciplines.
The commenters in favor of this option supported the use of ICF
language in descriptions, but consistently preferred a 7-point rating
scale for severity over the 5-point scale based on the ICF. Several
commenters also noted that sufficient training would be required for
contractors and providers of service under this option.
Response: We appreciate the perspectives of the commenters who see
Option (1) as a first step in the process of exploring alternatives to
the therapy caps that could move toward payment based on the needs of
beneficiaries.
Comment: Many commenters opposed this option as burdensome, easy to
``game,'' and lacking the potential for saving money. The commenters in
opposition to the option claimed it could require a great deal of
research to establish, validate and value codes, and then pilot test,
refine, establish inter-tester reliability, and modify the claims
processing process, which could take 2 years. Instead, the same
commenters recommended the use of valid and reliable measurement tools
currently in the public domain and in use by clinicians. One commenter
requested that CMS not use clinician-graded single item assessment
scales of patient severity or complexity, unless such methodology
possessed published reliability and validity on the selection and
grading processes because there are more psychometrically sound
published scales available that include a risk adjustment process to
predict treatment success and number of visits and are less vulnerable
to gaming. If scales were used, several commenters recommended that
they must be sensitive and cardinal so each change would represent an
equal increment.
Response: We recognize that Option (1) is not yet fully developed
and would require further study. As we consider this option further, we
will also assess the feasibility of using currently available validated
measurement scales in the public domain. The issues of ``gaming'' and
savings remain of interest in relationship to this and the other
options.
Comment: Several commenters voiced serious concerns about the
concept of using function-related codes and severity modifiers on the
claim to monitor patient improvement. The commenters were alarmed that
contractors would deny services when improvement was insufficiently
demonstrated, or when the beneficiary's goal was to prevent
deterioration of function. Several commenters were concerned that a
contractor's attention to function and severity modifiers might cause
the contractor to unduly limit the therapy sessions a patient needed to
maintain or increase functionality.
A few commenters interpreted the statute to require only that a
service be medically necessary to treat the underlying illness or
condition, and not to require that the service lead to improvement.
According to the commenters, a service required to maintain current
function is medically necessary but the focus on identifying
improvement would prevent those patients with progressive diseases from
receiving therapy to prevent further decline in function when there is
little probability of meeting an undefined improvement standard. A few
commenters provided citations of court cases that rejected Medicare
policies and practices that denied therapy services based on arbitrary
rules of thumb without consideration of the patient's individual
condition. Therefore, the same commenters recommended that CMS omit
reference to improvement standards in any proposal related to Option
(1).
Response: The policies for Medicare Part B outpatient therapy
services require payment for therapy services that require the skills
of a therapist. In

[[Page 73289]]

contrast, ``Unskilled services are palliative procedures that are
repetitive or reinforce previously learned skills, or maintain function
after a maintenance program has been developed * * *. services related
to activities for the general good and welfare of patients, for
example, general exercises to promote overall fitness and flexibility
and activities to provide diversion or general motivation, do not
constitute therapy services for Medicare purposes'' (Medicare Benefit
Policy Manual, Pub. 100-02, chapter 15, section 220.2.A.). We note that
when the goal of therapy is to halt degeneration of function due to
disease, therapy is not palliative or related to general welfare, but
may be an active treatment with measurable outcomes. For that reason,
we do not anticipate that function-related codes and severity modifiers
would be used exclusively as a proxy for the determination of medical
necessity.
The Medicare policy goes on to state, `` * * * services must be
necessary for the establishment of a safe and effective maintenance
program required in connection with a specific disease state. In the
case of a progressive degenerative disease, service may be
intermittently necessary to determine the need for assistive equipment
and/or establish a program to maximize function * * *.'' (Pub. L. 100-
02, chapter 15, section 220.2.A.). Further details concerning
maintenance therapy and examples of covered services to patients with
degenerative neurological diseases are found in Pub. 100-02, chapter
15, section 220.2.D.
Option (2): Enhance existing therapy caps exceptions process by
applying medical necessity edits when per-beneficiary expenditures
reach a predetermined value.
The existing automatic process for exceptions, and the revised
exceptions process described in Option (1) above, pay practitioners
indefinitely for services if they attest on the claim by appending a
specific modifier to therapy HCPCS codes that the services being
furnished are medically necessary and that supporting documentation is
included in the medical record. Unless the local contractor uses claims
edits or does post-payment review, these processes do not identify or
limit unusually high annual per-beneficiary utilization. High
utilization is not limited to beneficiaries with multiple or complex
conditions. We would use existing therapy utilization data to develop
annual per-beneficiary medical necessity payment edits, such as limits
to the number of services per-session, per-episode, or per-diagnostic
grouping, for exceptions to the therapy caps which would be set at
benchmark payment levels that only a small percentage of beneficiaries
would surpass in a single year. Once these levels were reached,
additional claims would be denied and practitioners would need to
appeal those denials if they wished to challenge Medicare's nonpayment.
This alternative would require 1 to 2 years to implement as an
expansion of existing policy, and its effects would be anticipated by
analysis of the current utilization of therapy services. Additional
practitioner burden would be incurred in the small number of cases
exceeding the per beneficiary expenditure edits if the practitioner
chose to appeal the medical necessity denial.
Comment: Few commenters preferred Option (2) over the other two. In
addition, the commenters stated that they were familiar with this
approach because other insurers use a similar system of edits, so the
adoption of Option (2) for Medicare patients would not represent an
additional administrative burden. The commenters who favored this
option reported that it would be the easiest for CMS to implement and
would be the only option likely to save money in the very short-term.
Some commenters who favored this option would still prefer the use of
existing measurement tools to gather data about therapy services. One
commenter pointed out that limits per-diagnosis should be based on
reasonable data that reflect good patient outcomes.
Most of the commenters who supported Option (2) also noted that
this option could influence therapy utilization and possibly outcomes,
creating flawed data that were not representative of needed services.
The commenters were concerned that future payment policy decisions
might later be based on those flawed data.
Response: We agree that Option (2) has the benefit of being
relatively easy to implement and we appreciate the perspective of some
commenters on the low anticipated burden. We also recognize that a
database of limited services would not be appropriate to use for
estimating the full cost of medically necessary services.
Comment: Some commenters took a neutral position on this option,
finding that it could be part of a viable alternative to therapy caps
but only after considerable study and development. MedPAC noted that
Option (2) would implement more meaningful therapy caps in the interim,
while longer-term solutions were being developed and tested. At the
same time, MedPAC supported CMS' efforts to identify medically
unnecessary care and to implement payment systems that ensure that the
program obtains value for its purchases. Other commenters were
concerned that the benchmark levels for edits be realistic and not
arbitrary. The commenters requested that CMS consider a method to deal
with outliers without forcing denials and appeals.
Response: Option (2) could be used in combination with other
options. We recognize the description we provided was not specific
about the edit levels and that further deliberation would be
appropriate before edits could be implemented.
Comment: The majority of commenters opposed Option (2). Although
some commenters agreed that edits for medically unlikely services are
useful and appropriate, they expressed concerns about this approach
because edits can often be arbitrary, are not based on patient needs,
and may improperly limit necessary services. Some commenters asserted
that individuals with degenerative conditions may require shorter
sessions over longer periods of time to address functional loss and
slow deterioration and to maximize health outcomes. The commenters also
opposed edits that would fail to address the affects of cognitive
impairment on treatment. Several commenters cited the existing ICD-9-
CPT code crosswalks, LCDs, NCCI edits, and MUEs as examples of similar
edits that commenters often found to be clinically inappropriate. The
commenters argued that current edits and policies based on unsupported
information led to denials and appeals that were costly to therapists
and CMS. The commenters urged CMS to avoid edits that lack clinical
relevance or a scientific basis and create anomalies in claims data.
Response: Option (2) was developed with input from therapy
professionals based on their review of therapy utilization data. If
this option were to be implemented, we would, at a minimum, review the
advice and recommendations of stakeholders, along with any available
utilization data to inform our decisions regarding the edit levels.
Comment: A few commenters criticized Option (2) as scientifically
flawed. One commenter reported that use of a combined effectiveness
(that is, functional status change) and efficiency (that is, number of
treatment visits) algorithm in a value-based payment process is one of
the few methods where one could determine if the patient needs more or
less treatment to reach optimal risk-adjusted gains in functional
status. The same commenter referenced numerous research efforts that
have analyzed functional status outcomes in

[[Page 73290]]

rehabilitation using sophisticated risk-adjustment methods and
requested that CMS use these as a basis for a new payment policy.
Other commenters asserted that currently available utilization data
are inadequate to develop predetermined edit values, citing studies of
therapy utilization under contract to CMS and studies performed by
industry that demonstrate why ICD-9 coding, lack of function/severity
data, and lack of a definition for ``episode'' are problematic.
Response: Current therapy utilization data reveal that one percent
of beneficiaries who receive services incur costs that proportionately
far exceed those of the other 99 percent of beneficiaries. However, we
are also aware that without some knowledge of the condition of the
beneficiary, it is impossible to determine which, if any, of those
services were medically necessary. While it would be desirable to
analyze more detailed utilization data that include patient function/
severity outcomes for setting edit values, those data are not available
to us in the short-term. We believe that the existing limited
utilization data, albeit not fully descriptive of patients, could
inform potential future edit values for therapy services.
Comment: If CMS plans to move forward with edits, many commenters
strongly requested that professional organizations be consulted to
determine whether such edits are clinically appropriate and realistic.
Some commenters specifically urged CMS to await the results of the
DOTPA pilot in the hope of capturing meaningful clinical differences
between patients before applying edits. Before such edits could
reliably be applied to payment, other commenters recommended that CMS
design, test, and evaluate additional data on functional status and
barriers to participation. Many commenters indicated that more data are
needed; especially thresholds based on episodes, condition groupings,
and similar criteria that could trigger medical review, but not support
denial. To that end, some commenters stated that it might be possible
to support this approach under Option (2), but after Option (1) was
implemented.
Response: We understand the commitment of stakeholders to the
development of alternatives to the therapy caps based on clinically
appropriate policies. We will consider the potential benefit of Option
(1) to develop data on which to base the edits required under Option
(2) as we further contemplate alternatives to the therapy caps.
Comment: A few commenters opposed Option (2) edits because the
edits would virtually eliminate the exceptions process mandated by law
and replace it with denial of claims at a predetermined value, which
may be inconsistent with the statutory requirement for an exceptions
process. The same commenters stated that there would be no basis for
edits until Option (1) was implemented to provide more detailed claims-
based information. Several commenters reported research showing 10
percent of Part B patients in nursing facilities have highly complex
problems, with multidisciplinary needs and inconsistent patterns of
therapy service use. The commenters were concerned that denials would
interfere with treatment of these complex patients with special needs.
Response: Option (2) would require an existing exception to the
therapy caps, which would be enhanced to allow limited billing and
payment for medically necessary services that exceed the caps. The
option could not be used if the exceptions process were not extended.
However, the Deficit Reduction Act of 2005 that established exceptions
to the caps for medically necessary therapy services also required
implementation of clinically appropriate code edits in order to
identify and eliminate improper payments for therapy services. CMS
currently applies NCCI and MUE edits to therapy services that fail to
meet a reasonable assumption of medical necessity. We view
implementation of Option (2) as consistent with our current authority
to create edits to control inappropriate billings.
Benchmark levels for Option (2) would be based on existing therapy
utilization data and limits would be set at levels that a high
percentage of beneficiaries would not exceed. While it may be helpful
to have more data related to patient condition as described in Option
(1) before implementing Option (2), we do not consider such information
vital to the development of limits that affect a very small percentage
of beneficiaries whose service payments would so far exceed average
payments that they would be likely to include inappropriate billings
and would be unlikely to interfere with the delivery of medically
necessary services.
Comment: If the option of implementing edits were pursued, several
commenters indicated that the edits should be variable based on
clinical criteria, result in medical review instead of denials, and
reflect issues of multidisciplinary care, care coordination, and
clinical issues.
Response: If Option (2) were to be further developed, we would
consider the commenters' suggestions prior to finalizing a plan for
implementation, along with any new information available from
additional research studies, OIG reports, or other sources.
Option (3): Introduce per-session ``Evaluation/Assessment and
Intervention'' (E&I) codes to bundle payment for groups of current
therapy HCPCS codes into a single per-session payment.
As discussed in section II.C.4.(c) of this final rule with comment
period, multiple therapy services are often furnished in a single
session, and we proposed to expand the MPPR policy to ``always
therapy'' services in CY 2011 in order to take into consideration the
efficiencies that occur when multiple services (the typical therapy
scenario) are furnished in one session to a beneficiary. Furthermore,
we note that section 1848(c)(2)(K) of the Act (as added by section 3134
of the ACA) regarding potentially misvalued codes under the PFS
specifies that the Secretary may make appropriate coding changes, which
may include consolidation of individual services into bundled codes for
payment under the PFS, as part of her review and adjustment of the
relative values for services identified as potentially misvalued.
This option would require that practitioners submit a single new
Level II HCPCS code to represent all the therapy services currently
reported and paid separately for an outpatient therapy session. Payment
for the HCPCS code would be based on patient characteristics (as
identified through prior CMS contractor analyses) and the complexity of
the evaluation/assessment and intervention services furnished during
the session. The new coding requirements would not necessarily disrupt
the current exceptions process or the revised exceptions process
described in Option (1) above. Approximately 12 E&I codes would be
needed for each discipline, taking into consideration the basic
algorithm shown in Table 47.

[[Page 73291]]

Table 47--Evaluation/Assessment & Intervention Level II HCPCS Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Evaluation/assessment complexity
--------------------------------------------------------------------------------------
Minimal Moderate Significant
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intervention level.................. None....................... E&I Code 1........ E&I Code 2........ E&I Code 3.
Minimal.................... E&I Code 4........ E&I Code 5........ E&I Code 6.
Moderate................... E&I Code 7........ E&I Code 8........ E&I Code 9.
Significant................ E&I Code 10....... E&I Code 11....... E&I Code 12.
--------------------------------------------------------------------------------------------------------------------------------------------------------

We would need to develop and test operational definitions for each
E&I code so that practitioners would be able to properly report
services and appropriate relative values could be established for each
per-session code. We believe that a pilot study might reveal that the
different practice patterns for the three therapy professions (physical
therapy, occupational therapy, and speech-language pathology) could
necessitate separate relative value determinations for each E&I code by
type of therapy service furnished. As a result, up to 36 total new
Level II HCPCS codes could be needed (12 per discipline).
We anticipate that the definitions of E&I codes 1 through 3 and 7
through 12 would describe services that may only be furnished by a
``clinician'' (therapist, physician, or non-physician practitioner).
E&I codes 1 through 3 would be reported for sessions that consisted
only of evaluations. In addition, the definitions of E&I codes 4
through 6 would describe services that could be furnished by or under
the permissible supervision of all qualified outpatient therapy
professionals. Based upon historical therapy utilization patterns, the
vast majority of E&I codes submitted would likely fall in the 4 through
9 code range. We would expect the RVUs under the PFS for all E&I codes
to take into consideration the efficiencies when multiple services
(those that would be currently reported under multiple CPT codes) are
furnished.
This option would require 2 to 4 years to add new codes and conduct
a short-term pilot study to refine coding and value the 12 new HCPCS
codes (or 36 if they are specific to each therapy discipline). There
would be significant initial practitioner administrative burden to
learn new codes and update billing systems. However, ultimately, with
elimination of the practitioner's reporting of 76 different codes and
many of the associated claims processing edits, the administrative
burden of reporting therapy services to Medicare would be minimized.
This bundled approach to reporting and payment could result in more
appropriate valuation of therapy services that reflects efficiencies
when individually reported services are furnished in the same session.
As a result, it could lead to reduced therapy expenditures, as well as
a reduction in the number of beneficiaries affected by the therapy caps
in a given year.
Comment: The vast majority of commenters concurred that provider
payments should be influenced by underlying beneficiary
characteristics. Most commenters agreed that following research and
development, an episode-based payment alternative would be the most
feasible payment model for outpatient therapy services in the longterm,
and some recommended it be developed in a performance-based model. The
commenters generally supported this option as a foundation to those
goals, but recommended expert therapist input into the process and
further study to determine how such an approach might affect different
therapy types and settings. Several commenters noted that it would be
critical to ensure clear nomenclature, the availability of an
appropriate reporting methodology, and adequate payment for these codes
that reflects the resources used to provide these services.
To assure appropriate payment for needed services, the commenters
agreed that the outcomes resulting from provider interventions must be
incorporated in payment models. The commenters believe that experience
gained in a transparent development process could be carried over into
future payment system reform. Therefore, the majority of commenters who
supported Option (3) also requested that there be a transparent process
of development and testing in which expert therapists from various
settings were included. Many also argued that Option (3) should be
developed only after Option (1) had been implemented and function and
severity data had been collected to inform the development of Option
(3).
Response: We appreciate the support of commenters for Option (3)
and their interest in moving toward long-term goals by implementing
short-term approaches as an incremental step. We agree that the
information presented in the proposed rule was limited regarding Option
(3) and that further study would be necessary before a bundled per-
session payment approach could be implemented. We will consider the
commenters' recommendations to develop an episode-based payment
alternative in the future.
Comment: The concept of moving toward per-session codes that would
be based on the severity of the patient and intensity of therapist
clinical judgment and work involved in the provision of the therapy
service was welcomed by many commenters. Those commenters who
encouraged CMS to use this option to reduce the administrative burden
of counting minutes and eliminate NCCI edits and MUEs anticipated
corresponding improvement in the effective and efficient delivery of
clinical interventions. The commenters urged CMS to ensure compliance
of policies related to Option (3) with other payment policies, such as
the delivery of medically necessary care driven by the development of
an appropriate functional goal-based plan of care.
Response: While a per-session payment methodology could result in
modification of current policies regarding counting treatment time, it
would not necessarily result in deleting claims edits. If we were to
adopt such a methodology, we would assess the current claims processing
edits and determine whether they continued to be appropriate and/or
implement new edits to address potential issues under the revised
payment approach.
Comment: Some commenters suggested a modified definition of
severity. The commenters recommended two separate severity tables of
``severity or complexity,'' one for evaluation and the other for
intervention. For each table separately, severity/complexity of
clinical presentation would be rated as low, moderate, or high. In all
cases, the commenters believe CMS should identify the factors to be
used to determine severity for both evaluations and interventions. The
commenters urged that CMS defer to professional standards of practice
and state law with respect to the provision of services in each
category. Other commenters

[[Page 73292]]

recommended modifiers for complex patients and comprehensive
multidisciplinary rehabilitation settings to facilitate application of
special policies for those circumstances.
Response: The tables presented in the proposed rule were
illustrative of the potential Level II per-session HCPCS codes, and
these codes would require further development prior to implementation.
We appreciate the commenters' suggestions and will consider them as we
weigh this option.
Comment: Some commenters who supported the general premise of
Option (3) and some commenters who opposed it were not optimistic that
per-session payment could be developed in a reliable and valid manner
in the shortterm.
Response: This alternative was developed as a short-term action
that would start the process toward bundled payments for therapy
episodes. The work completed by expert therapist advisors to the STATS
workgroups laid a foundation that could facilitate development of the
initial per-session HCPCS codes, which could reasonably be based on
utilization data that demonstrated which services were historically
billed together most of the time. We have analyzed data regarding
common therapy code combinations. While a per-session payment approach
could have a significant impact on payment for therapy services, we
would not expect that developing and valuing per-session E&I codes
would be a particularly lengthy or complex process. We note that over
the past several years, the CPT Editorial Panel has bundled multiple
services into a single code numerous times in different medical
specialty areas and the AMA RUC has then valued the new comprehensive
service by taking into account the expected efficiencies in the
physician work and/or practice expense.
Comment: Rather than consign the code definition and valuation
processes integral to Option (3) to the CPT Editorial Panel and AMC RUC
processes, which have little transparency, several commenters
recommended that CMS develop Level II HCPCS codes for this purpose and
allow for continued stakeholder input as to their valuation. Some
commenters expressed appreciation for being included in the STATS
process and suggested it as a model for future transparency in
developing payment policies.
Response: We appreciate the confidence stakeholders expressed
regarding our capacity to develop HCPCS codes and values using a
transparent process that includes input from stakeholders. If we were
to move toward per-session payment in the future, we would need to
consider the most appropriate approach to the development and valuation
of new codes to describe those services. In the meantime, we note that
if the CPT Editorial Panel were to develop new codes for comprehensive
therapy services, as they have developed new CY 2011 comprehensive
codes for cardiac catheterization and lower extremity endovascular
revascularization services that bundle services that are commonly
furnished together, we would consider those therapy codes for adoption
under the PFS and would value them if we recognized them for PFS
payment.
Comment: Due to the nature of certain services when assessment and
intervention are inseparable, some commenters asserted that
interventions should not be included in this model but should be
separately identified. The commenters provided the examples of active
wound care management and prosthetic/orthotic management.
Response: The details of therapy E&I codes have not been proposed
or finalized. We appreciate the perspective of the commenters and will
keep it in mind if we were to pursue the creation of per-session
therapy codes in the future.
Comment: While some commenters stated that Option (3) has the
potential to simplify and increase consistency in coding for therapy
services, several commenters who opposed this option and Option (1)
mentioned that providers would learn to ``game the system'' and that
all patients would be documented as severe on initial intake.
Response: We too are concerned about approaches where providers
could learn to game the system. The commenters who criticized this
option generally preferred the edits in Option (2).
Restriction on utilization of certain codes sometimes increases the
risk of billing different codes, billing more of the same codes, or
increasing patient visits, resulting in the same or greater cost to the
Medicare program. The edits described in Option (2) would prevent high
payments for individual beneficiaries, but might have little or no
effect on the payments to providers or suppliers who increase the
number of beneficiaries treated. Generally, we apply a number of
different methods concurrently to reduce risk.
At times, it may be difficult to know whether the clinical judgment
and objective measurements have been accurately reported or documented
in the record and whether the service furnished is appropriately
represented by the billed HCPCS code. Providers focused on billing
inappropriately may also document inappropriately. In the long term, we
hope to incentivize honest and ethical providers and suppliers of
services to furnish effective and efficient, high quality services.
Possible fraudulent activity may be identified by aberrant billing
patterns, and the new codes could facilitate the identification of such
patterns.
Several commenters expanded on the options presented as
alternatives to the therapy caps or recommended options of their own. A
few presented their own analyses of utilization to support their
recommendations.
Comment: Several commenters recommended incorporation of currently
and publicly available validated tools to inform the collection of
patient-specific information and move toward performance-based payment.
A few commenters suggested that the study ``Pay-for-Performance for
Outpatient Physical Therapy and Occupational Therapy'' that Focus On
Therapeutic Outcomes (FOTO) completed in 2006 under Grant 18-
P-93066-/0-01 might be a good template from which to start a process to
replace caps and ultimately develop a value-based purchasing process.
The commenters suggested the FOTO predictive model could be used, after
pilot testing, to develop a reimbursement process where care is based
on need and payment is based on results.
Response: We recognize the importance of demonstrating the
application of a value-based purchasing approach to physical and
occupational therapy services. We posted the FOTO study on the CMS Web
site at: http://www.cms.gov/TherapyServices/downloads/P4PFinalReport06-01-06.pdf.
We are aware that research continues on the functional status
indicator and that other measurement tools are also available in the
public domain. The STATS discussions resulted in some improvements in
the feasibility of matching outcomes data to claims. However, there are
a number of problems that would have to be resolved before any of the
currently available versions of therapy outcomes tools could be
incorporated into payment policy. The FOTO study did not address value-
based purchasing for speech-language pathology services and there
remain questions about applying the FOTO functional status indicator,
or any self-reported measure, to certain cognitively impaired patients
or to the Medicare population without further refinement.

[[Page 73293]]

As we continue to explore various options, we would be interested
in the feasibility of using historical research, existing electronic
input systems, and registry information to provide a conceptual
framework for alternative payment systems.
Comment: Although CMS did not discuss the option of establishing
therapy payments based on episodes in the discussion of short-term
options, many commenters encouraged CMS to pursue that goal. Using data
obtained from the severity/complexity codes described in Option (1),
DOTPA, and other data initiatives, several commenters urged CMS to
undertake research to develop a new episodic prospective payment system
for Part B therapy services. Some commenters described the details of a
plan to base therapy episode payment on groups based on patient
clinical characteristics, considering mean episode costs, adjusting for
high and low outliers or interrupted episodes, setting a default
payment for unmapped episode groups, and also adjusting for local wage
indices and providing an annual market basket payment rate update.
The opportunity for CMS to define sessions and episodes more
clearly and the potential to support the overall goal of payment reform
was eagerly anticipated by several commenters. The commenters applauded
CMS for recognizing the potential opportunity to gather these data on
episodes for payment of therapy services furnished in the institutional
setting.
Episode-based payment was recommended as an alternative to the
proposed therapy MPPR by numerous commenters. The commenters explained
that the fundamental problem with fee-for-service payment is the
incentive to over utilize therapy services in the outpatient setting
and limit institutional providers from using resources flexibly. The
commenters described analysis of a large database of Medicare
beneficiaries as the basis for a methodology for grouping diagnosis
codes to create episodes of care on which therapy payment would be
based. The commenters noted that adjustment would be needed to payments
for complex patients and readmissions. The same commenters supported
episode payments for separate therapy disciplines based on a patient's
medical diagnosis and goals. A critical goal for these commenters was
to identify and account for differences in the conditions and needs of
patients in skilled nursing facilities as opposed to other outpatient
therapy settings.
Response: We did not discuss development of episode-based payments
as an option in the CY 2011 PFS proposed rule because we recognize that
substantially more research would be necessary to define the episodes
and determine what resources would be needed for different groups or
categories of patients before the episodes could be incorporated into a
payment system, particularly one that also addressed quality,
efficiency, and good health outcomes. However, the absence of
discussion in our proposed rule of an episode-based payment methodology
as a short-term therapy cap alternatives option should not be
interpreted as our reluctance to pursue the definition of episodes or
the refinement of the concept of episode-based payments.
Comment: A number of commenters supported testing variables they
believe to be important in making a clinical judgment concerning a
patient's severity, including: general type of patient (orthopedic,
neurological, medical, etc.); impairment (body part treated); intake
functional status; patient age; symptom acuity; surgical history;
payer; gender; level of fear-avoidance of physical activities; and
number of co-morbid conditions. Other commenters urged inclusion of
clinical judgment of severity based on medical condition, physical
impairments resulting from these conditions, patient function, and
ability to participate in activities of daily living.
Response: As we progress in the analysis of payment alternatives to
the therapy caps, we appreciate the information on variables believed
to be critical by stakeholders who have conducted related research and/
or furnished therapy services to a wide array of patients in different
clinical settings. We welcome their expert contributions and
collaboration with us on this important issue.
In conclusion, we emphasize that we continue to be committed to
developing alternatives to the therapy caps that would provide
appropriate payment for medically necessary and effective therapy
services furnished to Medicare beneficiaries based on patient needs,
rather than the current therapy caps which establish financial
limitations on Medicare payment for therapy services in some outpatient
settings regardless of medical necessity. The Congress has repeatedly
intervened to allow exceptions to these caps for certain time periods,
and the current exceptions are automatically processed based on a
practitioner's attestation that medical necessity is documented in the
chart for an individual patient. We believe that, ultimately, payment
for therapy services should incentivize the most effective and
efficient care, consistent with Medicare's focus on value in its
purchasing.
The STATS contractor has worked closely with a broad variety of
clinicians, administrators, scientists, researchers, and other
contractors to develop the three alternatives presented in this
discussion in CY 2011 rulemaking for the PFS. We are grateful for all
public comments on the proposed rule from interested stakeholders,
including individual therapists from both facility and nonfacility
outpatient settings paid under Medicare Part B.
We are committed to finding alternatives to the current therapy cap
limitations on expenditures for outpatient therapy services that will
ensure that beneficiaries continue to receive those medically necessary
therapy services that maximize their health outcomes. We continue to
dedicate our resources to identifying alternatives that would encourage
the most efficient and cost-effective treatments. We believe motivated
therapists, with attention to the most cost-effective practices, can
incorporate practice efficiencies that benefit patients by achieving
the best possible results at the lowest cost. Our STATS and DOTPA
projects, which are currently engaged in data collection and analysis
to inform short-term and long-term alternatives to the therapy caps,
respectively, lay the foundation for future payment alternatives for
outpatient therapy services. We are optimistic that the STATS project
has identified short-term, feasible alternatives that may be tested in
the future. The DOTPA project will create a tool and test its use to
collect patient condition information that could then be applied to
identify patient need for therapy services. Together, these projects
may provide the basis for a long-term plan to reshape Medicare's
payment policy for outpatient therapy services to align with the value-
based purchasing principles that are now guiding principles of the
Medicare program.

B. Diabetes Self-Management Training (DSMT) Services (HCPCS Codes G0108
and G0109)

1. Background
Section 1861(s)(2)(S) of the Act provides for coverage of DSMT in
outpatient settings without limiting this coverage to hospital
outpatient departments. DSMT services consist of educational and
training services furnished to an individual with diabetes by a
certified provider in an outpatient setting.
Section 1861(qq)(2)(A) of the Act stipulates that training must be

[[Page 73294]]

furnished by a ``certified provider'' which is a physician or other
individual or entity that also provides other items or services for
which payment may be made under Medicare. This program is intended to
educate beneficiaries in the successful self-management of diabetes.
The program includes instructions in self-monitoring of blood glucose;
education about diet and exercise; an insulin treatment plan developed
specifically for the patient who is insulin-dependent; and motivation
for patients to use the skills for self-management. DSMT services are
reported under HCPCS codes G0108 (Diabetes outpatient self-management
training services, individual, per 30 minutes) and G0109 (Diabetes
outpatient self-management training services, group session (2 or
more), per 30 minutes).
2. Payment for DSMT Services
In accordance with section 1848(j)(3), Medicare payment for
outpatient DSMT services is made under the PFS as specified in Sec.
414.1 through Sec. 414.48. When we created HCPCS codes G0108 and
G0109, the only direct costs included in the PE were registered nurse
labor. Section 410.144(a)(4)(a) states that the DSMT team includes at
least a registered dietitian and a certified diabetes educator. We
initially did not establish work RVUs for DSMT services because we
believed training would typically be performed by individuals other
than a physician, such as a registered nurse (65 FR 83130). However,
since that time, we have received requests from a number of
stakeholders, including the American Association of Clinical
Endocrinologists (AACE), the American Association of Diabetes Educators
(AADE), and the Juvenile Diabetes Research Foundation, to include
physician work in valuing DSMT services that is similar to the
physician work that has been included in medical nutrition therapy
(MNT) services since CY 2007 and kidney disease education (KDE)
services since CY 2010. The stakeholders argued that because physicians
coordinate DSMT programs, provide patient instruction, and communicate
with referring physicians, physician work should be included in the
RVUs for DSMT services. The stakeholders also requested that we
reconsider the direct PE inputs for DMST services and include clinical
labor for diabetes educators at a higher hourly rate instead of
registered nurse labor. In addition, they stated that the supplies and
equipment in the PE for DSMT services should be the same as for KDE
services, with additional direct PE inputs for a diabetes educator
curriculum, data tracking software, and DSMT program accreditation.
For CY 2011, we proposed the following:
To assign physician work RVUs to DSMT services that are
comparable, as adjusted for the service times of the HCPCS codes, to
the work RVUs for MNT services. The rationale for the proposed work
RVUs for the DSMT HCPCS G-codes was based on the similarity of DSMT
services to MNT services in the individual (CPT code 97803) and group
(CPT code 97804) setting.
That HCPCS G0108 for 30 minutes of individual DSMT
services would be crosswalked to CPT code 97803 (Medical nutrition
therapy; re-assessment and intervention, individual, face-to-face with
the patient, each 15 minutes) for purposes of assigning work RVUs, with
the physician work RVUs for CPT code 97803 multiplied by two to account
for the greater time associated with HCPCS code G0108 (that is, 30
minutes).
That HCPCS G0109 for 30 minutes of group DSMT services
would be crosswalked to CPT code 97804 (Medical nutrition therapy;
group (2 or more individuals(s)), each 30 minutes) for purposes of
assigning work RVUs.
To modify the PE inputs for DSMT services to reflect the
current equipment and supplies for the KDE HCPCS G-codes implemented in
the CY 2010 PFS final rule with comment period (74 FR 61901) (that is,
HCPCS codes G0420 (Face-to-face educational services related to the
care of chronic kidney disease; individual, per session, per one hour)
and G0421 (Face-to-face educational services related to the care of
chronic kidney disease; group, per session, per one hour)), based on
the similarity in the equipment and supplies necessary for DSMT and KDE
services. We made adjustments to some of the equipment times for the 30
minute DSMT individual and group services as compared to the one hour
individual and group KDE services.
To include a diabetes educator curriculum and data
tracking software in the PE inputs for DSMT services, while noting that
we did not include the DSMT program accreditation costs because it is
our general practice not to include these costs in the PE inputs.
To utilize the same approach for clinical labor as we
adopted for MNT services when we provided physician work RVUs for those
services in CY 2007 (71 FR 69645), rather than changing the current
labor type for DSMT services. Specifically, we removed all of the
clinical labor from the group DSMT code and most of the clinical labor
from the individual DSMT code, given that we proposed work RVUs for
both DSMT HCPCS codes for CY 2011.
In the CY 2011 PFS proposed rule (75 FR 40100), we stated our
belief that these proposals would value DSMT services more consistently
with other similar services that are paid under the PFS. As a result of
our proposed CY 2011 changes, the proposed work RVUs for HCPCS codes
G0108 and G0109 were 0.90 and 0.25, respectively. As described above,
we also proposed to modify the direct PE inputs for these codes for CY
2011.
Comment: Numerous commenters specifically supported the
establishment of work RVUs for the DSMT services based on the work RVUs
of the similar MNT services, CPT codes 97803 for 15 minutes of
individual MNT services and 97804 for 30 minutes of group MNT services.
Some commenters explained that addition of work RVUs would lead to
higher payment rates for DSMT services, resulting in a significant
positive impact on diabetes education practices and increased patient
access to care for DSMT services. Several commenters suggested that
this change would appropriately recognize the active role many
physicians contribute to ensuring that their patients have access to
DSMT services and providing care coordination and communication with
the multidisciplinary DSMT team members. One commenter concurred with
the proposal to update the direct PE inputs for the DSMT HCPCS codes
based on those assigned to the HCPCS codes for KDE services.
Response: We appreciate the commenters' support for our proposal to
establish work RVUs and to update the direct PE inputs for the DSMT
services.
In conducting our review of the public comments on this issue for
this final rule with comment period, we examined newly available PFS
claims data for same day billings from one provider for a single
Medicare beneficiary. In response to that analysis and in accordance
with our PFS methodology which values services as delivered to the
typical patient, we note that we have made minor adjustments to some of
the direct PE inputs for supplies and equipment times for both HCPCS G-
codes for DSMT services, G0108 and G0109, under our final CY 2011
policy. We made these refinements after a review of our PFS utilization
data indicated that 2 units of HCPCS code G0108 (a total of 60 minutes)
were typically billed together on the same day for the same patient,
instead of the one unit of HCPCS code G0108 (30

[[Page 73295]]

minutes) which was used as the assumption for the typical session at
the time of our CY 2011 proposal. As a result, we have assigned half of
the amount of the direct inputs for supplies and equipment time in
HCPCS code G0420 (60 minutes individual KDE services) to HCPCS code
G0108 (30 minutes individual DSMT services). Regarding the direct PE
inputs for HCPCS code G0109, we continue to believe that there is a
similarity among the group and individual DSMT and KDE services and the
education practices when these services are delivered, as reflected in
their PFS utilization patterns. For this reason, we have made minor
modifications to the PE inputs for HCPCS code G0109 (30 minutes of
group DSMT services) to reflect half of each input for HCPCS code G0421
(60 minutes of group KDE services) that parallel the modifications we
made for the individual DSMT HCPCS code described previously. We
further note that these refinements to the direct PE inputs for DSMT
services are based on the final adjustments that were made to the
direct PE inputs for HCPCS codes G0420 and G0421 for KDE services,
discussed in section V. B.2.e. of this final rule with comment period,
because our approach to establishing the direct PE inputs for the DMST
HCPCS G-codes is based on the inputs for KDE services.
As a result, the modifications we made to the supplies and
equipment inputs for the DSMT HCPCS G-codes, G0108 and G0109, equal
half of the same supply and equipment times in the one hour HCPCS G-
codes for KDE services, G0420 and G0421.
In addition, because the $200 price of the diabetes educator
curriculum does not meet the $500 floor we established for inclusion in
the equipment database, we have bundled the diabetes educator
curriculum price with the $500 data tracking software one because the
patient's curriculum information is typically recorded in the tracking
software. The equipment descriptor for the data tracking software was
modified to read: Diabetes education data tracking software, includes
curriculum. Accordingly, we changed the price input from $500 to $700
and assigned the bundled equipment a total of 4 minutes. In this way,
we are including the cost of the curriculum in the direct PE inputs for
DSMT services as we proposed for CY 2011, while remaining consistent
with the established $500 floor on inclusion of equipment in the PE
database.
After consideration of the public comments we received, we are
finalizing the proposed work RVUs and direct PE input for DSMT
services, with modification to make the PE adjustments described
previously. The final CY 2011 direct PE database that lists the direct
PE inputs is available on the CMS Web site under the downloads for the
CY 2011 PFS final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. The final CY 2011 RVUs for
HCPCS codes G0108 and G0109 are displayed in Addendum B to this final
rule with comment period.

C. End-Stage Renal Disease Related Services for Home Dialysis (CPT
codes 90963, 90964, 90965, and 90966)

1. End-Stage Renal Disease Home Dialysis Monthly Capitation Payment
Services (CPT codes 90963, 90964, 90965, and 90966)
In the CY 2004 PFS final rule with comment period (68 FR 63216), we
established new Level II HCPCS G-codes for end-stage renal disease
(ESRD) monthly capitation payment (MCP) services. For center-based
patients, payment for the G-codes varied based on the age of the
beneficiary and the number of face-to-face visits furnished each month
(for example, 1 visit, 2-3 visits and 4 or more visits). Under the MCP
methodology, the lowest payment applied when a physician provided one
visit per month; a higher payment was provided for two to three visits
per month. To receive the highest payment, a physician would have to
provide at least four ESRD-related visits per month. However, payment
for home dialysis MCP services only varied by the age of beneficiary.
Although we did not initially specify a frequency of required visits
for home dialysis MCP services, we stated that we ``expect physicians
to provide clinically appropriate care to manage the home dialysis
patient'' (68 FR 63219).
Effective January 1, 2009, the CPT Editorial Panel created new CPT
codes to replace the G-codes for monthly ESRD-related services, and we
accepted the new codes for use under the PFS in CY 2009. The CPT codes
for monthly ESRD-related services for home dialysis patients include
the following, as displayed in Table 32 of the CY 2011 PFS proposed
rule (75 FR 40101) and reprinted as Table 48 below: 90963, 90964,
90965, and 90966. In addition, the clinical vignettes used for the
valuation of CPT codes 90963, 90964, 90965, and 90966 include scheduled
(and unscheduled) examinations of the ESRD patient.
Given that we pay for a physician (or nonphysician practitioner
(NPP)) to evaluate the ESRD patient over the course of an entire month
under the MCP, we believe that it is clinically appropriate for the
physician (or NPP) to have at least one in-person, face-to-face
encounter with the patient per month. As such, for CY 2011 we proposed
to require the MCP physician (or NPP) to furnish at least one in-person
patient visit per month for home dialysis MCP services (as described by
CPT codes 90963 through 90966). The proposed requirement would be
effective for home dialysis MCP services beginning January 1, 2011. As
stated in the CY 2011 PFS proposed rule (75 FR 40100), we believe this
requirement reflects appropriate, high quality medical care for ESRD
patients being dialyzed at home and generally would be consistent with
the current standards of medical practice.
Comment: Many commenters stated that a monthly visit embodies the
standard of care for home dialysis patients. However, many of the same
commenters also stated that it may not always be feasible to furnish a
face-to-face visit every month for home dialysis patients due to
extenuating circumstances. A number of commenters explained that, in
contrast to patients who dialyze in a dialysis center, home dialysis
patients would need to travel to the doctor's office (or the physician
would need to visit the patient's home) which would be an undue burden
on both the physician and the patient. To that end, several commenters
urged CMS to provide flexibility in cases where a patient does not show
up for their scheduled appointment and for those that cannot travel due
to significant geographic distance between the patient and the
nephrologist. For example, some specialty societies stated that
pediatric home dialysis patients may experience exceptional
circumstances due to the scarcity of pediatric nephrologists and remote
geographic locations, making the monthly face-to-face visit requirement
harder to fulfill. In these circumstances, one commenter requested that
CMS consider allowing the MCP physician to furnish at least 1 visit
every 3 months and allowing the other monthly visits to be furnished as
a telehealth service. Additionally, several commenters explained that
the monthly management of a home dialysis patient involves many tasks
(in addition to face-to-face visits) including: Reviewing lab tests,
treatment data and the dialysis prescription; monitoring the patient's
vascular access; and overseeing quality improvement activities (as well
as incurring the practice expense

[[Page 73296]]

associated with managing the patient's care). The commenters stated
that the MCP physician should not be ``penalized'' if the patient
chooses not to attend the monthly visit. Moreover, many of the
commenters who agreed that monthly visits are optimal care did not
support a monthly visit requirement for the home dialysis MCP service.
The commenters stated that the frequency of face-to-face visits should
remain at the discretion of the nephrologist and patient. Several of
the commenters who did not support a policy change also stated that
requiring a monthly visit could create disincentives for providing
beneficiaries with home dialysis therapy in circumstances where it may
be difficult for the MCP physician to furnish a visit every month. The
commenters explained that nephrologists may not want to encourage home
dialysis therapy if they will not get paid as a result of a patient
``opting out'' of a scheduled visit.
Response: We continue to believe that furnishing monthly face-to-
face visits is an important component of high quality medical care for
ESRD patients being dialyzed at home and generally would be consistent
with the current standards of medical practice. However, we also
acknowledge that extenuating circumstances may arise that make it
difficult for the MCP physician (or NPP) to furnish a visit to a home
dialysis patient every month. Therefore, we will allow Medicare
contractors the discretion to waive the requirement for a monthly face-
to- face visit for the home dialysis MCP service on a case-by-case
basis, for example, when the MCP physician's (or NPP's) notes indicate
that the MCP physician (or NPP) actively and adequately managed the
care of the home dialysis patient throughout the month. Additionally,
as we explained in the CY 2004 PFS final rule with comment period (68
FR 63219 through 63220), we also believe that the use of other
practitioners working with the MCP physician (or NPP) to furnish the
required monthly visit for the home dialysis MCP service could help
alleviate scheduling issues and problems related to geographic
distance.
With regard to the comment on furnishing the proposed required
visit for the home dialysis MCP as a telehealth service, we note that
any interested parties may submit requests to add services to the list
of Medicare telehealth services. Requests submitted before the end of
CY 2010 will be considered for the CY 2012 PFS proposed rule.
Requestors should be advised that each request to add a service to the
list of Medicare telehealth services must include any supporting
documentation the requestor wishes us to consider as we review the
request. For more information on submitting a request for an addition
to the list of Medicare telehealth services, including where to
directly mail these requests, we refer readers to section IV.B. of this
final rule with comment period and the CMS Web site at: http://www.cms.hhs.gov/telehealth.
Comment: Several commenters stated that the conditions for coverage
for dialysis facilities require a monthly interaction between a
clinician representing the facility and the home dialysis patient. The
commenters believe that the conditions for coverage for dialysis
facilities permit flexibility in the monthly visit requirement if the
patient chooses to opt out of the monthly visit and requested that CMS
align the proposed visit requirement for the home dialysis MCP service
with the ``flexibility'' permitted under the conditions for coverage
for dialysis facilities.
Response: With regard to conditions for coverage for dialysis
facilities, Sec. 494.90(b)(4) of the regulations specifies that the
dialysis facility must ensure that all dialysis patients are seen by a
physician, nurse practitioner, clinical nurse specialist, or
physician's assistant providing ESRD care at least monthly. Section
494.100 requires ``a dialysis facility that is certified to provide
service to home patients to ensure that home dialysis services are at
least equivalent to those provided to in-facility patients and meet all
applicable conditions of this part.'' In addition, the interpretive
guidance for part 494 entitled ``Conditions for Coverage for ESRD
Facilities'' specifies that a monthly visit is required for each home
patient by a physician, an advanced practice registered nurse, or a
physician assistant. The visit may be conducted in the dialysis
facility, at the physician's office, or in the patient's home. The
guidelines state that ``any patient may choose not to be seen by a
physician every month'' but also specify that if there is a pattern of
a patient consistently missing physician and or practitioner visits,
the lack of medical oversight should be addressed with the patient in
the plan of care.
The requirement for at least one monthly visit with a clinician
associated with the dialysis facility is a condition for coverage for
the dialysis facility for purposes of participating in the Medicare
program and not a direct factor in determining the payment amount for
the dialysis facility. In other words, the clinician visit is not a
component of the facility's composite rate. However, as mentioned in
the background section, the clinical vignettes used for the valuation
of the home dialysis MCP service under the PFS include scheduled (and
unscheduled) examinations of the ESRD patient. Given that physician or
NPP visits are a factor in determining the PFS payment amount for the
home MCP service that is furnished to the typical Medicare beneficiary,
we do not believe that the monthly visit requirement for the home
dialysis MCP service is analogous to the visit requirement under the
conditions for coverage for dialysis facilities that has no
implications for setting payment rates under the PFS. Therefore, we do
not agree that the visit requirement for the home dialysis MCP service
necessarily should be ``aligned'' with the conditions for coverage for
dialysis facilities.
Comment: One commenter suggested that CMS consider structuring the
home dialysis MCP similar to the center-based MCP. Under this approach,
the commenter suggested that a higher payment amount could be made for
home dialysis MCP services with at least one in person, face-to-face
visit per month.
Response: We will consider the commenter's suggestion as we
continue to develop and refine Medicare payment policy for physicians
and practitioners managing patients on dialysis. In the event we decide
to make changes in the payment amount(s) for the home dialysis MCP
services, we would do so in a future proposed rule where the public
would have the opportunity to provide comments as afforded by the
rulemaking process.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal, with modification. We will require the
MCP physician (or NPP) to furnish at least one in-person patient visit
per month for home dialysis MCP services (as described by CPT codes
90963 through 90966). However, Medicare contractors will have the
discretion to waive the monthly visit requirement for the home dialysis
MCP service on a case-by-case basis.
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 Through
90970)
In CY 2008, the AMA RUC submitted recommendations for valuing the
new CY 2009 CPT codes displayed in Table 48 that replaced the MCP HCPCS
G-codes for monthly ESRD-related services. We accepted these codes for
use under the PFS.

[[Page 73297]]

Table 48--MCP Codes Recognized Under the PFS
----------------------------------------------------------------------------------------------------------------
MCP Code Long descriptor
----------------------------------------------------------------------------------------------------------------
90951.................................. End-stage renal disease (ESRD) related services monthly, for patients
younger than 2 years of age to include monitoring for the adequacy of
nutrition, assessment of growth and development, and counseling of
parents; with 4 or more face-to-face physician visits per month.
90952.................................. End-stage renal disease (ESRD) related services monthly, for patients
younger than 2 years of age to include monitoring for the adequacy of
nutrition, assessment of growth and development, and counseling of
parents; with 2-3 face-to-face physician visits per month.
90953.................................. End-stage renal disease (ESRD) related services monthly, for patients
younger than 2 years of age to include monitoring for the adequacy of
nutrition, assessment of growth and development, and counseling of
parents; with 1 face-to-face physician visit per month.
90954.................................. End-stage renal disease (ESRD) related services monthly, for patients 2-
11 years of age to include monitoring for the adequacy of nutrition,
assessment of growth and development, and counseling of parents; with
4 or more face-to-face physician visits per month.
90955.................................. End-stage renal disease (ESRD) related services monthly, for patients 2-
11 years of age to include monitoring for the adequacy of nutrition,
assessment of growth and development, and counseling of parents; with
2-3 face-to-face physician visits per month.
90956.................................. End-stage renal disease (ESRD) related services monthly, for patients 2-
11 years of age to include monitoring for the adequacy of nutrition,
assessment of growth and development, and counseling of parents; with
1 face-to-face physician visit per month.
90957.................................. End-stage renal disease (ESRD) related services monthly, for patients
12-19 years of age to include monitoring for the adequacy of
nutrition, assessment of growth and development, and counseling of
parents; with 4 or more face-to-face physician visits per month.
90958.................................. End-stage renal disease (ESRD) related services monthly, for patients
12-19 years of age to include monitoring for the adequacy of
nutrition, assessment of growth and development, and counseling of
parents; with 2-3 face-to-face physician visits per month.
90959.................................. End-stage renal disease (ESRD) related services monthly, for patients
12-19 years of age to include monitoring for the adequacy of
nutrition, assessment of growth and development, and counseling of
parents; with 1 face-to-face physician visit per month.
90960.................................. End-stage renal disease (ESRD) related services monthly, for patients
20 years of age and older; with 4 or more face-to-face physician
visits per month.
90961.................................. End-stage renal disease (ESRD) related services monthly, for patients
20 years of age and older; with 2-3 face-to-face physician visits per
month.
90962.................................. End-stage renal disease (ESRD) related services monthly, for patients
20 years of age and older; with 1 face-to-face physician visit per
month.
90963.................................. End-stage renal disease (ESRD) related services for home dialysis per
full month, for patients younger than 2 years of age to include
monitoring for the adequacy of nutrition, assessment of growth and
development, and counseling of parents.
90964.................................. End-stage renal disease (ESRD) related services for home dialysis per
full month, for patients 2-11 years of age to include monitoring for
the adequacy of nutrition, assessment of growth and development, and
counseling of parents.
90965.................................. End-stage renal disease (ESRD) related services for home dialysis per
full month, for patients 12-19 years of age to include monitoring for
the adequacy of nutrition, assessment of growth and development, and
counseling of parents.
90966.................................. End-stage renal disease (ESRD) related services for home dialysis per
full month, for patients 20 years of age and older.
----------------------------------------------------------------------------------------------------------------

There are four additional CPT codes for ESRD-related services that
are reported on a per-day basis. These daily CPT codes are: 90967 (End-
stage renal disease (ESRD) related services for dialysis less than a
full month of service, per day; for patients younger than 2 years of
age); 90968 (End-stage renal disease (ESRD) related services for
dialysis less than a full month of service, per day; for patients 2-11
years of age); 90969 (End-stage renal disease (ESRD) related services
for dialysis less than a full month of service, per day; for patients
12-19 years of age); and 90970 (End-stage renal disease (ESRD) related
services for dialysis less than a full month of service, per day; for
patients 20 years of age and older).
For the MCP codes displayed in Table 32 of the CY 2011 PFS proposed
rule, the AMA RUC initially recommended 36 minutes of clinical labor
time for the pre-service period. They also recommended an additional 6
minutes in the post-period for CPT codes 90960, 90961, 90962, and
90966. For the four codes describing daily services (CPT codes 90967
through 90970), the AMA RUC recommended including 1.2 minutes of
clinical labor per day, which is the prorated amount of pre-service
clinical labor included in the monthly codes. The AMA RUC also
recommended that CPT codes 90952 and 90953 be contractor-priced.
In the CY 2009 PFS final rule with comment period (73 FR 69898), we
asked the AMA RUC to reconsider their recommended PE inputs in the
interest of making certain that they accurately reflected the typical
direct PE resources required for these services. In addition, we asked
the AMA RUC to review the physician times for CPT codes 90960 and 90961
that are used in the calculation of the PE RVUs. We accepted the work
values for the new CPT codes for ESRD-related services that were
recommended by the AMA RUC.
Since CY 2009, we have continued to calculate the PE RVUs for the
entire series of MCP codes displayed in Table 32 of the CY 2011 PFS
proposed rule (75 FR 40101) by using the direct PE inputs from the
predecessor HCPCS G-codes, except for CPT codes 90952 and 90953 which
are contractor-priced. We have also continued to use the physician time
associated with the predecessor HCPCS G-codes for CPT codes 90960 and
90961 for purposes of calculating the PE RVUs.
In CY 2009, the AMA RUC submitted new recommendations for CPT codes
90951 and 90954 through 90970. For each of the MCP codes (CPT code
90951 and CPT codes 90954 through 90966), the AMA RUC recommended an
increased pre-service clinical staff time of 60 minutes. For each of
the daily dialysis service codes (CPT codes 90967 through 90970), the
AMA RUC

[[Page 73298]]

recommended an increased clinical labor time of two minutes, which is
the prorated amount of clinical labor included in the monthly codes.
The AMA RUC also recommended an additional 38 minutes of physician time
for CPT codes 90960 and 90961. This resulted in a total physician time
of 128 minutes and 113 minutes, respectively, for these codes. The AMA
RUC continued to recommend that CPT codes 90952 and 90953 be
contractor-priced.
For CY 2011, we proposed to accept these AMA RUC recommendations as
more accurate reflections of the typical direct PE resources required
for these services. Therefore, we proposed to develop the PE RVUs for
CPT code 90951 and CPT codes 90954 through 90970 using the direct PE
inputs as recommended by the AMA RUC and reflected in the proposed CY
2011 PE database, which is available on the CMS Web site under the
supporting data files for the CY 2011 PFS proposed rule at: http://www.cms.gov/PhysicianFeeSched/. We also proposed to use the AMA RUC-
recommended physician times for CPT codes 90960 and 90961. Consistent
with the AMA RUC's recommendations, we proposed to continue to
contractor-price CPT codes 90952 and 90953.
We did not receive public comment on our proposal to accept these
AMA RUC recommendations as more accurate reflections of the typical
direct PE resources required for these services. Therefore, we are
finalizing our CY 2011 proposal to develop the PE RVUs for CPT code
90951 and CPT codes 90954 through 90970 using the direct PE inputs as
recommended by the AMA RUC and reflected in the CY 2011 direct PE
database, which is available on the CMS Web site under the supporting
data files for the CY 2011 PFS final rule with comment period at:
http://www.cms.gov/PhysicianFeeSched/. We will also use the AMA RUC-
recommended physician times for CPT codes 90960 and 90961. Consistent
with the AMA RUC's recommendations, we will continue to contractor-
price CPT codes 90952 and 90953.

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

When a portable x-ray is furnished to a single patient, as many as
four component HCPCS codes may be billed and paid for the service,
including the portable x-ray transportation (HCPCS code R0070
(Transportation of portable x-ray equipment and personnel to home or
nursing home, per trip to facility or location, one patient seen)); the
portable x-ray set-up (HCPCS code Q0092 (Set-up of portable x-ray
equipment)); and the professional and technical components of the x-ray
service itself (CPT 70000 series). Currently, the direct PE database
contains x-ray equipment in both the radiology codes in the 70000
series of CPT and HCPCS code Q0092, the code for the set-up of a
portable x-ray. In the technical component of the x-ray service is the
direct PE input of a radiology room which contains x-ray equipment for
the various radiology codes in the 70000 series of CPT. In addition,
portable x-ray equipment is included as a direct PE input for HCPCS
code Q0092. Thus, x-ray equipment currently is recognized within the
direct PE values for two of the HCPCS codes that would be reported for
the portable x-ray service, resulting in an overvaluation of the
comprehensive portable x-ray service.
Therefore, for CY 2011 we proposed to remove portable x-ray
equipment as a direct PE input for HCPCS code Q0092, in order to pay
more appropriately for the x-ray equipment used to furnish a portable
x-ray service. We believe the resulting payment for the comprehensive
portable x-ray service would more appropriately reflect the resources
used to furnish portable x-ray services by providing payment for the x-
ray equipment solely through payment for the technical component of the
x-ray service that is furnished.
Comment: Several commenters opposed the removal of portable x-ray
equipment as a direct PE input for HCPCS code Q0092. The commenters
believe the elimination of the equipment from HCPCS code Q0092 is
inconsistent with longstanding CMS payment policy recognizing the
unique and additional costs incurred by portable x-ray suppliers in
furnishing services that involve special equipment requiring extra
assembly and disassembly time. In addition, the commenters believe that
the proposed equipment elimination conflicts with the statutory mandate
of section 1848(c) of the Act that CMS calculate the PFS RVUs based on
the actual resources used in furnishing a service because equipment is
a legitimate direct PE component of the set-up component service (HCPCS
code Q0092).
Response: We agree that x-ray equipment is used to furnish a
portable x-ray service and the equipment set-up is reported with HCPCS
code Q0092. However, because the portable x-ray set-up service would
always be reported along with the technical component of the x-ray
service (CPT 70000 series) that already includes x-ray equipment as a
direct PE input, to include x-ray equipment again in the PE of the set-
up code would clearly be duplicative. Only one item of equipment, that
is, a single x-ray machine, is used in furnishing the portable x-ray
service. We are, therefore, eliminating the portable x-ray equipment
from HCPCS code Q0092 and, instead, recognizing the cost of such
equipment in the direct PE for the technical component of the x-ray
service.
Comment: According to several commenters, because CMS has not
undertaken a review of all combinations of services paid under the PFS
that together might comprise a ``comprehensive service'' to identify
potentially duplicative direct PE inputs when the services are
furnished together, CMS should refrain from applying the proposed
policy to suppliers of portable x-ray services.
Response: While it would require an extensive analysis to review
all combinations of PFS services that may be furnished together and
identify potentially duplicative PE inputs, the PFS has several
longstanding policies that were adopted to provide appropriate payment
when certain services are furnished together. For example, existing
multiple procedure payment reduction policies reduce payment for the
second and subsequent surgical procedures or technical components of
imaging services when furnished to the same patient by the same
physician on the same day, based partly on the presence of efficiencies
in the PE under such circumstances. Furthermore, as discussed in
section II.C.4. of this final rule with comment period, we are adopting
a new multiple procedure payment reduction policy for CY 2011 for
therapy services because of the duplication in the PE when therapy
services are furnished together. Finally, we note that for those CPT
codes that are designated as add-on codes to primary services, we
ensure that the direct PE inputs do not duplicate inputs in the primary
services. Given our ongoing efforts to more appropriately value
services furnished together, we believe that HCPCS code Q0092
essentially functions as an ``add-on'' code to the primary service that
it generally accompanies, which is the technical component of an x-ray
service. Therefore, we believe it is fully consistent with our ongoing
efforts to recognize efficiencies through payment policy when multiple
services are furnished together to remove the duplicative x-ray
equipment from the direct PE inputs for HCPCS code Q0092.
Comment: A few commenters believe that elimination of x-ray
equipment in HCPCS code Q0092 would have a negative impact on the
financial status

[[Page 73299]]

of portable x-ray suppliers who are typically small business owners.
According to the commenters, CMS should heed the statutory mandates of
the Regulatory Flexibility Act (RFA) which require mitigation of such
adverse effects.
Response: We note that the RFA requires only that we analyze
regulatory options for small businesses that include a justification
for the reason action is being taken, the kinds and number of small
entities the rule affects, and an explanation of any meaningful options
that achieve the objectives with less significant adverse economic
impact on the small entities. The CY 2011 PFS proposed rule included a
regulatory impact analysis (75 FR 40230 through 40245), as does section
XI.A. of this final rule with comment period. As a specialty, the
aggregate impact on portable x-ray suppliers from the PFS changes
proposed for CY 2011 was an increase of 8 percent in the proposed rule
(75 FR 40232), and it is an increase of 6 percent for CY 2011 as
displayed in Table 101 of this final rule with comment period.
Therefore, the combined effect of all final PFS policies for CY 2011
will not adversely impact portable x-ray suppliers.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to remove portable x-ray equipment as a
direct PE input for HCPCS code Q0092.

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

In the CY 2010 PFS proposed rule (74 FR 33614), we proposed to
create new HCPCS G-code G0424 (Pulmonary rehabilitation, including
aerobic exercise (includes monitoring), per session, per day) to
describe the services of a pulmonary rehabilitation (PR) program as
specified in section 144(a) of the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA). Using CPT code 93797 (Cardiac rehab
without telemetry) as a reference code, we proposed to assign 0.18 work
RVUs and 0.01 malpractice RVUs to G0424. To establish PE RVUs, we
reviewed the PE inputs of similar services, particularly those of the
respiratory therapy HCPCS codes G0237 (Therapeutic procedures to
increase strength or endurance or respiratory muscles, face to face,
one on one, each 15 minutes (includes monitoring)) and G0238
(Therapeutic procedures to improve respiratory function, other than
described by G0237, one on one, face to face, per 15 minutes (includes
monitoring)), as well as the cardiac rehabilitation codes, CPT codes
93797 and 93798 (Physician services for outpatient cardiac
rehabilitation; with continuous ECG monitoring (per session)). In the
CY 2010 PFS final rule with comment period (74 FR 61886), we finalized
our proposal with modifications to the code descriptor and PE inputs,
as recommended by some commenters.
Based on commenters' recommendations from the CY 2010 PFS final
rule with comment period and further information furnished by
stakeholders, for CY 2011 we proposed to increase the work RVUs for
HCPCS code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs
for cardiac rehabilitation with monitoring (CPT code 93798) in view of
the monitoring required for HCPCS code G0424.
We also proposed to increase the clinical labor time for the
respiratory therapist from 15 minutes to 30 minutes and to crosswalk
the PE equipment inputs for HCPCS code G0424 to those for respiratory
treatment services (HCPCS code G0238), which include a 1-channel ECG
and a pulse oximeter. We retained the treadmill currently assigned to
HCPCS code G0424 and adjusted the equipment time to 45 minutes. While
several public commenters recommended this equipment, these commenters
also requested a full 60 minutes of respiratory therapist time be
included in the PE for HCPCS code G0424, comparable to the 15 minutes
of respiratory therapist time included in the one-on-one codes for 15
minutes of respiratory treatment services (HCPCS codes G0237 and
G0238). However, because pulmonary rehabilitation services reported
under HCPCS code G0424 can be furnished either individually or in
groups, we believe that 30 minutes of respiratory therapist time would
be more appropriate for valuing the typical pulmonary rehabilitation
service.
Comment: Many commenters applauded CMS for its proposal to increase
the work RVUs for HCPCS code G0424 to 0.28. While the commenters
supported the increase in work RVUs in the short term, they believe
that an accurate, independent assessment of the work value associated
with physician's office-based pulmonary rehabilitation is the only
reasonable way to determine actual physician work. The commenters
stated that continuing to rely on work values related to cardiac
rehabilitation is flawed, noting that the clinical characteristics of
the cardiac rehabilitation patient are different from the pulmonary
rehabilitation patient. Due to the expected frequency and duration of
acute events, the commenters explained that the pulmonary
rehabilitation patient would require greater physician involvement.
Response: Until we gain more data and experience on the use of this
code to report pulmonary rehabilitation services furnished to Medicare
beneficiaries under the new comprehensive benefit, we believe using the
work RVUs for cardiac rehabilitation with monitoring (CPT code 93798)
as a crosswalk is appropriate for this service. We further note that
the crosswalk methodology is commonly used by the AMA RUC in
recommending work RVUs to us for new or revised codes.
Comment: A number of commenters generally supported the increase in
the clinical labor time for a respiratory therapist from 15 minutes to
30 minutes. While the commenters generally agreed with CMS' reasoning
for not increasing the respiratory therapist time to 60 minutes, the
commenters noted that in the physician's office setting, pulmonary
therapy items and services are routinely provided one-on-one, face-to-
face, requiring 60 minutes of individualized therapy services by a
respiratory therapist. Some commenters believe that the proposal to
increase the respiratory therapist time to only 30 minutes would place
physicians at an economic disadvantage in the provision of pulmonary
rehabilitation items and services when furnished in an office setting
due to the limited amount of office space available to treat more than
one patient in the same time period. One commenter suggested that the
respiratory therapist time be increased to 45 minutes or that CMS
consider the development of a HCPCS code for the provision of pulmonary
rehabilitation items and services to patients on a one-on-one, face-to-
face per 15 minute basis to ensure that physicians can provide this
service in the office setting. Another commenter believed that HCPCS
code G0424 is undervalued at 0.46 PE RVUs in comparison to the PE RVUs
for other PFS services that are conceptually similar but do not include
a treadmill, arm ergometer, monitoring devices, or emergency carts.
Response: Payment for services under the PFS is resource-based, and
individual services are valued based upon the resources needed to
provide the typical service. As we noted in the CY 2011 PFS proposed
rule (75 FR 40103), pulmonary rehabilitation services reported under
HCPCS code G0424 can be furnished either individually or in groups and
we continue to believe that 30 minutes of respiratory therapist time is
appropriate for valuing the typical pulmonary rehabilitation service.
We believe that

[[Page 73300]]

pulmonary rehabilitation in the physician's office is most commonly
furnished to a group of patients, rather than one-on-one for 60 minutes
of respiratory therapist time. Regarding the commenter who was
concerned that the PE for HCPCS code G0424 was undervalued in
comparison to similar services that do not use the equipment necessary
for HCPCS code G0424, we note that we have utilized the standard PFS PE
methodology to develop the PE RVUs for HCPCS code G0424 based on the
direct PE inputs we consider to be appropriate.
Comment: One commenter suggested that the valuing of HCPCS code
G0424 is flawed and does not fully account for the inclusion of all
professionals who are involved in the pulmonary rehabilitation program,
specifically physical therapists. In addition, the commenter referenced
the CY 2010 PFS final rule with comment (74 FR 61884) where CMS stated
and recognized that physical therapists provide pulmonary
rehabilitation services. The commenter believes that by only basing the
value on services performed by respiratory therapists, CMS has
miscalculated the payment for the comprehensive, multidisciplinary
pulmonary rehabilitation program and recommended that CMS create a
separate HCPCS code with a higher value that could be used to delineate
those patients who require individualized physical therapy within the
pulmonary rehabilitation program.
Response: Like all services paid under the PFS, pulmonary
rehabilitation is valued based on the staff type who would typically
perform this service, a respiratory therapist. Because the items and
services furnished by a pulmonary rehabilitation program are
individualized, we expect that evaluations and individualized
treatments would be conducted by one or more members of the
multidisciplinary team of the pulmonary rehabilitation program with the
appropriate expertise. Therefore, individualized treatment by a
physical therapist would be furnished when required by the patient as
part of the pulmonary rehabilitation plan of care. However, we do not
believe individualized treatment would be typical and, therefore, we do
not believe the creation of a separate HCPCS code with a higher value
is necessary to recognize those cases that require individualized
physical therapy as part of a pulmonary rehabilitation program.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to increase the work RVUs for HCPCS
code G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for
cardiac rehabilitation with monitoring (CPT code 93798). In addition,
we are finalizing our CY 2011 proposal to increase the clinical labor
time for the respiratory therapist from 15 minutes to 30 minutes and to
crosswalk the PE equipment inputs for HCPCS code G0424 to those for
respiratory treatment services (HCPCS code G0238), which include a 1-
channel ECG and a pulse oximeter.

F. Application of Tissue Cultured Skin Substitutes to Lower Extremities
(HCPCS Codes G0440 and G0441)

There are currently two biological products, Apligraf and
Dermagraft, which are FDA-approved for the treatment of diabetic foot
ulcers. While commonly used by podiatrists for this purpose, these
products are also used by other specialists in the treatment of other
clinical conditions, such as burns.
Many Medicare contractors have established local coverage
determinations specifying the circumstances under which these services
are covered. In the case of diabetic foot ulcers, clinical studies of
Apligraf application were based on up to 5 treatments over a 12-week
period. In contrast, Dermagraft was applied weekly, up to 8 treatments
over a 12-week period.
The skin substitute CPT codes were reviewed and new codes were last
created by the CPT Editorial Panel for CY 2006. There are currently 2
skin repair CPT codes that describe Apligraf application, one primary
code, CPT code 15340 (Tissue cultured allogeneic skin substitute; first
25 sq cm or less) and one add-on code, CPT code 15341 (Tissue cultured
allogeneic skin substitute; each additional 25 sq cm, or part thereof
(List separately in addition to code for primary procedure)) and 4
codes that describe Dermagraft application, two initial codes based on
body area, CPT codes 15360 (Tissue cultured allogeneic dermal
substitute, trunk, arms, legs; first 100 sq cm or less, or 1% of body
area of infants and children) and 15365 (Tissue cultured allogeneic
dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits,
genitalia, hands, feet, and/or multiple digits; first 100 sq cm or
less, or 1% of body area of infants and children) and two add-on codes,
CPT codes 15361 (Tissue cultured allogeneic dermal substitute, trunk,
arms, legs; each additional 100 sq cm, or each additional 1% of body
area of infants and children, or part thereof (List separately in
addition to code for primary procedure)) and 15366 (Tissue cultured
allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears,
orbits, genitalia, hands, feet, and/or multiple digits; each additional
100 sq cm, or each additional 1% of body area of infants and children,
or part thereof (List separately in addition to code for primary
procedure)).
In the CY 2011 PFS proposed rule (75 FR 40103), we noted that
several stakeholders had expressed concern about the appropriateness
and equity of the coding and payment for these services, given their
similar uses and the office resources required when the products are
applied repeatedly over a number of weeks for treatment of lower
extremity ulcers. They were concerned that current coding, with the
associated payment policies and relative values, does not provide for
appropriate payment for the services based on how they are furnished.
In addition, some stakeholders believe that the current coding and
payment provides a financial incentive for the selection of one tissue
cultured product over another, rather than facilitating clinical
decision-making based solely on the most clinically appropriate product
for the patient's case. For example, the Dermagraft and Apligraf
application codes have 90-day and 10-day global periods, respectively,
and their current values include several follow-up office visits. When
patients are treated periodically with repeated applications of the
products over several weeks, the patients may be seen in follow-up by
the physician. However, those encounters would not be evaluation and
management visits but, instead, would be procedural encounters that
would typically be valued differently under the PFS than the follow-up
office visits currently included in the values for the Dermagraft and
Apligraf application codes. Furthermore, while different stakeholders
indicated that debridement and site preparation are variably performed
when these products are applied, the CPT codes for Dermagraft
application allow separate reporting of these preparation services when
they are performed, while the Apligraf application codes bundle these
services. Since CY 2006, the PFS has accepted the AMA RUC work and PE
recommendations for the Dermagraft and Apligraf application codes and
has paid accordingly.
With respect to Medicare payment policy, some Medicare contractors
allow the use of modifier -58 (Staged or related procedure or service
by the same physician during the postoperative period) to be reported
with the skin substitute application codes and provide full payment for
the service

[[Page 73301]]

each time it is performed, even if the subsequent application(s) is
within the global period of the service. Other contractors do not allow
the use of modifier -58 and, therefore, provide a single payment for a
series of applications over 90 days or 10 days, as applicable to the
particular code reported for the product's initial application.
Because of the current inconsistencies in valuing similar skin
substitute application services and the common clinical scenarios for
their use for Medicare beneficiaries, in the CY 2011 PFS proposed rule
(75 FR 40103), we stated that we believe it would be appropriate to
temporarily create Level II HCPCS G-codes to report application of
tissue cultured skin substitutes applied to the lower extremities in
order to provide appropriate and consistent payment for the services as
they are commonly furnished. Therefore, we proposed to create two new
HCPCS G-codes for CY 2011, GXXX1 (Application of tissue cultured
allogeneic skin substitute or dermal substitute; for use on lower limb,
includes the site preparation and debridement if performed; first 25 sq
cm or less) and GXXX2 (Application of tissue cultured allogeneic skin
or dermal substitute; for use on lower limb, includes the site
preparation and debridement if performed; each additional 25 sq cm),
that would be recognized for payment under the PFS for the application
of Apligraf or Dermagraft to the lower limb. These codes would not
allow separate reporting of CPT codes for site preparation or
debridement. We emphasized that we would expect that the use of these
HCPCS G-codes for payment under Medicare would be temporary, while
stakeholders work through the usual channels to establish appropriate
coding for these services that reflects the current common clinical
scenarios in which the skin substitutes are applied. Furthermore, we
stated that we would expect to receive recommendations from the AMA RUC
for appropriate work values and direct practice expense inputs for the
applicable codes, according to the usual process for new or revised
codes.
Under the PFS, as a temporary measure, the HCPCS G-codes would be
assigned a 0-day global period so payment would be made each a time a
covered service was furnished. We proposed to base payment on the
physician work relative values and the direct PE inputs for the
existing CPT codes for Apligraf application, with adjustments for the
global period differences because the HCPCS G-codes and the Apligraf
application CPT codes. These CPT codes resemble the new HCPCS G-codes
in terms of wound size description and the inclusion of site
preparation and debridement in their current values so we believe they
appropriately represent the physician work involved in the proposed
HPCPCS G-codes. However, we proposed to adjust the work RVUs of the
Apligraf application codes to derive the HCPCS G-code proposed CY 2011
work values by extracting the values for any office visits and
discharge day management services because the HCPCS G-codes have a 0-
day global period. In addition, we proposed to adjust the direct PE
inputs of the Apligraf application codes to develop the proposed CY
2011 direct PE inputs of the HPCPS G-codes that have a 0-day global
period.
Our crosswalks and adjustments resulted in proposed CY 2011 work
RVUs of 2.22 for HPCPCS code GXXX1 and 0.50 for HCPCPS GXXX2. The
proposed direct PE inputs for HCPCS codes GXXX1 and GXXX2 are included
in the direct PE database for the CY 2011 proposed rule that is posted
on the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp.
We noted that many Medicare contractors currently have local
coverage policies that specify the circumstances under which Medicare
covers the application of skin substitutes. The local coverage policies
may include diagnostic or prior treatment requirements, as well as
frequency limitations on the number and periodicity of treatments. We
stated our expectation that these policies would be updated in the
context of the temporary new HCPCS G-codes that we proposed for use in
CY 2011 to report the application of tissue cultured allogeneic skin or
dermal substitutes. We proposed to establish the HCPCS G-codes for
temporary use in CY 2011 in order to improve the consistency and
resource-based nature of PFS payments for skin substitute application
services that require similar resources. However, we noted our
continued interest in ensuring that skin substitutes are properly
utilized for Medicare beneficiaries who will benefit from that
treatment. We indicated that we would continue to monitor the
utilization of these services and plan to identify any concerning
trends in utilization that contractors may want to examine further
through medical review or other approaches.
Comment: While acknowledging concerns with the existing CPT codes
for the application of skin substitutes, several commenters opposed the
proposed HCPCS G-codes because the commenters believe that CMS should
wait for new codes to be created by the CPT Editorial Panel and the
associated recommendations to be developed by the AMA RUC for physician
work and direct PE inputs for any new codes. The commenters argued that
CMS' proposal to create new temporary codes would circumvent or
otherwise influence the well-established processes already underway to
address issues identified by the stakeholders. Several commenters
pointed out that CMS' proposal would not treat the application of skin
substitutes that are not tissue cultured similarly to the procedures
for the application of Apligraf and Dermagraft. Because these
commenters argued that inconsistencies in coding and payment for the
other products would continue, several commenters recommended that CMS
await a more comprehensive solution from the CPT Editorial Panel.
On the other hand, a number of commenters supported the proposal to
establish the two new HCPCS G-codes, and a few of these commenters
recommended no changes to the proposed HCPCS code descriptors. However,
one commenter who generally supported the proposal recommended that CMS
expand the proposed HCPCS code descriptors to incorporate the
application of a broader range of skin substitutes that were not tissue
cultured, specifically to include the application of biologically
active skin substitutes.
Another commenter requested that CMS clarify the meaning of
``dermal substitute.'' This commenter also requested that CMS delete
the words ``for use on lower limb'' and allow the new codes to be used
for application of tissue cultured skin or dermal substitutes on
locations other than the lower limb. Consistent with this perspective,
the commenter further recommended that CMS not recognize the existing
CPT codes for application of Apligraf and Dermagraft on other areas of
the body. The commenter argued that, as proposed, the HCPCS G-codes
would lead to confusion and the potential for fraudulent billing
because both a HCPCS G-code and a CPT code could describe the
application of the same product to the lower extremities. The commenter
believes that CMS should only recognize the proposed G-codes under the
PFS for the application of tissue cultured skin or dermal substitutes
to any body site, to allow for consistency in reporting and payment of
these services.
Several commenters requested that CMS provide guidance on the
proper use of the current CPT codes and new HCPCS G-codes for reporting
the application of skin substitutes. Other

[[Page 73302]]

commenters were concerned that the temporary HCPCS G-codes could create
confusion, disrupt physician's office billing policies, and otherwise
burden coding staff and advised CMS to not finalize the proposal.
Response: We appreciate the perspectives of stakeholders and we
share the commenters' desire for appropriate and consistent payment
that is resource-based for the application of skin substitutes as these
services are commonly furnished for appropriate clinical indications.
We appreciate and value the work of the CPT Editorial Panel in
evaluating the complexities and nuances in this area and look forward
to reviewing any new codes created for CY 2012 or later years and the
AMA RUC recommendations for the physician work and direct PE inputs for
those new codes. We note that there are no new codes for CY 2011 that
describe the application of skin substitutes and, therefore, new codes
would not be available before CY 2012 at the earliest.
In proposing to create two temporary HCPCS G-codes for CY 2011, we
sought a fair and balanced temporary alternative to provide appropriate
and equitable payment for the application of tissue cultured skin or
dermal substitutes to the lower extremities. While we understand from
stakeholders that the work of the CPT Editorial Panel is ongoing in
this area, our proposal was specifically to establish temporary HCPCS
G-codes that would allow for more appropriate reporting and payment
under certain scenarios in the short term while a more comprehensive
solution is being developed and refined by expert advisors. Because our
proposal was so limited in scope and temporary, clearly it was not our
intention to circumvent or unduly influence the CPT Editorial Panel or
the AMA RUC as these groups proceed in their comprehensive work to
establish new codes and values for the application of skin substitutes.
We would also not expect that the characteristics of the temporary
HCPCS G-codes, in terms of terminology in the code descriptors, global
periods, work values, or direct PE inputs, should shape or otherwise
affect the ongoing work of stakeholders who are developing a complete
approach to coding for the application of skin substitutes. We
acknowledge that new CPT codes and their AMA RUC-recommended values and
direct PE inputs arising from these processes may appropriately differ
in one or multiple characteristics from the temporary HCPCS G-codes.
With regard to the commenters who were concerned about the limited
scope of our proposal and suggested that we not proceed or that we
broaden the scope of the proposed code descriptors to address
inequities and inconsistencies that the commenters believe would
persist under our proposal, we believe that the limited proposal
continues to be the most appropriate temporary approach for CY 2011.
First, it was not our intention to comprehensively address the issue of
coding revisions for the application of skin substitutes because we are
aware of the ongoing work of the CPT Editorial Panel in this area and
would not want to undermine its deliberative process. Moreover, based
on the public comments we received, we have reason to believe that a
revised coding structure for the application of skin substitutes will
be available soon. Second, the HCPCS G-codes that we proposed had a 0-
day global period based on the FDA-approved indications and regimens
for the application of the tissue cultured products to which the codes
would apply, and we are not certain to what extent a 0-day global
period would be appropriate for the application of other skin
substitutes. Third, while several commenters provided suggestions
regarding alternative language that could be used in the HCPCS G-code
descriptors, it is unclear which skin substitutes products would be
incorporated under the revised terms. Some of the suggested
alternatives would use phrases such as ``biologically active'' that, as
far as we know, are not fully defined in the medical community and are
not currently used in the CPT code descriptors that describe the
application of skin substitutes. Because of our uncertainty in this
regard, we would be hesitant to make such significant revisions to the
HCPCS G-code descriptors without the opportunity for public notice and
comment, which would allow stakeholders the opportunity to provide
input about revised code descriptors and the appropriateness of the
values for the HCPCS G-codes. In contrast, our proposal relied upon the
use of terms in the HCPCS G-code descriptors that are already included
in the descriptors for established CPT codes and, therefore, we do not
believe we would be setting a precedent that would affect the current
work of the CPT Editorial Panel on this issue. Finally, we do not see a
need to further clarify terms, such as ``dermal substitute,'' in the
HCPCS G-code descriptors because these are currently used in the CPT
code descriptors and the same definitions would apply to the G-codes.
Furthermore, we believe it would continue to be appropriate to
recognize the existing CPT codes for the application of tissue cultured
skin or dermal substitutes to areas of the body other than the lower
extremities. We established the 0-day global period, the physician work
values, and the direct PE inputs for the proposed HCPCS G-codes based
on the specific clinical scenarios where Apligraf or Dermagraft would
be applied to treat lower extremity ulcers. We do not necessarily
believe that the same global periods and values would be appropriate
for the application of these products to other body areas under
different clinical scenarios. The usual coding guidance that providers
should report the most specific HCPCS code that describes the service
furnished would apply in the case of the application of Apligraf or
Dermagraft. If one of these products were applied to the lower
extremities, we would expect the HCPCS G-codes to be reported, rather
than the CPT codes, as the HCPCS G-codes are more specific to
application in that body area.
Finally, because it is our common practice to create one or more
new HCPCS G-codes for payment under the PFS each year, we believe that
physicians' offices are experienced in integrating new codes into the
reporting of services furnished and paid under the PFS. Not only are
local coverage determinations commonly applicable to the application of
skin substitutes, we also understand that there are a subset of
physicians who regularly apply tissue cultured skin or dermal
substitutes to lower extremities to treat ulcers. In this context, we
believe that our national educational efforts, in addition to education
by local contractors, will quickly disseminate information to the
relevant practitioners about these new HCPCS G-codes and their
appropriate use in CY 2011.
After consideration of the public comments we received, we are
finalizing our proposal, with editorial modification, to create two new
HCPCS G-codes for reporting the application of tissue cultured skin
substitutes and dermal substitutes to the lower extremities in CY 2011.
For internal consistency, we are changing the descriptors of HCPCS
codes GXXX1 and GXXX2 from the proposed language to both refer to
``skin substitute or dermal substitute.'' HCPCS code GXXX2 as proposed
read ``Application of tissue cultured allogeneic skin or dermal
substitute; for use on lower limb, includes the site preparation and
debridement if performed; each additional 25 sq cm.'' The final codes
are HCPCS code G0440 (Application of

[[Page 73303]]

tissue cultured allogeneic skin substitute or dermal substitute; for
use on lower limb, includes the site preparation and debridement if
performed; first 25 sq cm or less) and HCPCS code G0441 (Application of
tissue cultured allogeneic skin substitute or dermal substitute; for
use on lower limb, includes the site preparation and debridement if
performed; each additional 25 sq cm) that will be recognized for
payment under the PFS in CY 2011.
Comment: A number of commenters supported the assignment of a 0-day
global period to the application of tissue cultured skin or dermal
substitutes. Many expressed the view that assigning a 0-day global
period to the codes would allow the products to be prescribed and
administered based on their clinical value, without concern for payment
differences between products. The commenters who did not support the 0-
day global period were those who believe that the proposal would
further payment inequities between products used similarly. For
example, one commenter reasoned that, insofar as a patient is likely to
require multiple administrations of a skin substitute product during a
90-day period, providers would have a significant incentive to use the
products whose application would be reported under the proposed codes
rather than a product whose application procedure continues to have a
90-day global period.
Another commenter addressed the bundling of site preparation and
debridement into the proposed HCPCS codes GXXX1 and GXXX2. The
commenter argued that the proposed values for the new codes HCPCS G-
codes would not be sufficient to account for this work. The commenter
recommended that the proposed values should be adjusted upward or
separate payment should be allowed for site preparation and/or
debridement.
In reviewing CMS' proposed methodology for setting the physician
work values for the HCPCS G-codes, one commenter contended that CMS
should finalize a total of 2.86 works RVUs for GXXX1 instead of the
proposed 2.22 work RVUs. The commenter claimed that the work RVUs for
GXXX1 should be crosswalked from CPT code 15340 less only the physician
work for the two post-procedure visits in CPT code 15340 which are not
included in HCPCS code GXXX1.
Another commenter recommended that CMS review the proposed PE
inputs for the new HCPCS G-codes. Specifically, the commenter explained
that the only difference in clinical labor time between CPT code 15340
and HCPCS code GXXX1 should be an adjustment to account for the
difference in the global period (10 days for CPT code 15340 and 0 days
for HCPCS code GXXX1). The commenter also stated that HCPCS code GXXX1
should include all the pre-service clinical staff time in CPT code
15340, yet did not for the proposed rule. The commenter was unclear on
whether the post-service clinical labor time was properly adjusted to
account for the change in global period from CPT code 15340 to HCPCS
code GXXX1.
Response: We agree with the commenters that a 0-day global period
is the most appropriate for the application of tissue cultured skin
substitutes or dermal substitutes to the lower limb for purposes of the
temporary HCPCS G-codes, pending a comprehensive change in coding
established by the CPT Editorial Panel. As discussed in the previous
response, we sought a fair and balanced temporary solution to provide
appropriate and consistent payment for the application of tissue
cultured skin substitutes or dermal substitutes to the lower limb. The
commenters who did not support the 0-day global period were those who
were more broadly against the creation of the new HCPCS G-codes codes
because of potential payment imbalances between products that would be
included in the new codes and those that would not be. No commenters
asserted that the 0-day global period would be inappropriate for the
codes to which we proposed to apply that period.
The proposed physician work values for HCPSC G-codes G0440 and
G0441 (proposed as HCPCS codes GXXX1 and GXXX2, respectively) were
crosswalked, with adjustment for the different global periods, from CPT
codes 15340 and 15341. CPT codes 15340 and 15341 currently include site
preparation and debridement and, as such, the additional reporting of a
separate CPT code for these activities, if performed on the same site
as the skin substitute application procedure, is not permitted. We
believe that the values for both the current CPT codes and the HCPCS G-
codes are clinically appropriate for the services they describe, with
payment for site preparation and debridement bundled if furnished.
In response to a commenter's concern, we reviewed the proposed
valuation of the physician work for HCPCS codes G0440 and G0441 to
ensure consistency with our proposed methodology, and we continue to
believe that the appropriate work value for HCPCS code G0440 is 2.22
RVUs as we proposed. HCPCS code G0440 was crosswalked to CPT code
15340, with adjustments to account for the 0-day global period of the
HCPCS G-code. CPT code 15340, with a 10-day global period, is currently
valued to include two CPT code 99212 (level 2 established patient
office or other outpatient visit) post-operative visits (0.48 RVUs
each, 0.96 RVUs total) and half of one CPT code 99238 (Hospital
discharge day management; 30 minutes or less) visit (1.28 RVUs each,
0.64 RVUs total). CPT code 15340 has a current total physician work
value of 3.82 RVUs. To adjust for the 0-day global period for the minor
procedure described by HCPCS code G0440, we believe it would be
appropriate to deduct the value of both the two post-operative office
visits and the discharge day visit. In the case of post-operative
office visits, these may be separately reported and paid if medically
reasonable and necessary. In addition, we also do not believe that a
half discharge day visit should be a building block based on the
clinical characteristics of the procedure described by HCPCS code
G0440. When we make these adjustments to the work value of 3.82 RVUs
for CPT code 15340, 2.22 work RVUs, the value we proposed for HCPCS
code G0440, remain.
We also reviewed the proposed PE inputs included in the direct PE
database for the CY 2011 PFS proposed rule. Like the physician work
values, to determine the PE inputs we crosswalked HCPCS code G0440 from
CPT code 15340 and HCPCS code G0441 from CPT code 15341. As one
commenter observed, the difference in the values should reflect the
shift from a 10-day global period to a 0-day global period. However,
for PE inputs, the change in global period typically affects both the
pre- and post-service PE inputs. To establish the post-operative
clinical labor time for HCPCS code G0440, we subtracted out the time
associated with the two CPT code 99212 visits that were removed (32
minutes total) and the half discharge day visit (19 minutes total) that
was eliminated, bringing the post-operative clinical labor time down
from 54 minutes to three minutes. For the pre-service activities, while
0-day global period procedures generally have 0 minutes of pre-service
clinical labor time allocated to them, we believe that 5 minutes in the
nonfacility setting and 10 minutes in the facility setting reflect more
appropriate pre-service clinical labor times in the instance of HCPCS
code G0440. These revised pre- and post-service clinical labor times
were reflected in the proposed CY 2011 direct PE database for HCPCS
code G0440.
While we valued the physician work and clinical labor time PE
inputs

[[Page 73304]]

according to the crosswalk methodology as described in the CY 2011 PFS
proposed rule (75 FR 40103 through 40104), upon review of the new CY
2011 HCPCS G-codes for this final rule with comment period, we noticed
that we had not applied the proposed methodology to the PE inputs for
equipment and supplies. Therefore, consistent with our proposal, we
have adjusted the supply and equipment PE inputs for HCPCS codes G0440
and G0441 in the final CY 2011 PE database to reflect the shift to a 0-
day global period from a 10-day global period for these HCPCS codes. As
the equipment and supply PE inputs for the 10-day global period CPT
codes reflect those necessary for multiple visits to the provider, the
equipment and supply inputs for the new HCPCS G-codes codes should
reflect more appropriate values for codes with a 0-day global period.
After consideration of the public comments we received, we are
finalizing our proposal to value HCPCS codes G0440 and G0441 as 0-day
global procedures into which site preparation and debridement are
bundled. As we proposed, under our final policy we have crosswalked the
physician work RVUs and direct PE inputs from CPT codes 15340 and 15341
to HCPCS codes G0440 and G0441, respectively, with adjustments. We have
adjusted the work RVUs and the direct PE inputs (clinical labor,
equipment, and supplies) to reflect the shift from a 10-day global
period to a 0-day global period for the new HCPCS G-codes.
Comment: Several commenters were concerned about the use of the -58
modifier for 10-day and 90-day global surgical procedures for the
application of skin substitutes when repeated application of a product
within the global period is the typical case. The commenters were
largely supportive of eliminating the use of the -58 modifier for the
two new HCPCS codes which, the commenters remarked, has been the source
of some confusion and has been interpreted inconsistently by Medicare
contractors. The commenters explained that the change to a 0-day global
period would result in no need for the -58 modifier to be reported with
the HCPCS G-codes. Several commenters recommended that CMS provide
guidance on use of the -58 modifier with the existing CPT codes for the
application of skin substitutes, most of which have 90-day global
period and all of which would continue to be recognized for payment
under the PFS.
Response: Assignment of a 0-day global period for the two HCPCS G-
codes eliminates the need for use of the -58 modifier with these two
new codes. We recognize that the -58 modifier may continue to be used
in conjunction with the other CPT codes with 10-day or 90-day global
periods for the application of skin substitutes. Specific
determinations of the appropriate use of the -58 modifier will continue
to be the responsibility of individual Medicare contractors.
In summary, after consideration of the public comments we received,
we are finalizing our CY 2011 proposal, with modification to adjust the
supply and equipment direct PE inputs, as well as editorial
modification to the code descriptors for consistency, to create two new
HCPCS G-codes for CY 2011, G0440 (Application of tissue cultured
allogeneic skin substitute or dermal substitute; for use on lower limb,
includes the site preparation and debridement if performed; first 25 sq
cm or less) and G0441 (Application of tissue cultured allogeneic skin
substitute or dermal substitute; for use on lower limb, includes the
site preparation and debridement if performed; each additional 25 sq
cm), that will be recognized for payment under the PFS for the
application of products described by the codes to the lower limb. These
codes do not allow separate reporting of CPT codes for site preparation
or debridement. Providers reporting the application of tissue cultured
allogeneic skin substitute or dermal substitutes to the lower limb for
payment under the PFS in CY 2011 should report HCPCS code G0440, along
with HCPCS code G0441 if applicable based on wound size, and not CPT
code 15340, 15341, 15360, 16361, 15365, or 15366.
Under the PFS, as a temporary measure, the HCPCS G-codes are
assigned a 0-day global period so payment is made each a time a covered
service is furnished. As proposed, we are basing payment on the
physician work relative values and the direct PE inputs for the
existing CPT codes 15340 and 15341 for Apligraf application, with
adjustments for the global period differences between the HCPCS G-codes
and the Apligraf application CPT codes. However, as we proposed, we
have adjusted the work RVUs of the Apligraf application codes to derive
the final CY 2011 HCPCS G-code work values by extracting the values for
any office visits and discharge day management services because the
HCPCS G-codes have a 0-day global period. In addition, with
modifications of our proposed PE equipment and supply inputs to be
fully consistent with our crosswalk proposal, we have adjusted the
direct PE inputs of the Apligraf application codes to develop the final
CY 2011 direct PE inputs for the HPCPS G-codes that have a 0-day global
period.
Our crosswalks and adjustments result in CY 2011 final work RVUs of
2.22 for HCPCS code G0440 and 0.50 for HCPCS G0441. The final direct PE
inputs for HCPCS codes G0440 and G0442 are included in the direct PE
database for the CY 2011 PFS final rule with comment period rule.

G. Canalith Repositioning (CPT code 95992)

For CY 2009, CPT created a new code for canalith repositioning,
specifically CPT code 95992 (Canalith repositioning procedure(s) (eg,
Epley maneuver, Semont maneuver), per day). This service may be
furnished by both physicians and therapists. Although we accepted the
AMA RUC-recommended work RVUs and PE inputs, we initially bundled this
procedure on an interim basis in the CY 2009 PFS final rule with
comment period (73 FR 69896), indicating that we believed it would be
paid through the E/M service that it would accompany. Subsequently, in
view of concerns from therapists who cannot furnish E/M services, we
clarified that therapists could report one of the generally defined
therapy CPT codes when canalith repositioning was furnished. In the CY
2010 PFS final rule with comment period (74 FR 61766), we changed the
code's status under the PFS to ``not recognized for payment under
Medicare,'' consistent with our expectation that another payable code
would be reported when the service was furnished.
Based on further information from stakeholders regarding the
distinct and separate nature of this procedure from an E/M service and
their request that we recognize this CPT code for payment, similar to
our separate payment for most other procedures commonly furnished in
association with an E/M service, we proposed to recognize CPT code
95992 for payment under the CY 2011 PFS, consistent with our typical
treatment of most other codes for minor procedures. In doing so, we
proposed to change the code's status to ``A'' and utilize the CY 2009
RUC recommendations for work RVUs (0.75) and PE inputs for establishing
its payment in CY 2011. (That is, status ``A'' means Active code. These
codes are separately payable under the PFS if covered.) Because
canalith repositioning (CPT code 95992) can be furnished by physicians
or therapists as a therapy service under a therapy plan of care or by
physicians as physicians' services outside of a therapy plan of care,
we would add CPT code

[[Page 73305]]

95992 to the ``sometimes therapy'' list on the therapy code abstract
file.
Comment: Many commenters supported CMS' proposal to acknowledge the
distinct and separate nature of CPT code 95992 from an E/M service by
recognizing CPT code 95992 for separate payment and agreed with the
proposed use of the AMA RUC- recommended values for work RVUs (0.75)
and PE inputs for establishing payment in CY 2011.
Response: We appreciate the commenters' support for our proposal.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to recognize CPT code 95992 for payment
under the PFS. As a result, the code's status has been changed to ``A''
in Addendum B to this final rule with comment period and the CY 2009
AMA RUC recommendations for work RVUs (0.75) and PE inputs will be used
for establishing its payment in CY 2011. (That is, status ``A'' means
Active code. These codes are separately payable under the PFS if
covered.) CPT code 95992 has also been added to the ``sometimes
therapy'' list on the therapy code abstract file.

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

To ensure that the PE RVUs are consistent between the intranasal/
oral and injectable immunization administration CPT codes that describe
services that utilize similar PE resources, we proposed to crosswalk
the PE values for CPT code 90471 (Immunization administration (includes
percutaneous, intradermal, subcutaneous, or intramuscular injections);
one vaccine (single or combination vaccine/toxoid)) to CPT codes 90467
(Immunization administration younger than age 8 years (includes
intranasal or oral routes of administration) when the physician
counsels the patient/family; first administration (single or
combination vaccine/toxoid), per day) and 90473 (Immunization
administration by intranasal or oral route; one vaccine (single or
combination vaccine/toxoid)).
Similarly, we also proposed to crosswalk the PE values for CPT code
90472 (Immunization administration (includes percutaneous, intradermal,
subcutaneous, or intramuscular injections); each additional vaccine
(single or combination vaccine/toxoid) (List separately in addition to
code for primary procedure)) to CPT codes 90468 (Immunization
administration younger than age 8 years (includes intranasal or oral
routes of administration) when the physician counsels the patient/
family; each additional administration (single or combination vaccine/
toxoid), per day (List separately in addition to code for primary
procedure)) and 90474 (Immunization administration by intranasal or
oral route; each additional vaccine (single or combination vaccine/
toxoid) (List separately in addition to code for primary procedure)).
Comment: Many commenters expressed support for the proposal. One
commenter questioned why the PE values are currently different and
several other commenters urged CMS to utilize the AMA RUC
recommendations and the resource-based methodology to develop PE RVUs
for these services in CY 2011, rather than crosswalk the PE RVUs.
Response: We appreciate the support from the commenters for our
proposal. We would note that, even with the same direct PE inputs,
somewhat different PE RVUs for the various CPT codes may result from
our PE methodology that relies upon the historical specialty mix, as
reflected in the most recent PFS utilization data, of providers who
furnished the services to allocate the indirect PE. Therefore, because
we believe it is especially important to have consistent PE values for
payment of these similar services under the PFS, we are unable to
utilize the AMA RUC direct PE input recommendations and the resource-
based methodology to develop PE RVUs for these services. While in
general we value services under the PFS with reference to the direct PE
inputs recommended by the AMA RUC and our standard resource-based
approach to establishing PE RVUs, we note that we also commonly use
crosswalks to other similar codes to establish the values for services
in certain circumstances. In this instance, we believe a crosswalk is
particularly appropriate in order to maintain appropriate relativity
between similar services and avoid the potential for non-clinically-
based bias in favor of one vaccine administration technique over
another.
Comment: A few commenters questioned why the CY 2011 proposed rule
referenced ``physician'' counseling when identifying CPT codes 90467
and 90468 and requested clarification that nurse practitioners (NPs)
and physician assistants (PAs) also be included within the scope of
this proposal.
Response: We would like to clarify that the reference to
``physician'' counseling noted by the commenters is part of the
official CPT code descriptors for CPT codes 90467 and 90468. Consistent
with our usual interpretation of CPT codes that include the term
physician in the code descriptor, for Medicare payment purposes this
specificity does not exclude NPs or PAs from providing counseling to
the patient/family that is within the NP's or PA's scope of practice.
Comment: Several commenters recommended modifying the proposal by
crosswalking the PE RVUs for CPT code 90466 (Immunization
administration younger than age 8 years of age (includes percutaneous,
intradermal, subcutaneous, or intramuscular injections) when the
physician counsels the patient/family; each addition injection (single
or combination vaccine/toxoid) per day (List separately in addition to
code for primary procedure)) to CPT code 90468 to achieve parity and
reflect the additional clinical time and other practice expenses
expended to provide immunizations to young children.
Response: For CY 2011, the CPT Editorial Panel revised the
reporting of immunization administration services for the pediatric
population. As a result, CPT codes 90466 and 90468 have been deleted
and replaced with CPT code 90461 (Immunization administration through
18 years of age via any route of administration, with counseling by
physician or other qualified health professional; each additional
vaccine/toxoid component (List separately in addition to code for
primary procedure)). In addition, CPT codes 90465 (Immunization
administration younger than 8 years of age (includes percutaneous,
intradermal, subcutaneous, or intramuscular injections) when the
physician counsels the patient/family; first injection (single or
combination vaccine/toxoid), per day) and 90467 were deleted and
replaced with CPT code 90460 (Immunization administration through 18
years of age via any route of administration, with counseling by
physician or other qualified health care professional; first vaccine/
toxoid component).
We agree with the commenters who believe that consistency in the PE
RVUs across CPT codes with different code descriptors reflecting
immunization services to different populations or using different
routes of administration is desirable. As a matter of longstanding
policy (69 FR 66307), we have crosswalked the nonfacility PE value from
CPT code 96372 (Therapeutic, prophylactic, or diagnostic injection
(specify substance or drug); subcutaneous or intramuscular)
[predecessor CPT codes 90782 and 90772] to the PE values for CPT code
90471 and to the HCPCS G-codes for administration of specific vaccines.
We

[[Page 73306]]

will continue this crosswalk for CY 2011 and, as we proposed, also
crosswalk the nonfacility PE value of CPT code 90471 to CPT code 90473.
The PE value for CPT code 90472 is based on the direct PE inputs for
that code, according to the usual PFS methodology. We will crosswalk
the nonfacility PE value of CPT code 90472 to CPT code 90474 for CY
2011 as we proposed. Finally, we are modifying our CY 2011 proposal and
crosswalking the nonfacility PE RVUs for CPT codes 90472 and 90474 to
new CPT code 90461 (replacement code for CPT codes 90466 and 90468) for
CY 2011. In addition, we will crosswalk the nonfacility PE RVUs for CPT
codes 90471 and 90473 to new CPT code 90460 (replacement code for CPT
codes 90465 and 90467).
After consideration of the public comments we received and the CY
2011 changes in codes for pediatric immunization services by the CPT
Editorial Panel, we are finalizing our CY 2011 proposals, with the
following modifications. In summary, for CY 2011 we will--
Crosswalk the nonfacility PE RVUs for CPT codes 90472 and
90474 to new CPT code 90461; and
Crosswalk the nonfacility PE RVUs for CPT codes 90471 to
90473 to new CPT code 90460.

I. Refinement Panel Process

As discussed in the 1993 PFS final rule with comment period (57 FR
55938), we adopted a refinement panel process to assist us in reviewing
the public comments on interim physician work RVUs for CPT codes with
an interim final status in each year and developing final work values
for the subsequent year. We decided that the panel would be comprised
of a multispecialty group of physicians who would review and discuss
the work involved in each procedure under review, and then each
individual would individually rate the work of the procedure. We
believed that establishing the panel with a multispecialty group would
balance the interests of those who commented on the work RVUs against
the budgetary and redistributive effects that could occur if we
accepted extensive increases in work RVUs across a broad range of
services. Historically, the refinement panel has based its
recommendation to change a work value or to retain the interim value
has hinged solely on the outcome of a statistical test on the ratings
(an F-test).
Depending on the number and range of codes that public commenters,
typically specialty societies, request be subject to refinement, we
establish refinement panels with representatives from 4 groups of
physicians: Clinicians representing the specialty most identified with
the procedures in question; physicians with practices in related
specialties; primary care physicians; and contractor medical directors
(CMDs). Typically the refinement panels meet in the summer prior to the
promulgation of the final rule finalizing the RVUs for the codes.
Typical panels have included 8 to 10 physicians across the 4 groups.
Over time, the statistical test used to evaluate the RVU ratings of
individual panel members have become less reliable as the physicians in
each group have tended to select a previously discussed value, rather
than independently evaluating the work. In addition, the resulting RVUs
have occasionally exhibited rank order anomalies (that is, a more
complex procedure is assigned lower RVUs than a less complex
procedure).
Recently, section 1848(c)(2)(K) of the Act (as added by section
3134 of the ACA) authorized the Secretary to review potentially
misvalued codes and make appropriate adjustments to the relative
values. In addition, MedPAC has encouraged CMS to critically review the
values assigned to the services under the PFS. MedPAC has stated its
belief that CMS has historically relied too heavily on specialty
societies to identify services that are misvalued by accepting a high
proportion of the recommendations of the AMA RUC.
We believe the refinement panel process continues to provide
stakeholders with a meaningful opportunity to review and discuss the
interim work RVUs with a clinically diverse group of experts which then
provides informed recommendations to CMS. Therefore, in the CY 2011
proposed rule (75 FR 40105), we indicated that we would like to
continue the refinement process, including the established composition
that includes representatives from the 4 groups of physicians, but with
administrative modification and clarification. Specifically, for
refinement panels beginning in CY 2011 (that is, for those codes with
CY 2011 interim values that would be subject to refinement during CY
2011), we proposed to eliminate the use of the F-test and instead base
revised RVUs on the median work value of the panel members' ratings. We
believe this approach will simplify the refinement process
administratively, while resulting in a final panel recommendation that
reflects the summary opinion of the panel members based on a commonly
used measure of central tendency that is not significantly affected by
outlier values. In addition, we clarified that we have the final
authority to set the RVUs and, therefore, may make adjustments to the
work RVUs resulting from refinement if policy concerns warrant their
modification.
Comment: Most commenters expressed support for the proposal to
eliminate the F-test, including the increased transparency of the
refinement panel process that the commenters believe would result from
this change. Many commenters, including the AMA RUC, agreed with the
use of the median work value of the panel members' ratings and believe
the median would provide a clearer view of the central tendency of the
estimates provided by the survey respondents. On the other hand,
several commenters believe the current process is effective and
eliminates the effects of agreement between the panel members' ratings.
The AMA RUC recommended that CMS be mindful when assigning
individuals to the refinement panel to ensure that all members,
including CMDs, are not from the same specialties that were involved in
the public comment originating the issue under review. Another
commenter cautioned CMS that the refinement panels need to be balanced
and should ensure that there is at least one representative on the
panel who has direct experience with the procedure or service under
review.
Response: We appreciate the support of the commenters regarding our
proposal to use the median work value of the panel members' ratings and
will move forward to finalize our proposal for refinement panels
beginning in CY 2011 (refinement of CY 2011 new/revised codes with
interim values).
When identifying individuals for the refinement panel, including
CMDs, we attempt to select individuals from each of the different
specialties with an interest in the codes being refined, not just the
specialty or specialties responsible for the public comment originating
the request for refinement. We also take steps to ensure that the panel
members have direct experience and knowledge of the procedure or
service under review. We will certainly continue our efforts in this
regard. However, we note that in recent years the number of physicians
who are available to participate in the refinement panel has been
limited at times, and some specialty societies have had difficulty
obtaining representation for the panel.

[[Page 73307]]

Comment: Several commenters urged CMS to use a methodology that
would allow the AMA RUC-recommended value to prevail when appropriately
supported by the pertinent specialty societies and when the value is
strongly supported by the rank order and resources of the procedure,
since the PFS final rule with comment period is the first opportunity
for the public to see the RVUs for the coming calendar year. These
commenters also believe a full and fair review process is warranted
prior to the publication of these values in the final rule with comment
period.
Response: We note that PFS payments for services are resource-
based. When reviewing the AMA RUC recommendations, our decisions to
value services are based on the resources needed to perform the typical
service and, therefore, these decisions are based upon a thorough
review of the AMA RUC recommendations in the context of the specific
new or revised codes. In those cases where we reject the AMA RUC
recommendations, we publish our rationale in the PFS final rule with
comment period where we first make the values public. These values are
published as interim final values that are subject to public comment.
The public comment period serves as the opportunity for public review
and we see no other alternative to this timing, given the timeframes in
which the new or revised CPT codes and the AMA RUC recommendations
regarding their values are available to us and in which the new or
revised CPT codes must be incorporated into the PFS for payment.
Comment: Several commenters expressed concerns about the proposal
to allow CMS to have the final authority to set the work RVUs if policy
concerns warrant modifications to the values derived from the
refinement process. These commenters opposed this proposal and
recommended that the decisions of the refinement panels remain
unchanged by CMS. The commenters believe a major strength of the
current process is that is gives stakeholders a strong incentive to
participate, knowing that the outcomes of the process will not be
overturned by CMS.
Response: Although we appreciate the concerns raised by the
commenters, by law, we retain the final responsibility and authority to
set the RVUs and, therefore, may make adjustments to the work RVUs
resulting from refinement if policy concerns (such as a rank order
anomaly) warrant their modifications.
Comment: One commenter urged CMS to make the refinement process
transparent and open to the public.
Response: We believe our proposal would make the refinement process
more transparent, as noted by some commenters. We further believe that
representation from specialty societies as part of the AMA RUC process
for valuing the codes allows the input of physicians who have direct
experience with the procedure or service under review.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to eliminate the use of the F-test for
the refinement panels and, instead, we will base the revised RVUs on
the median work value of the panel members' ratings. In addition, we
note that CMS retains the final authority to set the RVUs and,
therefore, make adjustments to the work RVUs resulting from refinement
if policy concerns warrant their modification.

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

In the CY 2011 PFS proposed rule (75 FR 40105), we reiterated our
concerns about the issue of developing PE RVUs for services that are
utilized 24 hours a day, 7 days a week (24/7), such as those that
require certain centralized monitoring system equipment and which have
been discussed in earlier PFS rulemaking cycles, most recently in the
CY 2010 PFS final rule with comment period (74 FR 61755). We stated
that the PE equipment methodology was developed for equipment that is
in use during standard physician's office business hours and not
equipment that is used in furnishing such continuous services, and that
we would conduct further analysis of this issue. We indicated that
services that were contractor-priced in CY 2009 remained contractor-
priced in CY 2010 and that any proposed changes would be communicated
through future rulemaking.
In the CY 2011 PFS proposed rule (75 FR 40105), we explained that
since publication of the CY 2010 PFS final rule with comment period, we
focused our additional analysis on 4 of the CPT codes that commenters
have brought to our attention because they involve concurrent, remote,
24/7 attended monitoring of multiple patients from a central location:
CPT code 93012 (Telephonic transmission of post-symptom
electrocardiogram rhythm strip(s); 24-hour attended monitoring, per 30
day period of time; tracing only); CPT code 93229 (Wearable mobile
cardiovascular telemetry with electrocardiographic recording,
concurrent computerized real time data analysis and greater than 24
hours of accessible ECG data storage (retrievable with query) with ECG
triggered and patient selected events transmitted to a remote attended
surveillance center for up to 30 days; technical support for connection
and patient instructions for use, attended surveillance, analysis and
physician prescribed transmission of daily and emergent data reports);
CPT code 93268 (Wearable patient activated electrocardiographic rhythm
derived event recording with presymptom memory loop, 24-hour attended
monitoring, per 30 day period of time; includes transmission, physician
review and interpretation); and CPT 93271 code (Wearable patient
activated electrocardiographic rhythm derived event recording with
presymptom memory loop, 24-hour attended monitoring, per 30 day period
of time; monitoring, receipt of transmissions, and analysis).
We pointed out that of these four codes, CPT code 93229 is
currently contractor-priced in CY 2010, meaning that the local Medicare
contractors determine payment rates for the service within the PFS
geographic areas in their jurisdiction. The three services that are
currently nationally-priced on the PFS are in the first year of a 4-
year transition to lower payment rates based on the use of the PPIS
data adopted in the CY 2010 PFS final rule with comment period. We
refer readers to section II.A.2. of this final rule with comment period
for a description of the general PFS PE methodology that is the basis
for the following discussion of approaches to establishing PE RVUs for
these four CPT codes.
In the CY 2011 PFS proposed rule, we explained that we examined
several alternative methods for developing PE RVUS upon which PFS
payment rates for these four CPT codes could be based. Each of these
services involves transmission of information from multiple patients
who wear individual monitoring devices that transmit patient-specific
information to centralized equipment that is simultaneously in use for
multiple patients. We stated that we believed it would be most
consistent with the principles underlying the PFS PE methodology to
classify the centralized monitoring equipment as an indirect cost since
it is servicing multiple patients at the same time. We explained that
after classifying this equipment as an indirect cost, we used our
standard methodology to calculate an indirect practice cost index value
for each code based on the PE/HR survey data of the historical mix of
specialties providing these services. We went on to state that

[[Page 73308]]

establishing payment rates for these codes based on this approach would
result in decreases in the payment rates for these services, including
the typical contractor's price for CPT code 93229. For the three
services that are nationally priced, these decreases would be relative
to the lower payment rates based on the use of the PPIS data after the
4-year transition.
In the CY 2011 PFS proposed rule, we acknowledged that we had also
received PE/HR data from the Remote Cardiac Services Provider Group
(RCSPG), a group of Independent Diagnostic Testing Facility (IDTF)
suppliers of these types of services. We explained that for sensitivity
analysis purposes, we substituted these data for the PE/HR data of the
specialties performing these services, while continuing to treat the
centralized monitoring equipment as an indirect cost. We stated that we
found that establishing payment rates for these codes based on the
approach of using the submitted RCSPG PE/HR data would again result in
decreases in the payment rates for these services, including the
typical contractor's price for CPT code 93229. As in the prior
alternative, the decreases for the nationally priced codes would be
relative to the payment rates reflecting the 4-year transition to the
PPIS data.
We indicated that although we believed that it would be most
consistent with the principles underlying the PE methodology to
classify the centralized monitoring equipment as an indirect cost, we
also performed a sensitivity analysis of the payment rates if the
centralized monitoring equipment were classified as a direct cost. In
this simulation, we assumed that the centralized monitoring equipment
was in year-round use, 7 days per week for 24 hours per day. We found
that establishing payment rates for these codes based on the approach
of classifying the centralized monitoring equipment as a direct cost
would again result in decreases in the payment rates for the nationally
priced services relative to their payment rates after the 4-year
transition to the use of the PPIS data, as well as to the typical
current contractor's price for CPT code 93229.
Finally, we explained that we considered proposing contractor-
pricing for all four of these services for CY 2011 but were cognizant
of past public comments on this issue that had requested that all of
these services be priced nationally on the PFS, including the one
service (CPT code 93229) that is currently contractor-priced.
In the CY 2011 PFS proposed rule, we also considered that the
services currently priced nationally on the PFS were scheduled to
receive lower payment rates under the 4-year transition to the PPIS
data and that the contractor's price for CPT 93229 was recently reduced
in the area where the majority of the billings for this service
currently occur.
We concluded that after taking all these factors into
consideration, we were not proposing CY 2011 methodological or direct
cost input changes for CPT codes 93012, 93268, or 93271--the services
that are nationally priced under the PFS. We proposed to continue
contractor-pricing for CPT 93229 for CY 2011. We solicited public
comments on this issue, including responses to our analysis of
alternative approaches to establishing PE RVUs for 24/7 services, and
further discussion of the issues we identified in our alternative
pricing methodologies. In addition, while we had focused the 24/7
services analysis up until that point in time on developing the PE RVUS
for remote cardiac monitoring services, we observed that there may be
24/7 services in other areas of medicine, either currently paid under
the PFS or in development for the future. Therefore, we also solicited
public comments on these current or emerging 24/7 services, including
descriptions of the similarities or differences between these other
services and remote cardiac monitoring services, particularly with
respect to the issues we identified in our analysis of alternative
approaches to establishing PE RVUs for remote cardiac monitoring
services under the PFS.
Comment: Several commenters expressed concerns regarding CMS'
discussion of PFS payment for remote cardiac monitoring, which included
no proposal of changes for CY 2011. The commenters pointed out the
benefits of 24/7 remote monitoring services for cardiac and other
specialty services and argued that these types of services can differ
in complexity and frequency from one another and from traditional
medical services. In general, the commenters expressed interest in CMS
accurately capturing the cost components for all of these services,
primarily arguing for the consideration of these costs as direct costs.
One commenter explained that the current methodology for assigning
PE RVUs does not work for remote cardiac providers whose businesses are
structured differently from physicians' practices and, as a result, the
RVUs assigned to the services do not reflect their proper relative
cost. Although CMS focused its analysis on services characterized by
concurrent, remote, 24/7 attended monitoring of multiple patients from
a single location, the commenter addressed cardiac event monitoring,
pacemaker monitoring, Holter monitoring, International Normalized Ratio
(INR) monitoring, and a number of new monitoring technologies such as
cardiac telemetry under the umbrella term of remote cardiac monitoring.
The commenter asserted that the IDTF providers of remote cardiac
monitoring services operate on a 24/7 basis because the services that
they furnish require round-the-clock service and are, therefore,
structured very differently from physicians' offices and other IDTFs.
The commenter argued that CMS should utilize PE/HR data submitted by
RCSPG, a group of IDTF suppliers of these types of services, to the
entire ranging of cardiac monitoring services furnished by these
providers. Alternatively, the commenter indicated that CMS could use
the all physician indirect percentage, use an indirect practice cost
index (IPCI) of one, and add equipment costs to the PE formula for
allocating indirect costs in setting the PE RVUs for cardiac monitoring
services. Finally, the commenter requested that if CMS did not adopt
one of the previous two suggestions, then CMS should temporarily
suspend the phase-in of the use of PPIS data for cardiac monitoring
services. Several other commenters also requested that CMS suspend the
PPIS transition for remote cardiac monitoring services.
Several commenters disagreed with CMS regarding the appropriateness
of treating the centralized monitoring equipment as an indirect cost,
arguing that the equipment is used specifically for patients that are
receiving a specific service and, therefore, represents a direct cost
like other medical equipment. The commenters contended that the
centralized equipment is inherently different from other indirect
practice expenses that are used to run a practice and are not tied
directly to any one particular service. One commenter speculated that
considering the cardiac monitoring equipment as an indirect expense
would dilute the payment for this cardiac telemetry by distributing it
to many people who are not providing it. Another commenter expressed
concern that an indirect cost approach does not appropriately account
for the significant differences in remote monitoring services and thus
cannot accurately capture the cost components of each.
With respect to the remote cardiac monitoring service described by
CPT code 93229 which is contractor-priced, one commenter made several
specific requests, namely that CMS: (1) Nationally price CPT code 93229
rather

[[Page 73309]]

than contractor-price the service; (2) consider the centralized
monitoring equipment associated with CPT code 93229 as a direct cost;
(3) adjust the equipment utilization assumption for the centralized
monitoring equipment from 100 percent to 50 percent; (4) use new direct
cost inputs (for example, the cost of the monitoring device worn by
patient) supplied by the commenter; (5) incorporate a new PE/HR, based
on the cardiac monitoring industry-wide RCSPG PE/HR data applied to all
cardiac monitoring services, based on data from two telemetry providers
for CPT code 93229 that yields a PE/HR of $243.22 that would be applied
to CPT code 93229, or based on data for telemetry and cardiac event
monitoring (CEM) which results in a PE/HR of $214.79 that would be
applied to telemetry and CEM services; and (6) apply an additional
indirect allocation in the CMS PE methodology based on the equipment
direct costs as previously recommended by one telemetry provider. The
commenter provided equipment inputs and the associated prices and
further recommended that CMS should continue to apply the clinical
labor and supply input items associated with this services as
recommended by the AMA RUC.
Response: We appreciate the continuing interest of the commenters
in the pricing of cardiac monitoring services under the PFS. After
further review of this issue, while we continue to recognize there are
some unique aspects to the services, we do not agree with the
commenters that the PE for cardiac monitoring services cannot be
appropriately valued using the PFS PE methodology. After our review, we
believe that we can appropriately identify and price the direct cost
inputs for these services. Furthermore, we note that the PPIS data for
allocating indirect costs is from a multispecialty, nationally
representative PE survey of both physicians and NPPS and, as the most
comprehensive source of PE information available to date, appropriate
for use for cardiac monitoring services. Therefore, we disagree that we
should suspend the PE transition to the PPIS data or otherwise change
our established methodology for setting the PE RVUs furnished by a
subset of providers in a certain specialty area.
We continue to believe that it is more appropriate to classify the
costs associated with the centralized monitoring equipment, including
the hardware and software, workstation, webserver, and call recording
system, as indirect costs since it is difficult to allocate those costs
to services furnished to individual patients in a manner that
adequately reflects the number of patients being tested. This would be
true for CPT code 93229 which has not previously been nationally
priced. We believe that the ability to appropriately allocate costs to
individual services is a key concept that should guide our adoption of
the direct PE inputs for services paid under the PFS. Having drawn this
conclusion, we plan to review the direct PE inputs for other nationally
priced services that include centralized monitoring equipment under the
PFS and, if we find that we have not consistently treated that
equipment as an indirect cost, we may propose changes to the direct PE
inputs for existing codes in a future PFS rulemaking cycle.
We agree with several commenters that it would be appropriate at
this time to nationally price CPT code 93229, especially in light of
our conclusion regarding how the centralized monitoring system should
be treated under the PFS PE methodology and the fact that the
commenters have provided current prices and associated documentation
for the direct PE inputs used in the typical case. Therefore, we are
accepting the AMA RUC recommendations originally made for CY 2009 (73
FR 69896) for clinical labor and supplies for CPT code 93229 and are
utilizing these direct PE inputs for CY 2011. With respect to the
equipment inputs provided to us by one commenter who currently
furnishes the majority of services described by CPT code 93229, under
our final CY 2011 policy the only piece of equipment that would be
appropriately treated as a direct PE input is the cardiac telemetry
monitoring device worn by the patient. The other equipment items,
including the monitoring system software and hardware, workstation,
webserver, and call recording system are indirect practice costs.
Therefore, we are accepting the commenter's submission of $21,575 as
the price for this device in the typical case, and applying a 50
percent utilization rate and useful life of 3 years as recommended by
the commenter.
We do not believe it would be appropriate to deviate from our
standard PFS PE methodology to adopt a PE/HR that is specific to CPT
code 93229 or any other set of cardiac monitoring codes based on data
from two telemetry providers, from a subset of services provided by
certain specialty cardiac monitoring providers, or from a certain group
of specialty providers that overall furnish only a portion of cardiac
monitoring services, nor to change our established indirect PE
allocation methodology. We believe the current PE methodology
appropriately captures the relative costs of these services in setting
their PE RVUs, based on the conclusion we have drawn following our
assessment of the centralized monitoring system that is especially
characteristic of services such as CPT code 93229. We note that these
direct PE inputs are included in the final CY 2011 direct PE database
that is posted on the CMS Web site under downloads for this CY 2011 PFS
final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage. We further note that the
CY 2011 payment for CPT code 93229 (without considering the negative
PFS update that will apply for CY 2011 under current law) is close to
the current typical contractor's price for the service in CY 2010.
After consideration of the public comments we received, we are
establishing a national price for CPT code 93229 based on nationally
set RVUs, instead of maintaining the code as contractor-priced as we
proposed. We are adopting the AMA RUC's recommendations for the
clinical labor and supply inputs, and utilizing price, utilization, and
useful life information provided by the commenters as equipment inputs
for the cardiac telemetry monitoring device worn by the patient. The
final CY 2011 RVUs for CPT code 93229 are displayed in Addendum B to
this final rule with comment period. While we are making no changes to
the direct PE inputs for other remote cardiac monitoring CPT codes for
CY 2011, we will consider in the future whether changes could be
appropriate if we conclude that these services utilize a centralized
monitoring system that would most appropriately be treated an indirect
cost.
Comment: While most of the commenters addressed remote cardiac
monitoring services specifically discussed in the CY 2011 PFS proposed
rule, several commenters addressed other types of emerging 24/7
services. One commenter described a pilot program that utilizes
telehealth to monitor certain health status indicators for cardiac
patients. This monitoring occurs during the day and night and includes
an assessment by a nurse. The commenter stated that the initial results
of the pilot show a lower rate of hospital readmissions for
participants. The commenter asserted that there is currently no payment
for this service, and urged CMS to consider funding for these types of
programs.
Outside of cardiac monitoring, another commenter noted that there
are many types of remote monitoring

[[Page 73310]]

services that provide important benefits, especially for chronically
ill patients. The commenter explained that these may include health
status monitoring services, activity and sensor monitoring services,
and medication dispensing and monitoring services. The commenter
asserted that the resource requirements for these types of services can
differ in complexity and frequency and may involve varied resources,
including equipment and other fees; training and coaching; data
collection, monitoring and documentation; and personal emergency
response. As such, the commenter recommended that CMS' PE methodology
for remote monitoring services be as transparent and flexible as
possible to allow for these differences, and to accurately capture the
cost components for each. Therefore, the commenter, concluded that a
direct cost approach would be the most appropriate approach in most
cases.
Response: We thank the commenters for providing information on
other current and emerging 24/7 services. We will consider appropriate
payment for other 24/7 services under the PFS as specific codes for
such services are created by the CPT Editorial Panel. Regarding direct
PE inputs for other remote monitoring services, we acknowledge
diversity in the direct and indirect costs to providers for furnishing
various monitoring services--and all services--and believe that our
current PE methodology, as discussed earlier in this section, is able
to yield appropriate values across this wide range. As stated earlier
in the context of remote cardiac monitoring, we believe that the
ability to appropriately allocate costs to the services furnished to
individual patients is a key concept that should guide our adoption of
the direct PE inputs for services paid under the PFS, including remote
monitoring and other 24/7 services.
We look forward to continuing a dialogue with stakeholders involved
in developing and furnishing 24/7 services as medical practice evolves
in order to ensure that the PFS pays appropriately for those 24/7
services that are covered by Medicare and paid as physicians' services.

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services

1. History
Prior to January 1, 1999, Medicare coverage for services delivered
via a telecommunications system was limited to services that did not
require a face-to-face encounter under the traditional model of medical
care. Examples of these services included interpretation of an x-ray or
electrocardiogram or electroencephalogram tracing, and cardiac
pacemaker analysis.
Section 4206 of the BBA provided for coverage of, and payment for,
consultation services delivered via a telecommunications system to
Medicare beneficiaries residing in rural health professional shortage
areas (HPSAs) as defined by the Public Health Service Act.
Additionally, the BBA required that a Medicare practitioner
(telepresenter) be with the patient at the time of a teleconsultation.
Further, the BBA specified that payment for a teleconsultation had to
be shared between the consulting practitioner and the referring
practitioner and could not exceed the fee schedule payment which would
have been made to the consultant for the service provided. The BBA
prohibited payment for any telephone line charges or facility fees
associated with the teleconsultation. We implemented this provision in
the CY 1999 PFS final rule with comment period (63 FR 58814).
Effective October 1, 2001, section 223 of the Medicare, Medicaid
and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554)
(BIPA) added a new section 1834(m) to the Act which significantly
expanded Medicare telehealth services. Section 1834(m)(4)(F)(i) of the
Act defines Medicare telehealth services to include consultations,
office visits, office psychiatry services, and any additional service
specified by the Secretary, when delivered via a telecommunications
system. We first implemented this provision in the CY 2002 PFS final
rule with comment period (66 FR 55246). Section 1834(m)(4)(F)(ii) of
the Act required the Secretary to establish a process that provides for
annual updates to the list of Medicare telehealth services. We
established this process in the CY 2003 PFS final rule with comment
period (67 FR 79988).
As specified in regulations at Sec. 410.78(b), we generally
require that a telehealth service be furnished via an interactive
telecommunications system. Under Sec. 410.78(a)(3), an interactive
telecommunications system is defined as multimedia communications
equipment that includes, at a minimum, audio and video equipment
permitting two-way, real-time interactive communication between the
patient and the practitioner at the distant site. Telephones, facsimile
machines, and electronic mail systems do not meet the definition of an
interactive telecommunications system. An interactive
telecommunications system is generally required as a condition of
payment; however, section 1834(m)(1) of the statute does allow the use
of asynchronous ``store-and-forward'' technology in delivering these
services when the originating site is a Federal telemedicine
demonstration program in Alaska or Hawaii. As specified in regulations
at Sec. 410.78(a)(1), store and forward means the asynchronous
transmission of medical information from an originating site to be
reviewed at a later time by the practitioner at the distant site.
Medicare telehealth services may be provided to an eligible
telehealth individual notwithstanding the fact that the individual
practitioner providing the telehealth service is not at the same
location as the beneficiary. An eligible telehealth individual means an
individual enrolled under Part B who receives a telehealth service
furnished at an originating site. As specified in BIPA, originating
sites are limited under section 1834(m)(3)(C) of the statute to
specified medical facilities located in specific geographic areas. The
initial list of telehealth originating sites included the office of a
practitioner, a critical access hospital (CAH), a rural health clinic
(RHC), a federally qualified health center (FQHC) and a hospital. More
recently, section 149 of the Medicare Improvements for Patients and
Providers Act of 2008 (Pub. L. 110-275) (MIPPA) expanded the list of
telehealth originating sites to include hospital-based renal dialysis
centers, skilled nursing facilities (SNFs), and community mental health
centers (CMHCs). In order to serve as a telehealth originating site,
these sites must be located in an area designated as a rural HPSA, in a
county that is not in a metropolitan statistical area (MSA), or must be
an entity that participate in a Federal telemedicine demonstration
project that has been approved by (or receives funding from) the
Secretary as of December 31, 2000. Finally, section 1834(m) of the
statute does not require the eligible telehealth individual to be
presented by a practitioner at the originating site.
2. Current Telehealth Billing and Payment Policies
As noted above, Medicare telehealth services can only be furnished
to an eligible telehealth beneficiary in an originating site. An
originating site is defined as one of the specified sites where an
eligible telehealth individual is located at the time the service is
being furnished via a telecommunications system. In general,
originating sites must be located in a rural HPSA or in a county
outside of an MSA. The

[[Page 73311]]

originating sites authorized by the statute are as follows:
Offices of a physician or practitioner
Hospitals
CAHs
RHCs
FQHCs
Hospital-Based or Critical Access Hospital-Based Renal
Dialysis Centers (including Satellites)
SNFs
CMHCs
Currently approved Medicare telehealth services include the
following:
Initial inpatient consultations
Follow-up inpatient consultations
Office or other outpatient visits
Individual psychotherapy
Pharmacologic management
Psychiatric diagnostic interview examination
End Stage Renal Disease (ESRD) related services
Individual medical nutrition therapy (MNT)
Neurobehavioral status exam
Individual health and behavior assessment and intervention
(HBAI).
In general, the practitioner at the distant site may be any of the
following, provided that the practitioner is licensed under State law
to furnish the service being furnished via a telecommunications system:
Physician
Physician assistant (PA)
Nurse practitioner (NP)
Clinical nurse specialist (CNS)
Nurse midwife
Clinical psychologist
Clinical social worker
Registered dietitian or nutrition professional.
Practitioners furnishing Medicare telehealth services are located
at a distant site, and they submit claims for telehealth services to
the Medicare contractors that process claims for the service area where
their distant site is located. Section 1834(m)(2)(A) of the Act
requires that a practitioner who furnishes a telehealth service to an
eligible telehealth individual be paid an amount equal to the amount
that the practitioner would have been paid if the service had been
furnished without the use of a telecommunications system. Distant site
practitioners must submit the appropriate HCPCS procedure code for a
covered professional telehealth service, appended with the -GT (Via
interactive audio and video telecommunications system) or -GQ (Via
asynchronous telecommunications system) modifier. By reporting the -GT
or -GQ modifier with a covered telehealth procedure code, the distant
site practitioner certifies that the beneficiary was present at a
telehealth originating site when the telehealth service was furnished.
The usual Medicare deductible and coinsurance policies apply to the
telehealth services reported by distant site practitioners.
Section 1834(m)(2)(B) of the Act provides for payment of a facility
fee to the originating site. To be paid the originating site facility
fee, the provider or supplier where the eligible telehealth individual
is located must submit a claim with HCPCS code Q3014 (Telehealth
originating site facility fee), and the provider or supplier is paid
according to the applicable payment methodology for that facility or
location. The usual Medicare deductible and coinsurance policies apply
to HCPCS code Q3014. By submitting HCPCS code Q3014, the originating
site authenticates that it is located in either a rural HPSA or non-MSA
county or is an entity that participates in a Federal telemedicine
demonstration project that has been approved by (or receives funding
from) the Secretary as of December 31, 2000 as specified in section
1834(m)(4)(C)(i)(III) of the Act.
As described above, certain professional services that are commonly
furnished remotely using telecommunications technology, but that do not
require the patient to be present in-person with the practitioner when
they are furnished, are covered and paid in the same way as services
delivered without the use of telecommunications technology when the
practitioner is in-person at the medical facility furnishing care to
the patient. Such services typically involve circumstances where a
practitioner is able to visualize some aspect of the patient's
condition without the patient being present and without the
interposition of a third person's judgment. Visualization by the
practitioner can be possible by means of x-rays, electrocardiogram or
electroencephalogram tracings, tissue samples, etc. For example, the
interpretation by a physician of an actual electrocardiogram or
electroencephalogram tracing that has been transmitted via telephone
(that is, electronically, rather than by means of a verbal description)
is a covered physician's service. These remote services are not
Medicare telehealth services as defined under section 1834(m) of the
Act. Rather, these remote services that utilize telecommunications
technology are considered physicians' services in the same way as
services that are furnished in-person without the use of
telecommunications technology; they are paid under the same conditions
as in-person physicians' services (with no requirements regarding
permissible originating sites), and should be reported in the same way
(that is, without the -GT or -GQ modifier appended).

B. Requests for Adding Services to the List of Medicare Telehealth
Services

As noted above, in the December 31, 2002 Federal Register (67 FR
79988), we established a process for adding services to or deleting
services from the list of Medicare telehealth services. This process
provides the public with an ongoing opportunity to submit requests for
adding services. We assign any request to make additions to the list of
Medicare telehealth services to one of the following categories:
Category 1: Services that are similar to professional
consultations, office visits, and office psychiatry services. In
reviewing these requests, we look for similarities between the
requested and existing telehealth services for the roles of, and
interactions among, the beneficiary, the physician (or other
practitioner) at the distant site and, if necessary, the telepresenter.
We also look for similarities in the telecommunications system used to
deliver the proposed service, for example, the use of interactive audio
and video equipment.
Category 2: Services that are not similar to the current
list of telehealth services. Our review of these requests includes an
assessment of whether the use of a telecommunications system to deliver
the service produces similar diagnostic findings or therapeutic
interventions as compared with the in-person delivery of the same
service. Requestors should submit evidence showing that the use of a
telecommunications system does not affect the diagnosis or treatment
plan as compared to in-person delivery of the requested service.
Since establishing the process to add or remove services from the
list of approved telehealth services, we have added the following to
the list of Medicare telehealth services: individual HBAI services;
psychiatric diagnostic interview examination; ESRD services with 2 to 3
visits per month and 4 or more visits per month (although we require at
least 1 visit a month to be furnished in-person by a physician, CNS,
NP, or PA in order to examine the vascular access site); individual
MNT; neurobehavioral status exam; and initial and follow-up inpatient
telehealth consultations for beneficiaries in hospitals and skilled
nursing facilities (SNFs).

[[Page 73312]]

Requests to add services to the list of Medicare telehealth
services must be submitted and received no later than December 31 of
each calendar year to be considered for the next rulemaking cycle. For
example, requests submitted before the end of CY 2010 are considered
for the CY 2012 proposed rule. Each request for adding a service to the
list of Medicare telehealth services must include any supporting
documentation the requester wishes us to consider as we review the
request. Because we use the annual PFS rulemaking process as a vehicle
for making changes to the list of Medicare telehealth services,
requestors should be advised that any information submitted is subject
to public disclosure for this purpose. For more information on
submitting a request for an addition to the list of Medicare telehealth
services, including where to mail these requests, we refer readers to
the CMS Web site at http://www.cms.gov/telehealth/.

C. Submitted Requests for Addition to the List of Telehealth Services
for CY 2011

We received requests in CY 2009 to add the following services as
Medicare telehealth services effective for CY 2011: (1) Individual
kidney disease education (KDE) services; (2) individual diabetes self-
management training (DSMT) services; (3) group KDE, DSMT, MNT, and HBAI
services; (4) initial, subsequent, and discharge day management
hospital care services; (5) initial, subsequent, discharge day
management, and other nursing facility care services; (6)
neuropsychological testing services; (7) speech-language pathology
services; and (8) home wound care services. The following presents a
discussion of these requests, including our proposed additions to the
CY 2011 telehealth list.
1. Individual KDE Services
The American Society of Nephrology, Dialysis Patient Citizens,
AMGEN, and Kidney Care Partners submitted requests to add individual
KDE services, reported by HCPCS code G0420 (Face-to-face educational
services related to the care of chronic kidney disease; individual, per
session, per one hour), to the list of approved telehealth services for
CY 2011 on a category 1 basis.
Individual KDE services, covered under the new Medicare KDE benefit
effective for services furnished beginning in CY 2010, are defined as
face-to-face educational services provided to a patient with stage IV
chronic kidney disease (CKD). We believe the interaction between a
practitioner and a beneficiary receiving individual KDE services is
similar to the education, assessment, and counseling elements of
individual MNT services, reported by HCPCS code G0270 (Medical
nutrition therapy; reassessment and subsequent intervention(s)
following second referral in same year for change in diagnosis, medical
condition or treatment regimen (including additional hours needed for
renal disease), individual, face to face with the patient, each 15
minutes); CPT code 97802 (Medical nutrition therapy; initial assessment
and intervention, individual, face-to-face with the patient, each 15
minutes); and CPT code 97803 (Medical nutrition therapy; re-assessment
and intervention, individual, face-to-face with the patient, each 15
minutes), all services that are currently on the telehealth list.
Therefore, we proposed to add HCPCS code G0420 to the list of
telehealth services for CY 2011 on a category 1 basis and to revise our
regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include
individual KDE as a Medicare telehealth service.
Comment: Several commenters expressed support for CMS' proposal to
add KDE services to the list of Medicare telehealth services for CY
2011. One commenter stated that the proposal would provide patients at
risk for developing chronic kidney disease and ESRD with access to
educational services that may help in controlling the progression of
disease. Another commenter suggested that delivery of KDE services
through telehealth would provide beneficiaries with the flexibility to
interact with practitioners in a manner tailored to their needs, thus
facilitating a more patient-centered approach. Another commenter noted
that greater flexibility in the provision of KDE services is
particularly important in rural areas where individuals do not have as
much access to dialysis centers.
Response: We agree with the commenters that adding KDE services to
the list of Medicare telehealth services may be valuable to Medicare
beneficiaries, especially insofar as it helps provide greater access to
the services for beneficiaries in rural or other isolated areas.
Comment: One commenter who supported the proposal also encouraged
the CMS to maintain its existing policy regarding the qualified
providers for KDE services in order to appropriately ensure the quality
and content conveyed to patients in educational sessions and remain
concordant with the intent of MIPPA.
Response: We note that the addition of KDE to the list of Medicare
telehealth services does not alter the qualifications for providers of
KDE services as specified in Sec. 410.48 of the regulations.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to add HCPCS code G0420 to the list of
telehealth services for CY 2011 on a category 1 basis and to revise our
regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include
individual KDE as a Medicare telehealth service.
2. Individual DSMT Services
The Tahoe Forest Health System and the Marshfield Clinic submitted
requests to add individual DSMT services, reported by HCPCS code G0108
(Diabetes outpatient self-management training services, individual, per
30 minutes), to the list of telehealth services for CY 2011 on a
category 1 basis. In the CY 2009 PFS final rule with comment period (73
FR 69743), we stated that we believe individual DSMT services are not
analogous to individual MNT services because of the element of skill-
based training that is encompassed within individual DSMT services that
is not an aspect of individual MNT services (or any other services
currently approved for telehealth). Due to the statutory requirement
that DSMT services include teaching beneficiaries the skills necessary
for the self-administration of injectable drugs, we have stated our
belief that DSMT, whether provided to an individual or a group, must be
evaluated as a category 2 service as specified in the CY 2009 PFS
proposed rule (73 FR 38516). Prior to CY 2011 rulemaking, we had
considered several previous requests to add DSMT to the list of
Medicare telehealth services. We had not added individual DSMT to the
list of telehealth services because we believe that skill-based
training, such as teaching patients how to inject insulin, would be
difficult to accomplish effectively without the physical presence of
the teaching practitioner (70 FR 45787 and 70157, and 73 FR 38516 and
69743).
In considering the new request to add individual DSMT services to
the list of telehealth services in CY 2011, we took into account
requestors' argument that individual DSMT services are highly similar
to individual MNT services and that injection training constitutes just
a small proportion of DSMT services. Except for the component of
individual DSMT services that involves instruction in self-
administration of injectable drugs for eligible beneficiaries, we
agreed with the requestors that individual DSMT

[[Page 73313]]

services are similar to individual MNT services, which are currently on
the list of Medicare telehealth services. We note that Medicare
coverage of DSMT services was initially authorized in the BBA. After
more than a decade of Medicare coverage, the most recent information
shows that DSMT continues to be significantly underutilized in the
context of the eligible population of Medicare beneficiaries. While we
are uncertain to what extent geographic barriers to care contribute to
this underutilization, given the morbidity associated with poorly
managed diabetes and the growing evidence-base regarding effective DSMT
services, we believe it is very important to facilitate Medicare
beneficiary access to these underutilized services. While we were
previously concerned about treating the components of DSMT services
differently in the context of considering DSMT services for the
telehealth list, in the CY 2011 PFS proposed rule (75 FR 40108), we
stated our belief that our concern regarding the skill-based injection
training component of DSMT services could be addressed by imposing a
requirement that a minimum portion of the training be furnished in-
person. We noted that for beneficiaries who meet the coverage criteria,
Medicare covers 10 hours of DSMT services in the year following the
initial training, as described in the Medicare Benefit Policy Manual
(Pub. 100-02, Chapter 15, Section 300.3). Taking into consideration the
initial year coverage of DSMT services, for CY 2011 we proposed that a
minimum of 1 hour of instruction in injection training must be
furnished in-person during the year following the initial DSMT service.
Imposing this condition would allow us to expand access to DSMT
services by adding individual DSMT services to the list of telehealth
services, while ensuring effective injection training for
beneficiaries.
Therefore, we proposed to add HCPCS code G0108 to the list of
telehealth services beginning in CY 2011. We also proposed that, as a
condition of payment for individual DSMT services furnished as
telehealth services to an eligible telehealth individual, a minimum of
1 hour of in-person instruction in the self-administration of
injectable drugs must be furnished to the individual during the year
following the initial DSMT service. The injection training may be
furnished through either individual or group DSMT services. By
reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth
service, the distant site practitioner would certify that the
beneficiary has received or will receive 1 hour of in-person DSMT
services for purposes of injection training during the year following
the initial DSMT service. Consistent with this proposal, we proposed to
revise our regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to
include individual DSMT services as a Medicare telehealth service, with
the exception of 1 hour of in-person instruction in self-administration
of injectable drugs which must be furnished to the eligible telehealth
individual as individual or group DSMT services during the year
following the initial DSMT service.
Comment: A number of commenters expressed support for CMS' proposal
to add DSMT services to the list of Medicare telehealth services. One
commenter requested that CMS clarify that this proposal would permit
NPs and PAs in all patient care settings to provide and bill for DSMT
services furnished through telehealth technologies.
Response: As we stated in the CY 2011 PFS proposed rule (75 FR
40109), our proposal is consistent with the statutory requirements of
section 1834(m)(1) of the Act and as provided in Sec. 410.141(e) that
individual DSMT services may be furnished by a physician, individual,
or entity that furnishes other services for which direct Medicare
payment may be made and that submits necessary documentation to, and is
accredited by, an accreditation organization approved by us as
described in the Benefit Policy Manual (Pub. 100-04, chapter 15,
section 300.2). However, consistent with the statutory requirements of
section 1834(m)(1) of the Act and as provided in Sec. 410.78(b)(1) and
(b)(2) of our regulations, Medicare telehealth services, including
individual DSMT furnished as a telehealth service, can only be
furnished by a licensed physician, PA, NP, CNS, certified nurse-
midwife, clinical psychologist, clinical social worker, or registered
dietitian or nutrition professional. Additionally, the site of the
beneficiary must conform with the statutory requirements of telehealth
originating sites from section 1834(m)(3)(C) of the Act and described
in section IV.A. 2. of this final rule with comment period.
Comment: One commenter requested that pharmacists be added to the
list of eligible Medicare telehealth distant site practitioners. The
commenter stated that since pharmacists are already providing valuable
DSMT services to patients in-person, these practitioners should not be
excluded from providing those same valuable services via telehealth.
Response: Under section 1834(m) of the Act, payment is made for a
Medicare telehealth service furnished by a physician or practitioner in
a distant site. For purposes of Medicare telehealth services, the
physician or practitioner must either be a physician as defined in
section 1861(r) of the Act or another practitioner as defined in
section 1842(b)(18)(C) of the Act. Because pharmacists do not fall
within these statutory definitions, we do not have the authority to
make payment to pharmacists as eligible distant site practitioners for
Medicare telehealth services.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to add HCPCS code G0108 to the list of
telehealth services beginning in CY 2011. As a condition of payment for
individual DSMT services furnished as telehealth services to an
eligible telehealth individual, a minimum of 1 hour of in-person
instruction in the self-administration of injectable drugs must be
furnished to the individual during the year following the initial DSMT
service. The injection training may be furnished through either
individual or group DSMT services. By reporting the -GT or -GQ modifier
with HCPCS code G0108 as a telehealth service, the distant site
practitioner certifies that the beneficiary has received or will
receive 1 hour of in-person DSMT services for purposes of injection
training during the year following the initial DSMT service. Consistent
with this final policy, we are revising our regulations at Sec.
410.78(b) and Sec. 414.65(a)(1) to include individual DSMT services as
a Medicare telehealth service, with the exception of 1 hour of in-
person instruction in self-administration of injectable drugs which
must be furnished to the eligible telehealth individual as individual
or group DSMT services during the year following the initial DSMT
service.
We note that, as specified in Sec. 410.141(e), individual DSMT
services may be furnished by a physician, individual, or entity that
furnishes other services for which direct Medicare payment may be made
and that submits necessary documentation to, and is accredited by, an
accreditation organization approved by CMS. However, consistent with
the statutory requirements of section 1834(m)(1) of the Act and as
provided in Sec. 410.78(b)(1) and (b)(2) of our regulations, Medicare
telehealth services, including individual DSMT furnished as a
telehealth service, can only be furnished by a licensed physician, PA,
NP, CNS, certified nurse-midwife, clinical psychologist, clinical
social worker, or registered dietitian or nutrition professional.

[[Page 73314]]

3. Group KDE, MNT, DSMT, and HBAI Services
The American Society of Nephrology, Dialysis Patient Citizens,
AMGEN, Tahoe Forest Health Systems, Kidney Care Partners, the American
Telemedicine Association, and the Marshfield Clinic submitted requests
to add one or more of the following group services to the telehealth
list for CY 2011:
Group KDE services, reported by HCPCS code G0421 (Face-to-
face educational services related to the care of chronic kidney
disease; group, per session, per one hour);
Group MNT services, reported by CPT code 97804 (Medical
nutrition therapy; group (2 or more individual(s)), each 30 minutes);
Group DSMT services, reported by HCPCS code G0109
(Diabetes outpatient self-management training services, group session
(2 or more), per 30 minutes); and/or
Group HBAI services, reported by CPT code 96153 (Health
and behavior intervention, each 15 minutes, face-to-face; group (2 or
more patients)) and 96154 (Health and behavior intervention, each 15
minutes, face-to-face; family (with the patient present)).
When furnished as individual services, HBAI and MNT services are
currently on the list of Medicare telehealth services. Furthermore, we
proposed to add individual KDE and DSMT services to the list of
Medicare telehealth services beginning in CY 2011 as described above.
In the CY 2007 and CY 2010 PFS rulemaking cycles (70 FR 45787 and
70157, and 74 FR 33543 and 61764), we stated that we did not believe
that group services could be appropriately delivered through
telehealth. In the CY 2011 PFS proposed rule (75 FR 40109), we observed
that currently there are no group services approved as Medicare
telehealth services and that there is a different interactive dynamic
between the practitioner and his or her patients in group services as
compared to individual services. We previously had considered requests
to add various group services to the list of Medicare telehealth
services on a category 2 basis because we had believed that, especially
given the interactive dynamic between practitioners and their patients,
group services were not similar to other services on the list of
Medicare telehealth services. Therefore, we had maintained that it was
necessary to evaluate the addition of group services by comparing
diagnostic findings or therapeutic interventions when services are
furnished via telehealth versus when services are furnished in-person.
In the CY 2011 proposed rule (75 FR 40109), we stated that we
continue to believe that the group dynamic may be a critical and
defining element for certain services, and that this characteristic
precludes many group services from being considered on a category 1
basis for addition to the list of Medicare telehealth services. For
example, we believe that due to the therapeutic nature of the group
dynamic that is integral to group psychotherapy, group psychotherapy is
fundamentally different from other Medicare telehealth services and,
therefore, could not be considered on a category 1 basis for addition
to the telehealth services list. For the same reason, in the absence of
evidence to the contrary, we do not believe group psychotherapy
services could be appropriately delivered through telehealth.
However, upon further consideration, with regard to the particular
group education and training services for which we received requests
for addition to the Medicare telehealth services list, for CY 2011 we
concluded that we believe the group dynamic is not central to the core
education and training components of these particular services,
specifically DSMT, MNT, KDE, and HBAI services. We believe that these
group services are sufficiently similar to the individual, related
services that are already on the telehealth services list or were
proposed for addition beginning in CY 2011. Specifically, we believe
that for these group services, which consist principally of an
information exchange for the purpose of education and training, the
roles of, and interactions between, the patients and the practitioner
are sufficiently similar to the related individual education and
training services that the services can be furnished appropriately as a
telehealth service.
Therefore, we proposed to add HCPCS code G0421 for group KDE
services, CPT code 97804 for group MNT services, HCPCS code G0109 for
group DSMT services, and CPT codes 96153 and 96154 for group HBAI
services to the Medicare telehealth services list on a category 1 basis
for CY 2011. Furthermore, because the concerns we raised above
regarding adequate injection training with the addition of individual
DSMT are also present for group DSMT, we proposed to require the same
minimum of 1 hour of in-person instruction for injection training
within the year following the initial DSMT service for any beneficiary
that receives DSMT services via telehealth. By reporting the -GT or -GQ
modifier with HCPCS code G0109, the distant site practitioner would
certify that the beneficiary has received or will receive 1 hour of in-
person instruction in self-administration of injectable drugs which
must be furnished to the eligible telehealth individual as individual
or group DSMT services during the year following the initial DSMT
service. Consistent with this proposal to add these group education and
training services, we also proposed to revise our regulations at Sec.
410.78(b) and Sec. 414.65(a)(1) to include group KDE, MNT, DSMT, and
HBAI services as Medicare telehealth services, with the exception of 1
hour of in-person instruction in self-administration of injectable
drugs which must be furnished to the eligible telehealth individual as
individual or group DSMT services in the year following the initial
DSMT service.
Comment: Many commenters agreed with CMS' proposal to add group
KDE, MNT, DSMT, and HBAI to the list of Medicare telehealth services
for CY 2011. Some commenters commended CMS' willingness to expand the
list of Medicare telehealth services and explained that the additions
would facilitate beneficiary access to care.
Many commenters also urged CMS to make further additions to the
list of Medicare telehealth services beyond those proposed for CY 2011.
Response: We believe adding these group services to the list of
Medicare telehealth services will facilitate beneficiary access to
care, and we appreciate the commenters' shared interest in that goal.
The process for requesting additional services to be added to the
list of Medicare telehealth services is described in section IV.B. of
this final rule with comment period. Requests for additions for CY 2012
must be received by the end of CY 2010. Further information is
available about the process on the CMS web site at: http://www.cms.gov/telehealth/.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to add HCPCS code G0421 for group KDE
services, CPT code 97804 for group MNT services, HCPCS code G0109 for
group DSMT services, and CPT codes 96153 and 96154 for group HBAI
services to the Medicare telehealth services list on a category 1
basis. Furthermore, because we have the same concerns for group DSMT
services that we raised above regarding adequate injection training for
individual DSMT services, we are requiring the same minimum of 1 hour
of in-person instruction for injection training within

[[Page 73315]]

the year following the initial DSMT service for any beneficiary that
receives DSMT services via telehealth. By reporting the -GT or -GQ
modifier with HCPCS code G0109, the distant site practitioner would
certify that the beneficiary has received or will receive 1 hour of in-
person DSMT services for purposes of injection training during the year
following the initial DSMT service. Consistent with the addition of
these group education and training services, we are also revising our
regulations at Sec. 410.78(b) and Sec. 414.65(a)(1) to include group
KDE, MNT, DSMT, and HBAI services as Medicare telehealth services, with
the exception of 1 hour of in-person instruction for injection training
within the year following the initial DSMT service.
As described above for individual DSMT services, we note that group
DSMT services may be furnished by a physician, individual, or entity
that furnishes other services for which direct Medicare payment may be
made and that submits necessary documentation to, and is accredited by,
an accreditation organization approved by CMS, as specified in Sec.
410.141(e) for DSMT services. However, consistent with the statutory
requirements of section 1834(m)(1) of the Act and as provided in Sec.
410.78(b)(1) and (b)(2) of our regulations, Medicare telehealth
services, including group DSMT furnished as a telehealth service, can
only be furnished by a licensed physician, PA, NP, CNS, certified
nurse-midwife, clinical psychologist, clinical social worker, or
registered dietitian or nutrition professional.
4. Initial, Subsequent, and Discharge Day Management Hospital Care
Services
The University of Louisville School of Medicine, the American
Telemedicine Association, and Mille Lacs Health System submitted
various requests to add initial hospital care services (reported by CPT
codes 99221 (Level 1 initial hospital care), 99222 (Level 2 initial
hospital care), and 99223 (Level 3 initial hospital care)); subsequent
hospital care services (reported by CPT codes 99231 (Level 1 subsequent
hospital care), 99232 (Level 2 subsequent hospital care), and 99233
(Level 3 subsequent hospital care)); and/or hospital discharge day
management services (reported by CPT codes 99238 (Hospital discharge
day management; 30 minutes or less) and 99239 (Hospital discharge day
management; more than 30 minutes) to the Medicare telehealth services
list beginning in CY 2011, generally on a category 1 basis. Some of the
requestors also recommended that we limit the delivery of these
services through telehealth to the provision of services to patients
with a psychiatric diagnosis or to those treated in a psychiatric
hospital or licensed psychiatric bed.
We appreciate the recommendations of the requestors to
substantially expand the list of Medicare telehealth services. The
requestors submitted a number of studies regarding the outcomes of
telehealth services in caring for patients with psychiatric diagnoses.
However, we note that the CPT codes for hospital care services are used
to report care for hospitalized patients with a variety of diagnoses,
including psychiatric diagnoses. In the CY 2011 PFS proposed rule (75
FR 40110), we stated our belief that it would not be appropriate to add
services to the telehealth list only for certain diagnoses because the
service described by a HCPCS code is essentially the same service,
regardless of the patient's diagnosis. When evaluating the addition of
services for telehealth on a category 1 basis, our focus is on the
roles of, and interactions among, the beneficiary, the physician or
practitioner, and the telepresenter (if applicable), which generally
are similar across diagnoses for services that may be reported with the
same HCPCS codes. Even in the unique case of certain ESRD services, we
limited additions to the list of Medicare telehealth services based on
the appropriateness of certain specific codes, taking into
consideration the full service descriptions (69 FR 47511). Therefore,
we continue to believe that it is most appropriate to consider
additions to the list of telehealth services based on the overall
suitability of the services described by the relevant HCPCS codes to
delivery through telehealth.
In the CY 2005, CY 2008, and CY 2009 PFS rulemakings (69 FR 47510
and 66276, 72 FR 38144 and 66250, and 73 FR 38517 and 69745,
respectively), we did not add initial, subsequent, or discharge day
management hospital care services to the list of approved telehealth
services because of our concern regarding the use of telehealth for the
ongoing evaluation and management (E/M) for the generally high acuity
of hospital inpatients. While we continue to have some concern in this
area, we also share the requestors' interest in improving access for
hospitalized patients to care furnished by treating practitioners.
Therefore, we reevaluated these services in the context of the CY 2011
requests, including considering the possibility that these services
could be added on a category 1 basis based on their resemblance to
services currently on the telehealth list, such as initial and follow-
up inpatient telehealth consultations. The following presents a
discussion of our review for the CY 2011 proposed rule of the
subcategories of hospital care services included in these requests.
Currently, one of the three codes for an initial hospital care
service (specifically CPT codes 99221, 99222, or 99223) is reported for
the first hospital inpatient E/M visit to the patient by the admitting
or a consulting practitioner when that visit is furnished in person. In
addition, we note that currently there are several HCPCS G-codes on the
Medicare telehealth services list that may be reported for initial and
follow-up inpatient consultations through telehealth, specifically
HCPCS codes G0406 (Follow-up inpatient telehealth consultation,
limited, physicians typically spend 15 minutes communicating with the
patient via telehealth); G0407 (Follow-up inpatient telehealth
consultation, intermediate, physicians typically spend 25 minutes
communicating with the patient via telehealth); G0408 (Follow-up
inpatient telehealth consultation, complex, physicians typically spend
35 minutes or more communicating with the patient via telehealth);
G0425 (Initial inpatient telehealth consultation, typically 30 minutes
communicating with the patient via telehealth); G0426 (Initial
inpatient telehealth consultation, typically 50 minutes communicating
with the patient via telehealth); and G0427 (Initial inpatient
telehealth consultation, typically 70 minutes or more communicating
with the patient via telehealth).
While initial inpatient consultation services are currently on the
list of approved telehealth services, there are no services on the
current list of telehealth services that resemble initial hospital care
for an acutely ill patient by the admitting practitioner who has
ongoing responsibility for the patient's treatment during the hospital
course. Therefore, we were unable to consider initial hospital care
services on a category 1 basis for the telehealth list for CY 2011.
We reviewed the documentation submitted in support of adding the
initial hospital care codes to the Medicare telehealth services list as
category 2 requests. Most of the studies provided by the requestors
were specific to the treatment of patients with particular diagnoses.
Additionally, the studies were not specific to initial hospital care
visits by admitting practitioners. Finally, most of the studies
concluded that more research was required in order to establish medical
equivalence between telehealth

[[Page 73316]]

and in-person services. Therefore, we received no information that
provides robust support for the addition of initial hospital care
services to the approved telehealth list on a category 2 basis. The
initial hospital care codes describe the first visit to the
hospitalized patient by the admitting practitioner who may or may not
have seen the patient in the decision-making phase regarding
hospitalization. We believe it is critical that the initial hospital
visit by the admitting practitioner be conducted in-person to ensure
that the practitioner with ongoing treatment responsibility
comprehensively assesses the patient's condition upon admission to the
hospital through a thorough in-person examination. Therefore, we did
not propose to add initial hospital care services to the Medicare
telehealth services list for CY 2011.
We again considered adding subsequent hospital care services
reported by CPT codes 99231 through 99233 to the telehealth list for CY
2011 on a category 1 basis. In the CY 2005 and CY 2008 PFS proposed
rules (69 FR 47511 and 72 FR 38155), we stated that the potential
acuity of patients in the hospital setting precludes consideration of
subsequent hospital visits as similar to existing telehealth services.
However, as stated earlier, we also note that HCPCS codes for initial
and follow-up inpatient consultation services are on the list of
telehealth services. These E/M services are furnished to high acuity
hospitalized patients, although not by the admitting practitioner
himself or herself. However, in light of the increasingly prevalent
care model that entails multidisciplinary team care for patients with
complex medical illnesses that involve multiple body systems,
consulting practitioners may often play a key, intensive, and ongoing
role in caring for hospitalized patients. Therefore, we believe that
subsequent hospital care visits by a patient's admitting practitioner
may sufficiently resemble follow-up inpatient consultation services to
consider these subsequent hospital care services on a category 1 basis
for the telehealth list. While we still believe the potential acuity of
hospital inpatients is greater than those patients likely to receive
currently approved Medicare telehealth services, we also believe that
it would be appropriate to permit some subsequent hospital care
services to be furnished through telehealth in order to ensure that
hospitalized patients have frequent encounters with their admitting
practitioner. However, we also continue to believe that the majority of
these visits should be in-person to facilitate the comprehensive,
coordinated, and personal care that medically volatile, acutely ill
patients require on an ongoing basis.
Therefore, for CY 2011 we proposed that subsequent hospital care
services, specifically CPT codes 99231, 99232, and 99233, be added to
the list of telehealth services on a category 1 basis for CY 2011, but
with some limitations on the frequency with which these services may be
furnished through telehealth. Because of our concerns regarding the
potential acuity of hospital inpatients, we proposed to limit the
provision of subsequent hospital care services through telehealth to
once every 3 days. We were confident that admitting practitioners would
continue to make appropriate in-person visits to all patients who need
such care during their hospitalization. Consulting practitioners should
continue to use the inpatient telehealth consultation HCPCS G-codes,
specifically G0406, G0407, G0408, G0425, G0426, or G0427 when reporting
consultations furnished to inpatients via telehealth.
Consistent with this proposal, we proposed to revise Sec.
410.78(b) and Sec. 414.65(a)(1) to include subsequent hospital care
services as Medicare telehealth services, with the limitation of one
telehealth subsequent hospital care service every 3 days.
We also considered adding hospital discharge day management
services to the list of telehealth services. These services, reported
by CPT codes 99238 and 99239, include the final examination of the
patient, discussion of the hospital stay, instructions for continuing
care to all relevant caregivers, and preparation of discharge records,
prescriptions, and referral forms. These services are furnished when a
practitioner deems it medically reasonable and necessary to assess a
patient's readiness for discharge and to prepare a patient for
discharge from an acute care environment to a less intensive setting.
There are no services on the current list of telehealth services that
resemble such preparation of a patient for discharge. We believe it is
especially important that, if a practitioner furnishes a discharge day
management service, the service be furnished in-person in order to
allow the practitioner to comprehensively assess the patient's status
in preparation for discharge so that the patient will have a higher
likelihood of making a successful transition to the less intensive
setting. Therefore, we did not consider hospital discharge day
management services for addition to the Medicare telehealth services
list on a category 1 basis.
We reviewed the documentation submitted by requestors in support of
adding these codes to the Medicare telehealth services list on a
category 2 basis. Most of the submitted studies were specific to the
treatment of patients with specific diagnoses and were not specific to
discharge services. Additionally, most of the studies concluded that
more research was required in order to establish medical equivalence
between telehealth and in-person services. The submitted documentation
did not provide the necessary evidence to alter our previous conclusion
that hospital discharge day management services should be provided in-
person in light of the acuity of hospitalized patients, their typically
complex post-hospitalization care needs, and the importance of patient
education by the admitting practitioner who had ongoing responsibility
for the patient's treatment during the hospital stay. Therefore, we did
not propose to add hospital discharge day management services to the
list of telehealth services for CY 2011.
Comment: Many commenters expressed support for all of CMS' proposed
additions to the list of Medicare telehealth services, including
subsequent hospital care services. One commenter urged CMS to focus on
adding services where research demonstrates that technology can
facilitate medically equivalent services and improve beneficiary access
to providers, and to carefully monitor implementation of any new
telehealth services to ensure that patients' experience of the care is
positive and that patient outcomes are not compromised. The commenter
encouraged CMS' continued attention to the evidence and the role of
patient needs as CMS evaluates telehealth requests. The commenter cited
CMS' decision not to propose the addition of hospital discharge day
management services as a Medicare telehealth service as an example of
the agency applying appropriate rigor to best reflect patient needs and
preferences.
Response: We appreciate the support for our proposed additions, as
well as our consideration and decisions regarding requested additions
to telehealth services that we did not propose to add to the list of
telehealth services for CY 2011.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to add subsequent hospital care
services, specifically CPT codes 99231, 99232, and 99233, to the list
of telehealth services on a category 1 basis for CY 2011, but with the
limitation of one

[[Page 73317]]

subsequent hospital care service furnished through telehealth every 3
days. We are revising Sec. 410.78(b) and Sec. 414.65(a)(1)
accordingly to include subsequent hospital care services as Medicare
telehealth services, with the limitation of one telehealth subsequent
hospital care service every 3 days. We are also finalizing our decision
not to add initial or discharge day management hospital care services
to the list of Medicare telehealth services.
5. Initial, Subsequent, Discharge Day Management, and Other Nursing
Facility Care Services
The American Telemedicine Association and the Marshfield Clinic
submitted requests to add nursing facility care codes, covering the
spectrum of initial (reported by CPT codes 99304 (Level 1 initial
nursing facility care), 99305 (Level 2 initial nursing facility care)
and 99306 (Level 3 initial nursing facility care)); subsequent
(reported by CPT codes 99307 (Level 1 subsequent nursing facility
care), 99308 (Level 2 subsequent nursing facility care), 99309 (Level 3
subsequent nursing facility care), and 99310 (Level 4 subsequent
nursing facility care)); discharge day management (reported by CPT
codes 99315 (Nursing facility discharge day management; 30 minutes or
less) and 99316 (Nursing facility discharge day management; more than
30 minutes)); and other (reported by CPT code 99318 (Evaluation and
management of a patient involving an annual nursing facility
assessment)) services, to the Medicare telehealth services list
beginning in CY 2011. The commenters requesting the addition of these
services expressed concerns regarding limited access to care if we did
not allow these services to be furnished through telehealth, and
requested that CMS acknowledge the recent Congressional inclusion of
nursing facilities as telehealth originating sites by adding these
codes to the list of Medicare telehealth services.
In the CY 2010 PFS proposed and final rules (74 FR 33544 and 74 FR
61762), we discussed concerns about potential disparities in patient
acuity between nursing facility services and the current list of
Medicare telehealth services. We also declined to add HCPCS codes to
the Medicare telehealth services list that are used exclusively to
describe Federally-mandated nursing facility visits. As discussed in
the CY 2010 PFS proposed rule (74 FR 33543), the long-term care
regulations at Sec. 483.40(c) require that residents of SNFs receive
initial and periodic personal visits. These regulations ensure that at
least a minimal degree of personal contact between a practitioner and a
SNF resident is maintained, both at the point of admission to the
facility and periodically during the course of the resident's stay. We
continue to believe that these Federally-mandated visits should be
conducted in-person, and not as Medicare telehealth services.
Therefore, in the CY 2010 PFS final rule with comment period, we
revised Sec. 410.78 to preclude physicians and other practitioners
from furnishing the physician visits required under Sec. 483.40(c)
through telehealth.
We reviewed the use of telehealth for each of the subcategories of
nursing facility services included in the requests for CY 2011. We
identified the E/M services that fulfill Federal requirements for
personal visits under Sec. 483.40(c), and we did not propose for CY
2011 to add any HCPCS codes to the Medicare telehealth services list
that are used exclusively to describe these Federally-mandated visits.
These codes include the CPT codes for initial nursing facility care
(CPT codes 99304 through 99306) that are used to report the initial E/M
visit that fulfills Federally-mandated requirements under Sec.
483.40(c) and other nursing facility service (CPT code 99318) that is
only payable by Medicare if the visit is substituted for a Federally-
mandated visit under Sec. 483.40(c).
The nursing facility discharge day management services reported
under CPT code 99315 and 99316 are E/M visits that prepare a nursing
facility resident for discharge from the facility. There are no
Medicare requirements that such a service be furnished. If a
practitioner chooses to furnish this service, we continue to believe
that an in-person visit is most appropriate in order to ensure the
resident is prepared for discharge from the nursing facility. These
services are furnished when a practitioner deems it medically
reasonable and necessary to assess a patient's readiness for and to
prepare a patient being discharged from the monitored nursing facility
environment to another typically less intensive setting. There are no
services on the current list of telehealth services that resemble such
preparation of a patient for discharge. As in the case of hospital
discharge day management services, we believe it is especially
important that, if a practitioner furnishes a nursing facility
discharge day management service, the service be furnished in-person.
The practitioner must be able to comprehensively assess the patient's
status in preparation for discharge so that the patient will have a
higher likelihood of making a successful transition from the nursing
facility to another setting. Therefore, we did not consider nursing
facility discharge day management services for addition to the Medicare
telehealth services list on a category 1 basis for CY 2011. When we
considered the addition of these services under category 2, we had no
evidence that nursing facility discharge services furnished through
telehealth are equivalent to in-person discharge services. Therefore,
we did not propose to add nursing facility discharge day management
services to the CY 2011 telehealth list.
Subsequent nursing facility services, reported by CPT codes 99307
through 99310, may be used to report either a Federally-mandated
periodic visit under Sec. 483.40(c) or another E/M visit, prior to or
after the initial nursing facility care visit, as long as the
subsequent nursing facility care visit is medically reasonable and
necessary for the resident's care. While we continue to believe that
many SNF residents have complex medical care needs, we believe that it
is appropriate to consider the addition of these codes to the
telehealth list on a category 1 basis. As we state above in the context
of our discussion of subsequent hospital care services, the HCPCS codes
for initial and follow-up inpatient consultation services for nursing
facility patients are on the list of Medicare telehealth services, and
subsequent nursing facility services are similar to those services.
These E/M services are furnished to high acuity, complex SNF patients,
although not by the admitting practitioner himself or herself.
Therefore, we believe that subsequent nursing facility visits by a
patient's admitting practitioner sufficiently resemble follow-up
inpatient consultation services to consider them on a category 1 basis
for the telehealth list. We concluded for CY 2011 that it would be
appropriate to permit some subsequent nursing facility care services to
be furnished through telehealth to ensure that complex nursing facility
patients have frequent encounters with their admitting practitioner,
although we continue to believe that the Federally-mandated visits
should be in-person to facilitate the comprehensive, coordinated, and
personal care that these complex patients require on an ongoing basis.
Therefore, we proposed that subsequent nursing facility care
services, specifically CPT codes 99307, 99308, 99309 and 99310, be
added to the list of Medicare telehealth services on a category 1 basis
beginning in CY 2011, with some limitations on furnishing these
services through telehealth. Because of our concerns regarding the
potential acuity and

[[Page 73318]]

complexity of SNF inpatients, we proposed to limit the provision of
subsequent nursing facility care services furnished through telehealth
to once every 30 days. We were especially interested in public
comments, including any evidence regarding patterns of high quality
care and clinical outcomes, regarding this proposal to limit the
provision of subsequent nursing facility care services furnished
through telehealth to once every 30 days. We remain committed to
ensuring that SNF inpatients receive appropriate in-person visits and
that Medicare pays only for medically reasonable and necessary care.
Currently and continuing in CY 2011, an unlimited number of initial and
follow-up consultation services may be furnished through telehealth to
these patients, so we believe that only a limited number of subsequent
nursing facility care services by the admitting practitioner would be
appropriate for SNF inpatients. Finally, we specified that subsequent
nursing facility care services reported for a Federally-mandated
periodic visit under Sec. 483.40(c) may not be furnished through
telehealth. In light of this CY 2011 proposal, we were confident that
admitting practitioners would continue to make appropriate in-person
visits to all patients who need such care during their SNF stay.
Consistent with our proposal, we proposed to revise Sec. 410.78(b)
and Sec. 414.65(a)(1) to include subsequent nursing facility care
services as Medicare telehealth services, with the limitation of one
telehealth subsequent nursing facility care service every 30 days.
Federally-mandated periodic visits may not be furnished through
telehealth, as specified currently in Sec. 410.78(e)(2).
Comment: One commenter recommended that CMS limit the use of
telehealth for subsequent nursing facility care services to CPT codes
99307 and 99308, the lower two levels of care. The commenter stated
that the subsequent nursing facility care services described by CPT
codes 99309 and 99310, the higher two levels of care, require a
detailed to comprehensive history and examination, along with moderate
to complex decisionmaking that warrant an in-person visit with the
physician. The same commenter disagreed with the limitation of one
telehealth subsequent nursing facility care service every 30 days and
suggested that unless and until evidence of overutilization is
obtained, the limit could hinder access to appropriate care under the
telehealth benefit. The commenter agreed with the CMS policy that all
Federally-mandated visits as defined by the long-term care regulations
Sec. 483.40(c) should be conducted in-person and not as Medicare
telehealth services.
Response: We appreciate the response to our specific request for
public comment regarding the addition of subsequent nursing facility
care services to the list of Medicare telehealth services with the
limitation of one telehealth subsequent nursing facility care service
every 30 days. As we stated in the proposed rule (75 FR 40112), we
remain committed to ensuring that SNF inpatients receive appropriate
in-person visits and that Medicare pays only for medically reasonable
and necessary care. We received no new evidence from the commenter
regarding patterns of high quality care and clinical outcomes in terms
of our proposal to limit the provision of subsequent nursing facility
care services furnished through telehealth to once every 30 days.
Because we want to ensure that nursing facility patients with complex
medical conditions have appropriately frequent medically reasonable and
necessary encounters with their admitting practitioner, we continue to
believe that it would be appropriate to permit the full range of
subsequent nursing facility care services to be furnished through
telehealth. At the same time, because of our concerns regarding the
potential acuity and complexity of SNF inpatients, we want to ensure
that these patients continue to receive in-person visits as appropriate
to manage their care. We are adding these services as Medicare
telehealth services with the limitation as we proposed, and we remain
confident that admitting practitioners will continue to make
appropriate in-person visits to all patients who need such care during
their SNF stay.
After consideration of the public comments we received, we are
finalizing our CY 2011 proposal to add subsequent nursing facility care
services, specifically CPT codes 99307, 99308, 99309 and 99310, to the
list of Medicare telehealth services on a category 1 basis beginning in
CY 2011, with limits to the provision of subsequent nursing facility
care services furnished through telehealth to once every 30 days. We
are revising Sec. 410.78(b) and Sec. 414.65(a)(1) to include
subsequent nursing facility care services as Medicare telehealth
services, with the limitation of one telehealth subsequent nursing
facility care service every 30 days. Federally-mandated periodic visits
may not be furnished through telehealth, as specified currently in
Sec. 410.78(e)(2).
6. Neuropsychological Testing Services
The American Telemedicine Association submitted a request to add
neuropsychological testing services, described by CPT codes 96119
(Neuropsychological testing (for example, Halstead-Reitan
Neuropsychological Battery, Wechsler Memory Scales and Wisconsin Card
Sorting Test), per hour of the psychologist's or physician's time, both
face-to-face time administering tests to the patient and time
interpreting these test results and preparing the report); and 96119
(Neuropsychological testing (for example, Halstead-Reitan
Neuropsychological Battery, Wechsler Memory scales and Wisconsin Card
Sorting Test), with qualified health care professional interpretation
and report, administered by technician, per hour of technician time,
face-to-face), to the list of telehealth services for CY 2011 based on
their similarity to other telehealth services.
In the CY 2008 PFS final rule with comment period (72 FR 66251), we
stated that we have received conflicting comments and data regarding
the appropriateness of furnishing neuropsychological testing via
telehealth. While we appreciate the recent request for addition of
these same services to the Medicare telehealth services list, we did
not believe that these services are similar to services currently on
the Medicare telehealth services list and, therefore, we concluded that
they would not be appropriate for consideration or addition under
category 1 for CY 2011. In the CY 2011 request for the addition of the
these services, we received no information to indicate that the
diagnostic findings of neuropsychological testing through telehealth
are similar to those based upon in-person testing, and therefore that
testing through telehealth does not affect the patient's diagnosis.
Consequently, we did not propose to add neuropsychological testing
services to the list of approved Medicare telehealth services for CY
2011.
We received no public comments regarding our discussion of the
request to add neuropsychological testing to the list of Medicare
telehealth services. Therefore, we are finalizing our decision not to
add neuropsychological testing to the list of Medicare telehealth
services for CY2011.
7. Speech-Language Pathology Services
The Marshfield Clinic submitted a request to add various speech-
language pathology services to the list of approved telehealth services
for CY

[[Page 73319]]

2011. Speech-language pathologists are not permitted under section
1842(b)(18)(C) of the Act to furnish and receive payment for Medicare
telehealth services. Therefore, we did not propose to add any speech-
language pathology services to the list of Medicare telehealth services
for CY 2011. For further discussion of these services in the context of
telehealth, we refer readers to the CY 2005 and CY 2007 PFS proposed
and final rules with comment period (69 FR 47512 and 66276, and 71 FR
48995 and 69657).
Comment: One commenter stated that research has proven that
audiology procedures offered via telehealth services have great
potential. The commenter also stated that CMS should use its broad
discretion in implementing programs to expand the list of available
telehealth services to include audiology.
Response: It is not within our administrative authority to pay
speech language pathologists and audiologists for services furnished
via telehealth. The statute authorizes the Secretary to pay for
telehealth services only when furnished by a physician or a
practitioner as those terms are defined in section 1834(m)(4)(D) and
(E) of the Act.
After consideration of the public comment we received, we are
finalizing our decision not to add various speech-language pathology
services to the list of approved telehealth services for CY 2011.
8. Home Wound Care Services
Wound Care Associates, LLC, submitted a request to add wound care
in the home setting to the list of Medicare telehealth services. A
patient's home is not permitted under current statute to serve as an
originating site for Medicare telehealth services. Therefore, we did
not propose to add home wound care services to the list of Medicare
telehealth services for CY 2011.
We received no public comments regarding our discussion of the
request to add wound care in the home setting to the list of Medicare
telehealth services. Therefore, we are finalizing our decision not to
add wound care in the home setting to the list of Medicare telehealth
services for CY2011.
9. Other Issues
We received other public comments on matters related to Medicare
telehealth services that were not the subject of proposals in the CY
2011 PFS proposed rule. We thank the commenters for sharing their views
and suggestions. Because we did not make any proposals regarding these
matters, we do not generally summarize or respond to such comments in
this final rule with comment period. However, we are summarizing and
responding to the following comments in order to reiterate certain
information.
Comment: One commenter requested an explanation of the acceptable
time and format to request or recommend changes to the criteria set in
2003 by which CMS considers specific services for Medicare coverage
when furnished through telehealth.
Response: As we discussed in the CY 2010 PFS final rule with
comment period (74 FR 61766), our established criteria and process for
reviewing requests to add to the list of approved Medicare telehealth
services were subject to full notice and comment procedures in the CY
2003 PFS proposed and final rules. Since we did not make any proposals
relating to the criteria or process for CY 2011, any potential
revisions to the process for adding or deleting services from the list
of approved Medicare telehealth services are outside the scope of this
CY 2011 final rule with comment period.
Throughout the year, we regularly meet with parties who want to
share their views on topics of interest to them. These discussions may
provide us with information regarding changes in medical practice and
afford opportunities for the public to bring to our attention issues
they believe we should consider for future rulemaking. Thus, we
encourage stakeholders to contact us at any time if there are topics
related to physician payment policy that they would like to discuss.
Comment: One commenter requested an explanation regarding how the
payment rates for telehealth consultations are set in a manner that is
consistent with section 1834(m)(2)(A) of the Act that requires Medicare
to pay a practitioner who furnishes a telehealth service an amount
equal to the amount that the practitioner would have been paid if the
service had been furnished without the use of a telecommunications
system.
Response: As we stated in the CY 2009 PFS final rule with comment
period (73 FR 69745), we established the RVUs for follow-up inpatient
telehealth consultations at the same level as the RVUs established for
subsequent hospital care (as described by CPT codes 99231 through
99233). For CY 2010, we established the RVUs for initial inpatient
telehealth consultations at the same level as the RVUs for initial
hospital care (as described by CPT codes 99221 through 99223) (75 FR
61775). We believe this is appropriate because a physician or
practitioner furnishing a telehealth service is paid an amount equal to
the amount that would have been paid if the service had been furnished
without the use of a telecommunication system. Since physicians and
practitioners furnishing follow-up inpatient consultations in an in-
person encounter must continue to utilize subsequent hospital care
codes (as described by CPT codes 99231 through 99233) and those
furnishing initial inpatient consultations in an in-person encounter
must generally utilize initial hospital care codes (as described by CPT
codes 99221 through 99223), we believe it is appropriate that the RVUs
for the subsequent and initial telehealth HCPCS G-codes are set at the
same level as the subsequent and initial hospital care codes,
respectively.

D. Summary of CY 2011 Telehealth Policies

In summary, we are finalizing our proposals to add the following
requested services to the list of Medicare telehealth services for CY
2011:
Individual and group KDE services (HCPCS codes G0420 and
G0421, respectively);
Individual and group DSMT services, with a minimum of 1
hour of in-person instruction to be furnished in the year following the
initial DSMT service to ensure effective injection training (HCPCS
codes G0108 and G0109, respectively);
Group MNT and HBAI services (CPT codes 97804, and 96153
and 96154, respectively);
Subsequent hospital care services, with the limitation for
the patient's admitting practitioner of one telehealth visit every 3
days (CPT codes 99231, 99232, and 99233); and
Subsequent nursing facility care services, with the
limitation for the patient's admitting practitioner of one telehealth
visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).
Furthermore, we are revising Sec. 410.78(b) and Sec. 414.65(a)(1)
accordingly. Specifically, we are adding individual and group KDE
services, individual and group DSMT services, group MNT services, group
HBAI services, and subsequent hospital care and nursing facility care
services to the list of telehealth services for which payment will be
made at the applicable PFS payment amount for the service of the
practitioner. In addition, we have reordered the listing of services in
these two sections and removed ``initial and follow-up inpatient
telehealth consultations furnished to beneficiaries in hospitals and
SNFs'' in Sec. 410.78(b) because these are described by the more
general term ``professional

[[Page 73320]]

consultations'' that is in the same section. Finally, we are continuing
to specify that the physician visits required under Sec. 483.40(c) may
not be furnished as telehealth services.

E. Telehealth Originating Site Facility Fee Payment Amount Update

Section 1834(m) of the Act establishes the payment amount for the
Medicare telehealth originating site facility fee for telehealth
services provided from October 1, 2001, through December 31 2002, at
$20. For telehealth services provided on or after January 1 of each
subsequent calendar year, the telehealth originating site facility fee
is increased by the percentage increase in the MEI as defined in
section 1842(i)(3) of the Act. The MEI increase for 2011 is 0.4
percent. Therefore, for CY 2011, the payment amount for HCPCS code
Q3014 (Telehealth originating site facility fee) is 80 percent of the
lesser of the actual charge or $24.10. The Medicare telehealth
originating site facility fee and MEI increase by the applicable time
period is shown in Table 49.

Table 49--The Medicare Telehealth Originating Site Facility Fee and MEI
Increase by the Applicable Time Period
------------------------------------------------------------------------
MEI
Facility increase Period
fee (%)
------------------------------------------------------------------------
$20.00 N/A 10/01/2001-12/31/2002
$20.60 3.0 01/01/2003-12/31/2003
$21.20 2.9 01/01/2004-12/31/2004
$21.86 3.1 01/01/2005-12/31/2005
$22.47 2.8 01/01/2006-12/31/2006
$22.94 2.1 01/01/2007-12/31/2007
$23.35 1.8 01/01/2008-12/31/2008
$23.72 1.6 01/01/2009-12/31/2009
$24.00 1.2 01/01/2010-12/31/2010
$24.10 0.4 01/01/2011-12/31/2011
------------------------------------------------------------------------

V. Addressing Interim Final Relative Value Units From CY 2010 and
Establishing Interim Relative Value Units for CY 2011

A. Background

In accordance with section 1848(c) of the Act, CMS determines work,
PE, and malpractice RVUs for each service paid under the PFS. On an
annual basis, the AMA RUC provides CMS with recommendations regarding
physician work values for new, revised, and potentially misvalued
codes. Over the last several years, CMS, in conjunction with the AMA
RUC, has identified and reviewed numerous potentially misvalued CPT
codes. In 2006, the AMA RUC established the Five-Year Review
Identification Workgroup to identify potentially misvalued services
using the following screens: ``New Technology;'' ``Site-of-Service
Anomalies;'' `` High Volume Growth;'' ``CMS Fastest Growing;'' ``High
Intra-Service Work per Unit Time (IWPUT);'' ``Services Surveyed by One
Specialty--Now Performed by a Different Specialty;'' ``Harvard-Valued,
Utilization over 1 Million;'' ``Harvard Valued, Utilization over
100,000;'' and ``Codes Reported Together/Bundled CPT Services.'' In
addition to providing recommendations to CMS for work RVUs, the AMA
RUC's Practice Expense Subcommittee reviews and then the AMA RUC
recommends direct PE inputs (clinical labor, medical supplies, and
medical equipment) for individual services. To guide the establishment
of malpractice RVUs for new and revised codes before the next 5-Year
Review of Malpractice, the AMA RUC also provides crosswalk
recommendations, that is, ``source'' codes with a similar specialty mix
of practitioners furnishing the source code and the new/revised code.
CMS reviews the AMA RUC recommendations on a code-by-code basis. For
AMA RUC recommendations regarding physician work RVUs, we determine
whether we agree with the recommended work RVUs for a service (that is,
we agree the valuation is accurate), or, if we disagree, we determine
an alternative value that better reflects our estimate of the physician
work for the service. Because of the timing of the CPT Editorial Panel
decisions, AMA RUC recommendations, and our rulemaking cycle, we
publish these work RVUs in the PFS final rule with comment period as
interim final values, subject to public comment. Similarly, we assess
the AMA RUC's recommendations for direct PE inputs and malpractice
crosswalks, and establish PE and malpractice interim final values,
which are also subject to comment. We note that, with respect to
interim final PE RVUs, the main aspect of our valuation that is open
for public comment for a new, revised, or potentially misvalued code is
the direct PE inputs and not the other elements of the PE valuation
methodology, such as the indirect cost allocation methodology, that
also contribute to establishing the PE RVUs for a code. The public
comment period on the PFS final rule with comment period remains open
for 60 days after the rule is issued.
If we receive public comments on the interim final work RVUs for a
specific code indicating that refinement of the interim final work
value is warranted based on sufficient information from the commenters
concerning the clinical aspects of the physician work associated with
the service (57 FR 55917), we refer the service to a refinement panel,
as discussed in further detail in sections III.I. and V.B.1. of this
final rule with comment period.
In the interval between closure of the comment period and the
subsequent year's PFS final rule with comment period, we consider all
of the public comments on the interim final work, PE, and malpractice
RVUs for the new, revised, and potentially misvalued codes and the
results of the refinement panel, if applicable. Finally, we address the
interim final RVUs (including the interim final direct PE inputs) by
providing a summary of the public comments and our responses to those
comments, including a discussion of any changes to the interim final
work or malpractice RVUs or direct PE inputs, in the following year's
PFS final rule with comment period. We then typically finalize the
direct PE inputs and the work, PE, and malpractice RVUs for the service
in that year's PFS final rule with comment period, unless we determine
it would be more appropriate to continue their interim final status for
another year and solicit further public comment.

B. Addressing Interim Final RVUs From CY 2010

In this section, we address the interim final values published in
Appendix C of the CY 2010 PFS final rule with comment period (74 FR
62144 through 62146), as subsequently corrected in the December 10,
2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR 26350).
We discuss the results of the CY 2010 refinement panel, respond to
public comments received on specific interim final values (including
direct PE inputs) from CY 2010, address the status of the interim final
values of a number of potentially misvalued codes from CY 2009 and CY
2010, and address the other new, revised, or potentially misvalued
codes with interim final values for CY 2010 that are not specifically
discussed elsewhere in this final rule with comment period.
We note that the final CY 2011 direct PE database that lists the
direct PE inputs is available on the CMS Web site under the downloads
for the CY 2011 PFS final rule with comment period at: http://
www.cms.gov/PhysicianFeeSched/PFSFRN/

[[Page 73321]]

list.aspTopOfPage. The final CY 2011 work, PE, and malpractice
RVUs are displayed in Addendum B to this final rule with comment
period.
1. CY 2010 Interim Final Work RVUs Referred to the Refinement Panel
We received public comments on 4 CPT codes with CY 2010 interim
final work values. We referred these services to the CY 2010 refinement
panel for further review. For ease of discussion, we will be referring
to these services as ``refinement codes.'' Consistent with past
practice (62 FR 59084), we convened a multispecialty panel of
physicians to assist us in the review of the comments. The panel was
moderated by our physician advisors, and consisted of the following
voting members:
One or two clinicians representing the commenting
organization.
Two primary care clinicians nominated by the American
Academy of Family Physicians and the American College of Physicians.
Three contractor medical directors (CMDs).
Clinicians with practices in related specialties who were
expected to have knowledge of the services under review.
We assembled a set of 300 reference services and asked the panel
members to compare the clinical aspects of physician work for the
refinement code to one or more of the reference services. In compiling
the set of reference services, we attempted to include: (1) Services
that are commonly performed for which the work RVUs are not
controversial; (2) services that span the spectrum of work intensity;
and (3) at least three services performed by each of the major
specialties that furnish the refinement codes so that the perspective
of relevant specialties would be represented. The panel process was
designed to capture each participant's independent judgment and his or
her clinical experience which informed and drove the discussion of the
refinement code during the refinement panel proceedings. Following the
discussion, each voting participant rated the physician work of the
refinement code. Ratings were obtained individually and confidentially,
with no attempt to achieve consensus among the panel members.
We then analyzed the ratings for each refinement code based on a
presumption that the interim final work RVUs were correct unless the
ratings clearly indicated a different result. Ratings of work were
analyzed for consistency among the four different groups (commenting
organization, primary care physicians, CMDs, and related clinicians)
represented on the panel. In addition, we used statistical tests to
determine whether there was sufficient agreement among the groups of
the panel and whether the agreed-upon RVUs differed significantly from
the interim final RVUs published in Addendum C of the CY 2010 final
rule with comment period. We did not modify the interim final RVUs
unless there was clear agreement for a change. If there was agreement
across groups for change, but the groups did not agree on what the new
RVUs should be, we eliminated the outlier group and looked for
agreement among the remaining groups as the basis for new RVUs for the
refinement code. This methodology is consistent with the historical
refinement process as established in the November 25, 1992 PFS final
rule with comment period (57 FR 55938).
Our decision to convene multispecialty panels of physicians and to
apply the statistical tests described above has historically been based
on our need to balance the interests of those who commented on the
interim final work values with the redistributive effects that would
occur in other specialties if the work values were changed. We refer
readers to section III.I. of this final rule with comment period for a
full discussion of the changes to the refinement process that we are
adopting for refinement panels beginning in CY 2011.
Table 50 lists those refinement codes reviewed under the CY 2010
refinement panel process described in this section. The table includes
the following information:
CPT Code. This is the CPT code for a service.
Short Descriptor. This is an abbreviated version of the
narrative description of the code.
CY 2010 Interim Final Work RVUs. The interim final work
RVUs that appeared in the CY 2010 PFS final rule with comment period
(74 FR 61949 through 61953), as subsequently corrected in the December
10, 2009 (74 FR 65449) and May 11, 2010 correction notices (75 FR
26350), are shown for each reviewed code.
Requested Work RVUs. This column identifies the work RVUs
requested by the commenters.
CY 2011 Final Work RVUs. This column contains the final
work RVUs after consideration by the refinement panel.
We note that we are accepting the results of the CY 2010 refinement
panel for all of these codes as the final work RVUs for CY 2011. These
final values are also displayed in Addendum B to this final rule with
comment period.

Table 50--CPT Codes Reviewed Under the CY 2010 Refinement Panel Process
----------------------------------------------------------------------------------------------------------------
CY 2010 interim Requested work CY 2011 final
CPT Code Mod Short descriptor final work RVUs RVUs work RVUs
----------------------------------------------------------------------------------------------------------------
74261............................ 26 Ct colonography, w/ 2.28 2.40 2.40
o dye.
78451............................ 26 Ht muscle image 1.38 1.40 1.38
spect, sing.
78452............................ 26 Ht muscle image 1.62 1.75 1.62
spect, mult.
95905............................ 26 Motor/sens nrve 0.05 0.15 0.05
conduct test.
----------------------------------------------------------------------------------------------------------------

2. CY 2010 Interim Final RVUs for Which Public Comments Were Received
a. Insertion of Breast Prosthesis (CPT Code 19340)
CPT code 19340 (Immediate insertion of breast prosthesis following
mastopexy, mastectomy or in reconstruction) was identified by CMS for
AMA RUC review as requested by the specialty society. The AMA RUC
recommended 13.78 work RVUs for CY 2010, which CMS accepted. However,
as noted by a public comment on the CY 2010 PFS final rule with comment
period, the interim final CY 2010 work RVUs published in the CY 2010
PFS final rule with comment period (74 FR 61779, 62023 and 62144) for
this service did not reflect the increases in the evaluation and
management services for the post-operative visits associated with this
service that resulted from the CY 2010 changes to the consultation code
policy. The work RVUs for CPT code 19340 with these increases included
are 13.99 RVUs. This correction was included in the May 11, 2010
correction notice to the CY 2010 final rule with comment period (75 FR
26356). We are finalizing the interim work RVUs for CPT code 19340 of
13.99 for CY 2011.

[[Page 73322]]

b. Computed Tomographic Colonography (CPT Code 74261)
For CPT code 74261, (Computed tomographic (CT) colonography,
diagnostic, including image postprocessing; without contrast material),
the AMA RUC recommended 2.40 work RVUs. During the AMA RUC meeting,
this code was compared to two CPT codes: 75635 (Computed tomographic
angiography, abdominal aorta and bilateral iliofemoral lower extremity
runoff, with contrast material(s), including noncontrast images, if
performed, and image postprocessing (work RVUs = 2.40)) and 78815
(Positron emission tomography (PET) with concurrently acquired computed
tomography (CT) for attenuation correction and anatomical localization
imaging; skull base to mid-thigh (work RVUs = 2.44)). Based on the
comparisons of similar physician work, physician time, and intensity/
complexity measures, the AMA RUC determined that work RVUs of 2.40 were
appropriate for CPT code 74261. We disagreed with the AMA RUC-
recommended work RVUs and believe CPT code 74263 (Computed tomographic
(CT) colonography, screening, including image postprocessing)
represents a more comparable service because it has virtually the same
description of work, pre-, intra-, and post-service time for which the
AMA RUC recommended work RVUs of 2.28. Therefore, we assigned interim
final work RVUs of 2.28 to CPT code 74261 for CY 2010.
Comment: Several commenters disagreed with the interim final work
RVUs assigned by CMS and believe that equalizing the work RVUs for
diagnostic and screening computed tomographic colonography ignores the
reality that patients referred for diagnostic study, by definition,
have greater complexity. These commenters believed that for this reason
and the increased time involved with a diagnostic study, higher work
RVUs are necessary to maintain the proper relativity with the
corresponding screening CPT code 74263. The commenters recommended that
CMS accept the AMA RUC-recommended work RVUs of 2.40 for CPT code 74261
and refer this code to the CY 2010 refinement panel for review.
Response: Based on the concerns expressed by the commenters, we
referred this code to the CY 2010 refinement panel for review. As a
result of the statistical analysis of the CY 2010 refinement panel
ratings, we are assigning 2.40 work RVUs to CPT code 74261 as the final
value for CY 2011.
c. Myocardial Perfusion Imaging (CPT Codes 78451, 78452, 78453, and
78454)
For CPT code 78451 (Myocardial perfusion imaging, tomographic
(SPECT) (including attenuation correction, qualitative or quantitative
wall motion, ejection fraction by first pass or gated technique,
additional quantification, when performed); single study, at rest or
stress (exercise or pharmacologic)), the AMA RUC recommended 1.40 work
RVUs, while the AMA RUC recommended 1.75 work RVUs for CPT code 78452
(Myocardial perfusion imaging, tomographic (SPECT) (including
attenuation correction, qualitative or quantitative wall motion,
ejection fraction by first pass or gated technique, additional
quantification, when performed); multiple studies, at rest and/or
stress (exercise or pharmacologic) and/or redistribution and/or rest
reinjection).
Upon review of the AMA RUC recommendations for these codes, it was
unclear what methodology the AMA RUC used to calculate the recommended
work RVUs for CPT code 78451. Therefore, we disagreed with the AMA RUC-
recommended work RVUs of 1.40 for CPT code 78451 and believe the work
RVUs for the survey 25th percentile were more appropriate. Therefore,
we assigned interim final work RVUs of 1.38 to CPT code 78451 for CY
2010.
For CPT code 78452, we disagreed with the reference code used, CPT
code 70496 (Computed tomographic angiography, head, with contrast
material(s), including noncontrast images, if performed, and image
postprocessing (work RVUs = 1.75)). We believe CPT code 78452 is
comparable to CPT code 73219 (Magnetic resonance (eg, proton) imaging,
upper extremity, other than joint; with contrast material(s) (work RVUs
= 1.62)), which has the same pre-, intra-, and post-service time.
Therefore, we assigned interim final work RVUs of 1.62 to CPT code
78452 for CY 2010.
We accepted the CY 2010 recommendations of the AMA RUC for the
direct PE inputs for CPT codes 78451, 78452, 78453, and 78454 (75 FR
61955).
Comment: Several commenters disagreed with the interim final work
RVUs assigned by CMS for these two services. The commenters pointed out
that the specialty and AMA RUC recommendations for both of these
services already reflected a tremendous reduction from the work RVUs
for the services as reported by multiple component codes in previous
years and expressed disappointment that additional reductions were made
by CMS. The commenters explained that in an effort to maintain
relativity between CPT codes 78451 and 78452, the recommended RVUs for
78451 were derived by calculating the relationship between the median
survey RVUs for CPT codes 78451 and 78452 and maintaining this
relationship between the recommended RVUs for CPT codes 78451 and
78452. That is, the survey work RVU relationship between CPT code
78451: 78452 is [1.50: 1.87], leading to the same relationship between
the AMA RUC-recommended RVUs for 78451: 78452 of [1.40: 1.75]. The AMA
RUC agreed that the computed work RVUs, 1.40 for CPT code 78451,
maintain the relativity of the original survey data and provide an
appropriate measure of the work for CPT code 78451.
The commenters believe that CMS does not have the special expertise
necessary to choose a different reference code than the code selected
by the multispecialty AMA RUC panel and disagreed with the reference
code used by CMS for establishing work RVUs for CPT code 78452. The AMA
RUC pointed out that the reference code has no associated computer
post-processing analysis, requires the interpretation of fewer images,
and has no additional cine-motion images to analyze and interpret, all
of which are included in the myocardial perfusion imaging procedures.
The commenters requested that CMS accept the AMA RUC
recommendations of 1.40 work RVUs for CPT code 78451 and 1.75 work RVUs
for CPT code 78452 and refer these codes to the CY 2010 refinement
panel for review.
Response: Based on the concerns expressed by the commenters, these
codes were referred to the CY 2010 refinement panel for review. As a
result of the statistical analysis of CY 2010 refinement panel ratings,
the work RVUs for these codes were unchanged. Therefore, we are
adopting the interim final values for these codes as final, with 1.38
work RVUs for CPT code 78451 and 1.62 work RVUs for CPT code 78452 for
CY 2011.
Comment: Several commenters asserted that CMS had incorrectly
crosswalked equipment time inputs for several myocardial perfusion
imaging codes (CPT codes 78451, 78452, 78453, and 78454), rather than
accepting the AMA RUC recommendations for these codes as CMS had stated
in the CY 2010 PFS final rule with comment period (74 FR 61955). One
commenter further suggested that the useful life of 5 years for the
Cobalt-57 flood source was incorrect.

[[Page 73323]]

Response: We appreciate the commenters' assistance, and we
corrected the equipment times in the May 11, 2010 correction notice to
the CY 2010 PFS final rule with comment period (75 FR 26356 and 26570).
We are finalizing these direct PE inputs for CY 2011. We also proposed
to change the useful life of the Cobalt-57 flood source from 5 to 2
years for CY 2011 (75 FR 40056). We address our final policies
regarding this proposal in section II.A.3.b.(4) of this final rule with
comment period.
Comment: Several commenters expressed concern that CMS applied
fully transitioned PE RVUs to the new and revised CY 2010 CPT codes,
specifically CPT codes 78451, 78452, 78453, and 78554. The commenters
argued that the result of the lack of a transition to use of the PPIS
data was an immediate 26 percent reduction for myocardial perfusion
imaging services, simply because the CPT code descriptors had been
revised to capture multiple procedure components. The commenters
requested that the new CPT codes follow the same blend of new and
previous PE RVUs that was applied to the existing CPT codes in CY 2010
and later years.
Response: Our longstanding policy is that if the CPT Editorial
Panel creates a new code for a given year, the new code would be paid
at its fully implemented PFS amount and not at a transition rate for
that year. Consistent with this policy, the new CY 2010 myocardial
perfusion imaging codes, and all other new CY 2010 CPT codes, are not
being paid based on transitional PE RVUs in CY 2010. We will continue
to pay these services based on the fully implemented PE RVUs in CY
2011, the same approach we are applying to other CPT codes that were
new for CY 2010 or CY 2011.
d. Nerve Conduction Test (CPT Code 95905)
For CPT code 95905 (Motor and/or sensory nerve conduction, using
preconfigured electrode array(s), amplitude and latency/velocity study,
each limb, includes F-wave study when performed, with interpretation
and report), the AMA RUC recommended 0.05 work RVUs, which we accepted
in the CY 2010 PFS final rule with comment (74 FR 61953).
Comment: One commenter requested that CMS refer CPT code 95905 to
the CY 2010 refinement panel for review. The commenter believes the AMA
RUC erred in its recommendation to CMS in regard to the physician work
involved. The commenter noted that when this code was discussed at the
AMA RUC meeting, the commenter and other specialty societies that
presented this code to the AMA RUC recommended assignment of 0.15 work
RVUs. The commenter also believes that the undervaluation of the
physician work for this service may undermine the ability of physicians
to provide the service.
Response: Based on the concerns expressed by the commenter, this
code was referred to the CY 2010 refinement panel for review. As a
result of the statistical analysis of the CY 2010 refinement panel
ratings, the work RVUs for this code were unchanged. Therefore, we are
finalizing the interim final values for CPT code 95905 as 0.05 work
RVUs for CY 2011.
e. Kidney Disease Education Services (HCPCS Codes G0420 and G0421)
During rulemaking for CY 2010, we adopted policies to provide for
the implementation of section 152(b) of the MIPPA which created a new
benefit category for kidney disease education (KDE) services for
Medicare beneficiaries diagnosed with Stage IV chronic kidney disease
(CKD). The MIPPA also amended section 1848(j)(3) of the Act which
allows for payment of KDE services under the PFS. For CY 2010, we
proposed and finalized the RVUs for the two HCPCS G-codes established
for the payment of KDE services (74 FR 61901), G0420 (Face-to-face
educational services related to the care of chronic kidney disease;
individual, per session, per one hour) and G0421 (Face-to-face
educational services related to the care of chronic kidney disease;
group, per session, per one hour). For purposes of valuing the HCPCS
codes for KDE services, we based the work RVUs and the PE inputs, with
minor modifications, on CPT codes for medical nutrition therapy (MNT)
services, specifically CPT code 97802 (Medical nutrition therapy;
initial assessment and intervention, individual, face-to-face with the
patient, each 15 minutes) and CPT code 97804 (Medical nutrition
therapy; group (2 or more individual(s)), each 30 minutes), because we
believed these services to be similar. We crosswalked the work RVUs for
HCPCS code G0420 from CPT code 97802 and for HCPCS code G0421 from CPT
code 97804. We multiplied the work RVUs for HCPCS code G0420 by four
and the work RVUs for HCPCS code G0421 by two to account for the fact
that we crosswalked a 15 minute code to a 60 minute code (CPT code
97802 to HCPCS code G0420) and a 30 minute code to a 60 minute code
(CPT code 97804 to HCPCS code G0421). In order to determine the direct
PE inputs for the KDE services, we indicated that we did not perform
straight multiplication of the actual MNT inputs because we did not
believe that the required equipment and supplies for the KDE services
would increase in direct proportion to the increased time for the
codes. For both HCPCS codes G0420 and G0421, we noted that we did not
increase the equipment time-in-use for the body analysis machine,
printer, or scale, and that we did increase the inputs for the table,
computer, paper, and other printed materials.
Comment: Several commenters expressed support for the CY 2010 work
RVUs for the KDE HCPCS codes G0420 and G0421. However, one commenter
requested that CMS include the supplies for the KDE services as
directly proportional multiple units of the MNT services in order to
appropriately pay for the costs of care, noting that HCPCS code G0420
(60 minutes) should have 4 times as many supplies as those in CPT code
97802 (15 minutes) and HCPCS code G0421 (60 minutes) should have 2
times as many as those in CPT code 97804 (30 minutes).
Response: We appreciate the commenters' support for the interim
final work
Response: We appreciate the commenters' support for the interim
final work RVUs we established for HCPCS codes G0420 and G0421 for KDE
services and we are finalizing those work RVUs for CY 2011. After
reviewing the direct PE inputs for supplies in both the KDE HCPCS G-
codes (G0420 and G0421) and the MNT CPT codes (CPT codes 97802 and
97804), we agree with the commenter that we had not increased the
number of sheets of paper for either HCPCS code G0420 or G0421 as we
indicated we would (74 FR 61901). Therefore, we have increased the
number of paper sheets from 2 in CPT code 97802 (15 minutes) to 8 in
HCPCS code G0420 (60 minutes) and from 2 in CPT code 97804 (30 minutes)
to 4 in HCPCS code G0421 (60 minutes). We have also made conforming
changes to the printer times for both KDE HCPCS G-codes in the
equipment file because we base the printer time on the number of sheets
of paper. We are adopting these modified direct PE inputs for HCPCS
codes G0420 and G0421 as final for CY 2011.

[[Page 73324]]

f. Excision of Soft Tissue and Bone Tumors (CPT codes 21011 through
21016, 21552, 21554 through 21558, 21930 through 21933, 21395, 21936,
22900 through 22905, 23071, 23073, 23075 through 23078, 23200, 23210,
23220, 24071, 24073, 24075 through 24077, 24079, 24150 through 24153,
25071, 25073, 25075 through 25078, 25170, 26111, 26113, 26115 through
26118, 26250, 26255, 26260, 26262, 27043, 27045, 27047 through 27049,
27059, 27075 through 27078, 27327 through 27329, 27337, 27339, 27364,
27365, 27615, 27616, 27618, 27619, 27632, 27634, 27619, 27645 through
27647, 28039, 28041, 28043, 28045 through 28047, 28171, 28173, and
28175)
For CY 2010, the CPT Editorial Panel split 31 excision codes into
62 codes differentiated by the size of the excised lesion, 18 codes
were revised, and 12 additional codes were created. Although we had
significant concerns with the pre-service times and the AMA RUC-
recommended work RVUs for these codes for CY 2010, in the context of
public comments on the CY 2010 proposed rule regarding the site-of-
service anomaly codes, we agreed to accept the AMA RUC-recommended work
values for these codes on an interim final basis for CY 2010 (74 FR
61954). We also requested that the AMA RUC reexamine the minutes
allocated for positioning of the patient for these codes. We noted that
we would work with the AMA RUC to address our concerns about the
valuation of these codes and would consider whether it would be
appropriate to propose further changes in future rulemaking. We
indicated that we did not agree with the AMA RUC's recommendations for
the inclusion of inpatient hospital care services in these codes,
particularly in the cases of codes that would be reported for the
smaller-sized tumors. As a result, we stated that we would monitor the
frequency data for these codes and may propose further changes to the
work RVUs in the future based on these data. We emphasized that the AMA
RUC itself recommended that these services be re-reviewed to determine
the accuracy of the utilization assumptions once 2 years of utilization
data were available.
In addition, we noted that the CPT 2010 instructions regarding the
use of the excision and resection of soft tissue and bone tumor codes
advised that a complex repair may be separately reported. However,
longstanding Medicare policy generally includes payment for all simple,
intermediate, and complex repairs of procedural incisions and,
therefore, Medicare would not separately pay for complex repairs
associated with procedures reported by these codes.
Comment: Several commenters were pleased that CMS agreed to accept
the AMA RUC-recommended values for these new and revised codes. One
commenter endorsed CMS' decision to closely monitor the utilization
rates for these codes and believes this would be important to ensure
accurate payment. The commenters did not see a need for CMS or the AMA
RUC to review the pre-service times assigned to the codes and stated
that all of these times were derived from the AMA RUC's pre-service
time package methodology, a methodology that CMS has historically
supported. The commenters asserted that the times assigned are
reflective of the actual patient positioning times. Therefore, the
commenters urged CMS to withdraw the request that the AMA RUC revisit
the pre-service times for these codes. The commenters asserted that
further review would add extra time and work to the already significant
workload of the AMA RUC and would not result in any changes.
Response: We appreciate the commenters' support for our acceptance
of the AMA RUC-recommended values for these new and revised codes and
we are finalizing the interim final work RVUs for these codes for CY
2011. As we stated in the CY 2010 PFS final rule with comment period,
we will continue to monitor the frequency data for these codes and work
with the AMA RUC to address our concerns and, if appropriate, propose
further changes in future rulemaking. In addition, we are reiterating
our request originally made in the CY 2010 PFS final rule with comment
period (74 FR 61954) that the AMA RUC review the pre-service times for
these codes and provide their recommendations to us.
g. Cryoablation of Prostate (CPT code 55873)
In June 2008, CMS requested that the AMA RUC review the nonfacility
direct PE inputs for CPT code 55873 (Cryosurgical ablation of the
prostate (includes ultrasonic guidance for interstitial cryosurgical
probe placement). During this review, the AMA RUC recognized that this
service was initially reviewed as a new code by the AMA RUC in February
2001. The AMA RUC believed that the intra-service physician time since
the initial review had declined (from 200 minutes) as the service is
now more commonly performed. The AMA RUC agreed with the specialty
society that the service should be surveyed for physician work and also
recommended revisions in the direct PE inputs. As a result of the AMA
RUC review and input from the specialty society, the AMA RUC
recommended 13.45 work RVUs and revisions to the direct PE inputs for
this service for CY 2010. We reviewed these recommendations and
accepted the AMA RUC-recommended work RVUs for this code and the direct
PE inputs in the CY 2010 PFS final rule with comment (74 FR 61954 and
61955).
Comment: One commenter expressed concern about the reduction in the
work RVUs for CPT code 55873 and the lack of public notice given prior
to the reduction. The commenter believes that the intra-service time
was underestimated and could vary based on the skill set of the
physician. The commenter requested that CMS reinstate the work RVUs as
included in the CY 2010 PFS proposed rule for CY 2010 (74 FR 33740).
Response: While we originally requested that the AMA RUC review the
nonfacility direct PE inputs for CPT code 55873, we believe that it is
appropriate for the AMA RUC to respond to its findings during a limited
review by taking other actions that it believes to be appropriate for
the particular circumstances, such as requesting that procedures be
resurveyed. We followed our usual methodology for revised codes whereby
we respond to the AMA RUC work recommendations and adopt interim final
values in the final rule with comment period for the upcoming year. In
this way, we facilitate appropriate payment for the services on an
interim final basis while providing public notice and the opportunity
for public comment prior to finalizing the values in the following
year.
We note that the RVUs for services paid under the PFS are resource-
based, and individual services are valued based upon the typical
resources used to provide the service. Because clinical utilization of
this service has increased over the last several years and information
from the current AMA RUC survey suggests there has been a decrease in
intra-service time from 200 to 100 minutes, we continue to believe the
reduction in intra-service time and the revised work RVUs as
recommended to us by the AMA RUC are clinically appropriate for this
service. We commonly expect greater work efficiency as clinical
experience with a new service increases over time, and this service
fits that profile. Therefore, we are finalizing the interim final work
RVUs of 13.60 for CPT code 55873 for CY 2011.

[[Page 73325]]

Comment: One commenter stated that the 162 minutes of clinical
labor time for CPT code 55873 in the final CY 2010 PFS direct PE
database should be 168 minutes. The commenter also indicated that
supply code SD074 be included as an input for CPT code 55873 based on
the AMA RUC's CY 2010 recommendations.
Response: We appreciate the commenter bringing this information to
our attention and agree with the commenter's assessment. The 6 minutes
of clinical labor time missing from the direct PE inputs for CPT code
55873 have now been included, as has the filiform, and these changes
are reflected in the final CY 2011 PFS direct PE database. We are
finalizing these direct PE inputs for CPT code 55873 for CY 2011.
h. Urodynamics Studies (CPT Codes 51728 and 51729)
In February 2008, the AMA RUC identified CPT codes 51726 (Complex
cystometrogram (ie, calibrated electronic equipment)); 51772 (Urethral
pressure profile studies (UPP) (urethral closure pressure profile), any
technique); 51795 (Voiding pressure studies (VP); bladder voiding
pressure, any technique); and 51797 (Voiding pressure studies, intra-
abdominal (ie, rectal, gastric, intraperitoneal) (List separately in
addition to code for primary procedure)) through the ``Codes Reported
Together'' potentially misvalued codes screen as combinations of codes
that were reported together more than 95 percent of the time. The AMA
RUC referred all four codes to the CPT Editorial Panel for creation of
CPT codes for new comprehensive services and for reorganization of the
coding structure to reflect the typical procedures performed. As a
result, CPT codes 51772 and 51795 were deleted, CPT code 51797 was
revised, and CPT codes 51727 (Complex cystometrogram (ie, calibrated
electronic equipment); with urethral pressure profile studies (ie,
urethral closure pressure profile), any technique); 51728 (Complex
cystometrogram (ie, calibrated electronic equipment); with voiding
pressure studies (i.e., bladder voiding pressure), any technique); and
51729 (Complex cystometrogram (i.e., calibrated electronic equipment);
with voiding pressure studies (ie, bladder voiding pressure) and
urethral pressure profile studies (i.e., urethral closure pressure
profile), any technique) were created for CY 2010. Accordingly, the AMA
RUC reviewed the clinical labor inputs for the typical patient and made
minor edits regarding the intra-service time for these services. In
addition, the AMA RUC made adjustments to the medical supplies and
equipment. As noted in the CY 2010 PFS final rule with comment period
(74 FR 61955), we accepted these recommendations for the direct PE
inputs on an interim final basis.
Comment: Several commenters asserted that CPT codes 51728 and 51729
should have additional clinical labor inputs, including a greater
number of minutes during the intra-service period and minutes during
the pre-service period. These commenters also requested revisions to
the PE supply inputs for the codes.
Response: We discuss our CY 2011 proposal and the final CY 2011
policy with respect to the direct PE inputs for CPT codes 51728 and
51729 in section II.A.3.c.(5) of this final rule with comment period.
As we state there, we reviewed the direct PE inputs for these two CPT
codes and three related CPT codes following revised AMA RUC
recommendations for CY 2011. We agreed with the AMA RUC recommendations
regarding changes for CY 2011. Specifically, we believe the pre-service
nonfacility clinical labor time for the 0-day global period CPT codes
51725 (simple cystometrogram (CMG) (eg, spinal manometer)) and 51726
should be removed and the intra-service clinical labor time for CPT
code 51726 should also be reduced, consistent with the usual treatment
of other 0-day global codes. We believe the AMA RUC provided
recommendations to us regarding the direct PE inputs for these
cystometrogram services that accurately reflect the costs of the
resources (that is, the clinical labor, equipment, and supplies)
typically required to furnish these services to Medicare beneficiaries.
Comment: Several additional commenters alerted CMS to incorrect
supply inputs for CPT codes 51728 and 51729. The commenters noted that
the AMA RUC direct PE recommendations for CPT code 51728 included an
additional beaker. In the case of CPT code 51729, the commenters stated
that CMS did not include the recommended beaker and tubing in the
direct PE database for the CY 2010 final rule with comment period.
Response: We appreciate the commenters' assistance, and we made
these corrections in the May 11, 2010 correction notice to the CY 2010
PFS final rule with comment period (75 FR 26356 and 26478). We are
finalizing these direct PE inputs, as corrected, for CPT codes 51728
and 51239 for CY 2011.
i. Coronary Computed Tomographic Angiography (CPT Codes 75571, 75572,
75573, and 75574)
In October 2008, the CPT Editorial Panel deleted eight Category III
CPT codes (0144T through 0151T) and created four new codes for CY 2010,
specifically CPT codes 75571 (Computed tomography, heart, without
contrast material, with quantitative evaluation of coronary calcium);
75572 (Computed tomography, heart, with contrast material, for
evaluation of cardiac structure and morphology (including 3D image
postprocessing, assessment of cardiac function, and evaluation of
venous structures, if performed)); 75573 (Computed tomography, heart,
with contrast material, for evaluation of cardiac structure and
morphology in the setting of congenital heart disease (including 3D
image postprocessing, assessment of LV cardiac function, RV structure
and function and evaluation of venous structures, if performed)); and
75574 (Computed tomographic angiography, heart, coronary arteries and
bypass grafts (when present), with contrast material, including 3D
image postprocessing (including evaluation of cardiac structure and
morphology, assessment of cardiac function, and evaluation of venous
structures, if performed)) to describe the evolution of the performance
of cardiac and coronary computed tomography for specific clinical
scenarios. We accepted the AMA RUC recommendations for direct PE inputs
for these codes on an interim final basis for CY 2010 (74 FR 61955).
Comment: Several commenters stated that the final CY 2010 PFS
direct PE database included incomplete direct PE inputs for CPT codes
75572 and 75573. The commenters also submitted updated pricing
information for the 64-slice CT scanner.
Response: We appreciate the commenters' assistance, and we
corrected these errors in the May 11, 2010 correction notice to the CY
2010 PFS final rule with comment period (75 FR 26356 and 26543). We are
finalizing the direct PE inputs for CPT codes 75571, 75572, 75573, and
75574, as corrected, for CY 2011. Additionally, we proposed an updated
price for the 64-slice CT scanner and its accompanying software in the
CY 2011 PFS proposed rule (75 FR 40062). We address that proposal and
our final CY 2011 policy in section II.A.3.c.(2) of this final rule
with comment period.

[[Page 73326]]

j. Adjacent Tissue Transfer or Rearrangement (CPT Codes 14301 and
14302)
CPT code 14300 (Adjacent tissue transfer or rearrangement, more
than 30 sq cm, unusual or complicated, any area) was identified by the
Five-Year Review Identification Workgroup through its ``Site-of-Service
Anomalies'' screen for potentially misvalued codes and subsequently
identified through the ``CMS Fastest Growing'' screen. The service was
referred to the CPT Editorial Panel to clarify the coding for tissue
transfers involving different size areas. As a result, CPT code 14300
was deleted and two new codes, CPT codes 14301 (Adjacent tissue
transfer or rearrangement, any area; defect 30.1 sq cm to 60.0 sq cm)
and 14302 (Adjacent tissue transfer or rearrangement, any area; each
additional 30.0 sq cm, or part thereof (List separately in addition to
code for primary procedure)) were created. We accepted the AMA RUC
recommendations for direct PE inputs on an interim final basis for CY
2010 (74 FR 61955).
Comment: One commenter stated that there were discrepancies between
the AMA RUC recommendations and the direct PE inputs for CPT codes
14301 and 14302.
Response: We appreciate the commenters' assistance, and we
corrected these errors in the May 11, 2010 correction notice to the CY
2010 PFS final rule with comment period (75 FR 26356 and 26368). Upon
additional review of the direct PE inputs for consistency with the CY
2010 AMA RUC recommendations for this CY 2011 final rule with comment
period, we also found that the instrument pack for CPT code 14301
should be EQ138 (instrument pack, medium ($1500 and up)) instead of
EQ137 (instrument pack, basic ($500-$1499)). Furthermore, CPT code
14301 should have one SA054 (pack, post-op incision care (suture)) as a
supply input in both the nonfacility and facility settings. The final
CY 2011 PFS direct PE database reflects these additional corrections.
We are finalizing the direct PE inputs for CPT codes 14301 and 14302
for CY 2011.
k. Insertion of a Temporary Prostatic Urethral Stent (CPT code 53855)
CPT code 53855 (Insertion of a temporary prostatic urethral stent,
including urethral measurement) was created for CY 2010 to describe the
service previously reported under the Category III CPT code 0084T. We
accepted the AMA RUC recommendations for direct PE inputs on an interim
final basis for CY 2010 (74 FR 61955).
Comment: One commenter stated that CPT code 53855 was incorrectly
missing supply codes SD074 and SH050 as inputs in the final CY 2010 PFS
direct PE database. The commenter also noted that SJ038 was incorrectly
substituted for SJ032.
Response: We appreciate the commenter bringing these items to our
attention and agree with the commenter's assessment. The supply items
for CPT code 53588 (filiform and one unit of lidocaine) have been
included in the direct PE inputs and we have replaced petroleum jelly
with lubricating jelly. These changes are reflected in the final CY
2011 PFS direct PE database. We are finalizing the revised direct PE
inputs for CPT code 53855 for CY 2011.
l. High Dose Rate Brachytherapy (CPT codes 77785, 77786, and 77787)
CPT codes 77785 (Remote afterloading high dose rate radionuclide
brachytherapy; 1 channel); 77786 (Remote afterloading high dose rate
radionuclide brachytherapy; 2-12 channels); and 77787 (Remote
afterloading high dose rate radionuclide brachytherapy; over 12
channels) were identified by the Five-Year Review Identification
Workgroup through the ``CMS Fastest Growing'' and ``High Volume
Growth'' potentially misvalued codes screens and later revised by the
CPT Editorial Panel for CY 2009. As a result, the AMA RUC made
recommendations for physician work and direct PE inputs for these
revised services for CY 2009, which we accepted in the CY 2009 PFS
final rule with comment period (73 FR 69892). Upon acceptance of the
AMA RUC recommendations, we received several comments concerning the
direct PE direct inputs (for example, supply costs and the useful life
of the renewable sources) related to several high dose radiation
therapy and placement CPT codes. In the CY 2010 PFS proposed rule (74
FR 33532), we requested that the AMA RUC revisit the direct PE inputs
for these services. In response to our request, the AMA RUC reviewed
the direct PE inputs for these services and made adjustments to the
clinical labor staff type, changed the time for some activities, and
edited the medical supplies and equipment for the typical patient
scenario. In addition, the AMA RUC also recommended further discussion
between the specialty and CMS regarding appropriate resolution of the
PE input price for the Iridium-192 brachytherapy source typically used
in CPT codes 77785, 77786, and 77787. We accepted these direct PE
recommendations for CY 2010 on an interim final basis (74 FR 61782).
Comment: One commenter informed CMS of two concerns regarding CPT
codes 77785, 77786, and 77787. The commenter stated that the AMA RUC
summary direct PE output table included incorrectly doubled PE inputs
for each of the codes. The commenter also pointed out that the medical
physicist clinical labor time for CPT code 77786 should be 54 minutes
instead of 29 minutes.
Response: We appreciate the commenters' assistance, and we
corrected these errors in the May 11, 2010 correction notice to the CY
2010 PFS final rule with comment period (75 FR 26356 and 26564). We are
finalizing the direct PE inputs for CPT codes 77785, 77786, and 77787,
as corrected, for CY 2011.
m. Injection of Facet Joint (CPT Codes 64490, 64491, 64492, 64493,
64494, and 64495)
Facet joint injection services were identified by the Five-Year
Review Identification Workgroup ``High Volume Growth'' potentially
misvalued codes screen and referred to the CPT Editorial Panel to
create an appropriate coding structure to report primary and additional
injections. As a result, the four existing codes describing these
services were deleted and CPT codes 66490 (Injection(s), diagnostic or
therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves
innervating that joint) with image guidance (fluoroscopy or CT),
cervical or thoracic; single level); 64491 (Injection(s), diagnostic or
therapeutic agent, paravertebral facet (zygapophyseal) joint (or nerves
innervating that joint) with image guidance (fluoroscopy or CT),
cervical or thoracic; second level (List separately in addition to code
for primary procedure)); 64492 (Injection(s), diagnostic or therapeutic
agent, paravertebral facet (zygapophyseal) joint (or nerves innervating
that joint) with image guidance (fluoroscopy or CT), cervical or
thoracic; third and any additional level(s) (List separately in
addition to code for primary procedure)); 64493 (Injection(s),
diagnostic or therapeutic agent, paravertebral facet (zygapophyseal)
joint (or nerves innervating that joint) with image guidance
(fluoroscopy or CT), lumbar or sacral; single level); 64494
(Injection(s), diagnostic or therapeutic agent, paravertebral facet
(zygapophyseal) joint (or nerves innervating that joint) with image
guidance (fluoroscopy or CT), lumbar or

[[Page 73327]]

sacral; second level (List separately in addition to code for primary
procedure)); and 64495 (Injection(s), diagnostic or therapeutic agent,
paravertebral facet (zygapophyseal) joint (or nerves innervating that
joint) with image guidance (fluoroscopy or CT), lumbar or sacral; third
and any additional level(s) (List separately in addition to code for
primary procedure)) were created for CY 2010. Accordingly, the AMA RUC
reviewed the direct PE inputs as recommended by the specialty and made
some minor edits to the clinical labor and medical supplies to reflect
the typical patient service, which we accepted in the CY 2010 PFS final
rule with comment on an interim final basis (74 FR 61955).
Comment: Several commenters stated that the equipment and supplies
listed in the final CY 2010 PFS direct PE database for CPT codes 64490,
64491, 64492, 64493, 64494, and 64495 were incorrect and not consistent
with the AMA RUC's recommendations.
Response: We verified that the equipment and supplies listed as
direct inputs for these codes in the final CY 2011 direct PE database
match the CY 2010 recommendations provided to us by the AMA RUC. We
encourage stakeholders who believe a change is required in the direct
PE inputs associated with a particular service in the typical case that
is furnished in the facility or nonfacility setting to address these
concerns with the AMA RUC. We are finalizing these direct PE inputs for
CPT codes 64490, 64491, 64492, 64493, 64494, and 64495 for CY 2011.
n. Knee Arthroscopy (CPT Code 29870)
In the CY 2008 PFS final rule (72 FR 66238), we deferred the
establishment of nonfacility direct PE inputs for CPT code 29870
(Arthroscopy, knee, diagnostic, with or without synovial biopsy
(separate procedure)) and stated that the physicians performing
arthroscopic services in the nonfacility setting should be given the
opportunity to have a multispecialty review by the AMA RUC. We accepted
the AMA RUC recommendations for nonfacility direct PE inputs in the CY
2010 PFS final rule with comment period on an interim final basis (74
FR 61955).
Comment: One commenter indicated that the wrong arthroscopic system
was approved by the AMA RUC for CPT code 29870.
Response: We verified that the equipment input for this code in the
final CY 2011 PFS direct PE database matches the recommendation
provided to us by the AMA RUC. We encourage stakeholders who believe a
change is required in the direct PE inputs associated with a particular
service in the typical case that is furnished in the facility or
nonfacility setting to address these concerns with the AMA RUC. We are
finalizing the direct PE inputs for CPT code 298770 for CY 2011.
3. Status of Interim Final Work RVUs for Potentially Misvalued Site-of-
Service Anomaly Codes From CY 2009 and CY 2010
In previous years, we have requested that the AMA RUC review codes
that, according to Medicare claims data, have experienced a change in
the typical site-of-service since the original valuation of the code.
The AMA RUC reviewed and recommended to CMS revised work RVUs for 29
codes for CY 2009 and 11 codes for CY 2010 that were identified as
having site-of-service anomalies. In the CYs 2009 and 2010 PFS final
rules with comment period (73 FR 69883 and 74 FR 61776 through 61778,
respectively), we indicated that although we would accept the AMA RUC
valuations for these site-of-service anomaly codes on an interim final
basis through CY 2010, we had ongoing concerns about the methodologies
used by the AMA RUC to review these services. We requested that the AMA
RUC reexamine the site-of-service anomaly codes and use the building
block methodology to revalue the services (74 FR 61777).
For CY 2011, as discussed in more detail in section II.C.3.d. of
this final rule with comment period, we are requesting that the AMA RUC
reconsider its previously recommended values, which have been applied
on an interim final basis in CYs 2009 and 2010, and revise the work
RVUs to better reflect the intensity of the services and the revised
physician times and post-procedure visits included in the valuation of
these codes. Until we receive the revised values from the AMA RUC for
CY 2012 and can make a determination regarding them, we are continuing
to accept the existing AMA RUC-recommended work RVUs listed in Tables
14 and 15 in section II.C.3.d. of this final rule with comment period
on an interim final basis for CY 2011.
4. Other New, Revised, or Potentially Misvalued Codes With CY 2010
Interim Final RVUs Not Specifically Discussed in the CY 2011 Final Rule
With Comment Period
For all other CY 2010 new, revised, or potentially misvalued codes
with CY 2010 interim final RVUs that are not specifically discussed in
this final rule with comment period, we are finalizing, without
modification, the interim final work and malpractice RVUs and direct PE
inputs that we initially adopted for CY 2010.

C. Establishment of Interim Final RVUs for CY 2011

In this section, we discuss the establishment of work, PE, and
malpractice interim final RVUs for CY 2011 and issues related to the
processes for establishing these values. These CY 2011 work, PE, and
malpractice interim final RVUs, and the associated direct PE inputs,
are open to comment on this CY 2011 final rule with comment period. In
general, the work, PE, and malpractice RVUs and the associated direct
PE inputs for the CY 2011 new and revised codes will be finalized in
the CY 2012 PFS final rule with comment period, where we will also
respond to the public comments received on the values and direct PE
inputs that are adopted on an interim final basis in this CY 2011 final
rule with comment period. The final CY 2011 PFS direct PE database and
the crosswalks for the malpractice RVUs for new and revised codes are
posted on the CMS Web site under the downloads for the CY 2011 PFS
final rule with comment period at: http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
For CY 2011, we received AMA RUC recommendations for 325 new,
revised, and potentially misvalued CPT codes and 93 recommended
deletions. Of the 325 codes, 84 were identified as potentially
misvalued, 125 as new, and 116 as revised. After subtracting out CPT
codes for which no work RVU recommendation were given--including codes
listed on the Clinical Lab Fee Schedule (CLFS), vaccine codes, and
technical component only codes--there were 291 codes for which the AMA
RUC provided work RVU recommendations for CY 2011: 82 CPT codes
classified by the AMA RUC as potentially misvalued, 108 as new, and 101
as revised. Of note, as displayed in Table 53, we consider 204 of the
AMA RUC work recommendations for CY 2011 new and established CPT codes
to be for codes identified through, created as a result of, or valued
in association with service(s) identified through a potentially
misvalued code screen. Additionally, we received direct PE input
recommendations from the AMA RUC for 325 CPT codes for CY 2011.
For CY 2011, we note that the CPT Editorial Panel deleted CPT codes
0160T (Therapeutic repetitive transcranial magnetic stimulation
treatment planning) and 0161T (Therapeutic repetitive transcranial
magnetic stimulation treatment delivery and management, per session)
and created two new CPT codes, 90867

[[Page 73328]]

(Therapeutic repetitive transcranial magnetic stimulation treatment;
planning) and 90868 (Therapeutic repetitive transcranial magnetic
stimulation treatment; delivery and management, per session). Due to
the timing of the creation of these codes, the AMA RUC was unable to
provide work and PE recommendations for CY 2011. As a result, these
codes will be contractor-priced for CY 2011.
1. Establishment of Interim Final Work RVUs for CY 2011
a. Background
As we previously explained in section V.A. of this final rule with
comment period, on an annual basis, the AMA RUC provides CMS with
recommendations regarding physician work values for new, revised, and
potentially misvalued codes. We review the AMA RUC-recommended work
RVUs on a code-by-code basis. We determine whether we agree with the
AMA RUC's recommended work RVUs for a service (that is, we agree the
valuation is accurate), or, if we disagree, we determine an alternative
value that better reflects our estimate of the physician work for the
service.
As stated earlier, the AMA RUC provided work RVU recommendations
for 291 CPT codes. Of the 291, we are accepting 207 (71 percent) of the
AMA RUC-recommended values and providing alternative values for the
remaining 84 (29 percent). Over the last several years our rate of
acceptance of the AMA RUC recommendations has been higher, at 90
percent or greater. However, in response to concerns expressed by
MedPAC, the Congress, and other stakeholders regarding the accurate
valuation of services under the PFS, we have intensified our scrutiny
of the work valuations of new, revised, and potentially misvalued
codes. We note that most recently, the law was amended (section
1848(c)(2)(L) of the Act (as added by section 3134 of the ACA)) to add
a new requirement which specifies that the Secretary shall establish a
formal process to validate RVUs under the PFS. The validation process
may include validation of work elements (such as time, mental effort
and professional judgment, technical skill and physical effort, and
stress due to risk) involved with furnishing a service and may include
validation of the pre-, post-, and intra-service components of work.
Furthermore, the Secretary is directed to validate a sampling of the
work RVUs of codes identified through any of the seven categories of
potentially misvalued codes specified by section 1848(c)(2)(K)(ii) of
the Act (as added by section 3134 of the ACA). While we are currently
in the planning stage of developing a formal validation process, we
believe we should be incorporating, where appropriate, the validation
principles specified in the law. That is, in reviewing the CY 2011 AMA
RUC recommendations for valuing the work of new, revised, and
potentially misvalued services, we have expended significant effort in
evaluating whether the recommended values reflect the work elements,
such as time, mental effort, and professional judgment, technical skill
and physical effort, and stress due to risk, involved with furnishing
the service. We subjected each of the CY 2011 codes to a rigorous
clinical review, examining the pre-, post-, and intra-service
components of the work. If we concluded that the AMA RUC's recommended
value for a code was not accurate, we looked for comparisons with other
established reference codes with clinical similarity or analogous pre-,
post-, and intra-service times, and, where applicable, employed the
building block approach to inform our interim final decision to
establish an alternative value that we believe is more appropriate.
The AMA RUC has emphasized the need to value services ``relative''
to other services, explaining in its public comment on the CY 2011 PFS
proposed rule that it will ``continue to employ magnitude estimation in
developing relative value recommendations as it is the cornerstone of
the RBRVS (resource-based relative value scale).'' We agree that
services paid under the PFS should be reviewed and valued in manner
consistent with Medicare payment policy to maintain appropriate
relativity between services and promote accurate pricing. In our review
of the 291 CY 2011 AMA RUC recommendations for work values, we noted
that the AMA RUC used a variety of approaches and methodologies to
arrive at the recommended work values. For some codes, the AMA RUC used
magnitude estimation in conjunction with survey data from physician
surveys conducted by the specialty societies to support the values. For
other codes, the AMA RUC used magnitude estimation to override the
results of the survey data, recommending to CMS a value that was not
based on survey data but rather, justified in terms of its appropriate
relativity within the system to other similar services. The AMA RUC may
also elect to use a crosswalk approach in valuing a code by applying a
work value from a currently valued code to the code under review based
on the clinical similarity of the procedures or explicit considerations
of pre-, intra-, and post-service times. In some instances, the AMA RUC
asserted that it used the building block methodology to value the code,
a methodology CMS has historically supported (74 FR 61776).
We understand that the AMA RUC believes that it must approach
valuation on a code-by-code basis, and depending on the context of the
particular code, some methodologies may be better suited than others
for valuation purposes. However, we remain concerned over the
variations and some applications of the AMA RUC's methodologies which,
if we continue to accept them, could contribute to inaccuracy in the
relativity of physician work valued under the PFS for different
services. Our concerns at this time include the following
methodological issues which we observed during our review of the CY
2011 AMA RUC work recommendations:
AMA RUC-recommended values without benefit of a survey:
For a number of codes, the AMA RUC justified the work RVUs by
crosswalking the codes to existing codes deemed comparable by the AMA
RUC. Since the specialty society did not conduct a survey for these
codes, there are no survey data to back up the recommended work RVUs.
Surveys conducted on existing codes produced predictable
results: In providing recommendations for existing potentially
misvalued codes, the AMA RUC often recommended maintaining the current
work RVUs and supported this valuation by citing the survey results.
Upon clinical review of a number of these cases, we are concerned over
the validity of the survey results since the survey values often are
very close to the current code values. Increasingly, rather than
recommending the median survey value that has historically been most
commonly used, the AMA RUC is choosing to recommend the 25th percentile
value, potentially responding to the same concern we have identified.
AMA RUC deviated significantly or disregarded survey
results completely: For the majority of codes, the AMA RUC cited the
survey results in support of the work RVU recommendations and in many
instances adopted either the survey median or 25th percentile value as
the AMA RUC-recommended value. However, in some instances, the AMA RUC
recommended work RVUs which deviated significantly from the survey
results. Rather than using the survey data, the AMA RUC appears to have
relied on another methodology to value the code, such as ``magnitude

[[Page 73329]]

estimation'' or crosswalk to a comparable code.
In reviewing the 291 work RVU recommendations from the AMA RUC for
CY 2011, we concluded that the strongest support for the valuation of a
code occurred when the AMA RUC cited multiple germane methodologies
that all yielded a similar value that was also supported by the survey.
We tended to accept the AMA RUC-recommended values in these instances.
However, we found the weakest and least convincing valuations occurred
in cases where the AMA RUC either deviated significantly or disregarded
the survey results in favor of tweaking various components of the code
in order to justify a value which the AMA RUC believed was correct due
to perceived ``magnitude estimation'' for that code. We are concerned
that such actions by the AMA RUC may create problems for any systematic
validation processes that could be implemented in the future as
required by section 1848(c)(2)(L) of the Act (as added by section 3134
of the ACA).
Accordingly, for those CY 2011 codes for which we did not accept
the AMA RUC recommendations and are instead establishing alternative
interim final values, we discuss our decisions based on groupings of
codes in the following sections. Table GG4 at the end of this section
displays the AMA RUC recommendations and interim final work RVUs for CY
2011 new, revised, and potentially misvalued codes. b. CY 2011 Interim
Final Work RVUs for New and Revised Codes (1) CY 2011 New and Revised
Codes that Do Not Represent Major New Comprehensive Services
We provide an explanation in the following sections of our
rationale for not accepting particular AMA RUC-recommended or Health
Care Professional Advisory Committee (HCPAC)-recommended work RVUs for
CY 2011 new and revised CPT codes that do not represent major new
comprehensive services that are listed in Table 51 and discussed in the
subsequent section. The issues are arranged by type of service in CPT
code order and address only work RVUs. These codes are listed in Table
53, which includes a complete list of all new, revised, and potentially
misvalued CPT codes with CY 2011 AMA RUC work RVU recommendations and
CMS' interim final decisions for CY 2011.
(A) Excision and Debridement (CPT Codes 11010, 11011, 11012, 11042,
11043, 10144, 11045, 11046, 11047, and 97598)
CPT codes 11043 (Debridement; skin, subcutaneous tissue, and
muscle) and 11044 (Debridement; skin, subcutaneous tissue, muscle, and
bone) were identified by the AMA RUC's Five-Year Review Identification
Workgroup through the ``Site-of-Service Anomalies'' potentially
misvalued codes screen in September 2007. The AMA RUC recommended that
the entire family of services described by CPT codes 11040 through
11044 and 97597 and 97598 be referred to the CPT Editorial Panel
because the current descriptors allowed reporting of the codes for a
bimodal distribution of patients and also to better define the terms
excision and debridement. These codes were included with many other
codes under review by the CPT Excision and Debridement Workgroup. CPT
codes 11010, 11011, 11012, and 11042 through 11047 were reviewed by the
AMA RUC and CPT codes 97597 and 97598 were reviewed by the HCPAC.
The code descriptors for CPT codes 11010 (Debridement including
removal of foreign material at the site of an open fracture and/or an
open dislocation (e.g., excisional debridement); skin and subcutaneous
tissues); 11011 (Debridement including removal of foreign material at
the site of an open fracture and/or an open dislocation (e.g.,
excisional debridement); skin, subcutaneous tissue, muscle fascia, and
muscle); and 11012 (Debridement including removal of foreign material
at the site of an open fracture and/or an open dislocation (e.g.,
excisional debridement); skin, subcutaneous tissue, muscle fascia,
muscle, and bone) were revised to clarify to payors and providers that
these codes describe debridement of a single traumatic wound caused by
an open fracture which creates a single exposure, despite the number of
fractures or dislocations in the same anatomic site. The AMA RUC and
the specialty society agreed that the revisions made to these
descriptors were editorial and the current work RVUs for these services
correctly related to the typical patient and should be maintained,
recommendations which we have accepted on an interim final basis for CY
2011.
The CPT Editorial Panel revised the descriptor for CPT code 11042
(Debridement subcutaneous tissue (includes epidermis and dermis, if
performed); first 20 square centimeters or less). As a result, the AMA
RUC reviewed the specialty-recommended work RVUs for this service, 1.12
work RVUs (the previous AMA RUC HCPAC recommendation as valued during
the CY 2005 Five-Year Review of Work), and noted that they were higher
than the current PFS value for this service (0.80 work RVUs). The AMA
RUC determined that there was compelling evidence to consider new work
RVUs for this service. The AMA RUC also reviewed the survey data for
CPT code 11042 and made slight changes to the pre-, intra-, and post-
service times. This service was compared to the key reference CPT code
16020 (Dressings and/or debridement of partial-thickness burns, initial
or subsequent; small (less than 5% total body surface area)) (work RVUs
= 0.80) and MPC CPT code 56605 (Biopsy of vulva or perineum (separate
procedure); 1 lesion) (work RVUs = 1.10). Based on these comparisons,
the AMA RUC agreed that the previous AMA RUC HCPAC recommendation of
1.12 work RVUs was an appropriate value as it would maintain relativity
between the key reference code and the surveyed code. The AMA RUC
recommended work RVUs of 1.12 for CPT code 11042.
We disagree with the AMA RUC-recommended value for this service and
are maintaining the current work RVUs of 0.80. We believe the AMA RUC-
recommended value (1.12 work RVUs) was based on the old surveyed value.
The reference code, CPT code 16020, has more overall time but is valued
at 0.80 work RVUs. In addition, the reference code has a size
limitation that varies by individual body size, but the surveyed CPT
code 11042 has an add-on code (CPT code 11045) for each additional 20
square centimeters. Therefore, we are not accepting the AMA RUC
recommendation and are assigning an alternative value of 0.80 work RVUs
to CPT code 11042 on an interim final basis for CY 2011.
For CPT code 11045 (Debridement subcutaneous tissue (includes
epidermis and dermis, if performed); each additional 20 square
centimeters, or part thereof (List separately in addition to code for
primary procedure)), which is the add-on code to CPT code 11042, the
AMA RUC recommended 0.69 work RVUs. This value was obtained by applying
a 14 percent reduction to the median work value of 0.80 to maintain the
relativity between CPT codes 11042 and 11045 of the survey data
collected. Due to the reduction in work RVUs to CPT code 11042 by CMS,
we reduced the AMA RUC-recommended work RVUs of 0.69 for CPT code 11045
and assigned 0.33 work RVUs to this service. This value was obtained by
removing

[[Page 73330]]

the pre- and post-service time from the interim final RVUs of 0.80 for
the primary procedure (CPT code 11042). Therefore, we are assigning an
alternative value of 0.33 work RVUs to CPT code 11045 on an interim
final basis for CY 2011.
CPT codes 11043 (Debridement, muscle and/or fascia (includes
epidermis, dermis, and subcutaneous tissue, if performed); first 20
square centimeters or less) and 11044 (Debridement, bone (includes
epidermis, dermis, subcutaneous tissue, muscle and/or fascia, if
performed); first 20 square centimeters or less) were surveyed as 90-
day global codes. However, due to disagreement with the survey
vignettes and the new global period (90 days), in addition to broad
variations in surveyed facility length of stay, the AMA RUC requested
that CMS change the global period to 0 days. CMS agreed and the codes
were resurveyed as 0-day global codes.
For CPT code 11043, the AMA RUC recommended 3.00 work RVUs. The AMA
RUC reviewed the survey data and compared the surveyed code to the key
reference CPT code 15002 (Surgical preparation or creation of recipient
site by excision of open wounds, burn eschar, or scar (including
subcutaneous tissues), or incisional release of scar contracture,
trunk, arms, le.g.s; first 100 sq cm or 1% of body area of infants and
children) (work RVUs = 3.65). The AMA RUC noted that the reference code
had significantly more total service time as compared to the surveyed
code and that the surveyed code was less intense to perform in
comparison to the reference code. Based on this comparison, the AMA RUC
recommended work RVUs of 3.00, the survey 25th percentile for this
service.
The AMA RUC-recommended work inputs for this service include less
clinical time and fewer follow-up E/M visits than are currently
attributed to the performance of this service; however, the AMA RUC-
recommended work RVU value decreased by only 0.14 RVUs. We disagree
with the AMA RUC-recommended RVUs for this service and believe 2.00
work RVUs, the survey low value, reflects a more appropriate decrease
in work RVU value given the recommended decrease in clinical time and
follow-up E/M visits. Therefore, we are assigning an alternative value
of 2.00 work RVUs to CPT code 11043 on an interim final basis for CY
2011.
For CPT code 11046 (Debridement, muscle and/or fascia (includes
epidermis, dermis, and subcutaneous tissue, if performed); each
additional 20 square centimeters, or part thereof (List separately in
addition to code for primary procedure)), which is the add-on code to
CPT code 11043, the RUC recommended 1.29 work RVUs, the survey 25th
percentile. To maintain consistency and relativity between this add-on
code and its primary code (CPT code 11043), for which we are
recommending the survey low value as discussed above, and given the
time and intensity the AMA RUC recommended to perform this service, we
disagree with the AMA RUC-recommended work RVUs for this service and
believe 0.70 work RVUs, the survey low value, are more appropriate.
Therefore, we are assigning an alternative value of 0.70 work RVUs to
CPT code 11046 on an interim final basis for CY 2011.
For CPT code 11044, the AMA RUC recommended 4.56 work RVUs. The AMA
RUC reviewed the survey data and compared the surveyed code to the
reference CPT code 15004 (Surgical preparation or creation of recipient
site by excision of open wounds, burn eschar, or scar (including
subcutaneous tissues), or incisional release of scar contracture, face,
scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/
or multiple digits; first 100 sq cm or 1% of body area of infants and
children) (work RVUs = 4.58). The AMA RUC noted that the reference code
had the same intra-service time and that the surveyed code and the
reference code required similar mental effort and judgment to perform.
Based on this comparison, the AMA RUC recommended work RVUs of 4.56,
the survey 25th percentile, and believes this value accurately reflects
the relative physician work to perform this service and maintains
proper rank order with CPT codes 11042 and 11043. The AMA RUC-
recommended work inputs for this service include less clinical time and
fewer follow-up E/M visits than are currently attributed to the
performance of this service; however, the AMA RUC-recommended work RVUs
increased. We disagree with the AMA RUC-recommended work RVUs for this
service and believe 3.60 work RVUs, the survey low value, reflect a
more appropriate decrease in work RVU value given the recommended
decrease in clinical time and follow-up E/M visits. Therefore, we are
assigning an alternative value of 3.60 work RVUs to CPT code 11044 on
an interim final basis for CY 2011.
For CPT code 11047 (Debridement, bone (includes epidermis, dermis,
subcutaneous tissue, muscle and/or fascia, if performed); each
additional 20 square centimeters, or part thereof) the AMA RUC
recommended 2.00 work RVUs, the survey median value. To maintain
consistency and relativity between this add-on code and its primary
code (CPT code 11044), for which we are recommending the survey low
value as discussed above, and given the time and intensity the AMA RUC
recommended to perform this service, we disagree with the AMA RUC-
recommended value and believe 1.20 RUVs, the survey low value, are more
appropriate for this service. Therefore, we are assigning 1.20 work
RVUs to CPT code 11047 on an interim final basis for CY 2011.
For CY 2011, the services previously reported by CPT codes 11040
(Debridement; skin, partial thickness) and 11041 (Debridement; skin,
full thickness) will now be reported with revised CPT codes 97597
(Debridement (eg, high pressure waterjet with/without suction, sharp
selective debridement with scissors, scalpel and forceps), open wound,
(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris,
biofilm), including topical application(s), wound assessment, use of a
whirlpool, when performed and instruction(s) for ongoing care, per
session, total wound(s) surface area; first 20 square centimeters or
less) and 97598 (Debridement (eg, high pressure waterjet with/without
suction, sharp selective debridement with scissors, scalpel and
forceps), open wound, (e.g., fibrin, devitalized epidermis and/or
dermis, exudate, debris, biofilm), including topical application(s),
wound assessment, use of a whirlpool, when performed and instruction(s)
for ongoing care, per session, total wound(s) surface area; each
additional 20 square centimeters, or part thereof (List separately in
addition to code for primary procedure)). The HCPAC recommended 0.54
work RVUs for CPT code 97597, which is a value between the CY 2010
values for CPT code 11040 (0.50 work RVUs) and CPT code 97597 (0.58
work RVUs), which we have accepted on an interim final basis in this
final rule with comment period for CY 2011. However, the work RVUs for
this CPT code were further subject to a work budget neutrality
adjustment, as discussed in section V.C.1.b.(iii) of this final rule
with comment period.
For CPT code 97598, the HCPAC recommended 0.40 work RVUs, the
survey 25th percentile. We disagree with the HCPAC-recommended value
for this service and, given the similarity of code descriptors between
the 11000 series and the 97000 series CPT codes, we believe a more
appropriate value would be 0.25 RVUs, the survey low value, as it is
more consistent with the work RVU value associated with new add-on CPT
code 11045, discussed above. We also believe the post-service

[[Page 73331]]

time for CPT code 97598 should be reduced to 0 minutes to coincide with
the CPT codes in the 11000 series, which have 0 or 1 minute of post-
service time. Therefore, we are assigning an alternative value of 0.25
work RVUs to CPT code 97598 and reducing the post-service time to 0
minutes on an interim final basis for CY 2011. However, the work RVUs
for this CPT code were subject to a work budget neutrality adjustment,
as discussed in section V.C.1.b.(iii) of this final rule with comment
period.
(B) Arthrodesis Including Discectomy (CPT Code 22551)
As a result of CPT code 22554 (Arthrodesis, anterior interbody,
including disc space preparation, discectomy, osteophytectomy and
decompression of spinal cord and/or nerve roots; cervical, below C2)
being reviewed by the AMA RUC because of its identification by the
Five-Year Review Identification Workgroup ``Codes Reported Together''
potentially misvalued codes screen in February 2