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

Federal RegisterNov 27, 2007

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

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

[CMS-1385-FC]

RIN 0938-AO65

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

AGENCY:

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

ACTION:

Final rule with comment period.

SUMMARY:

This final rule with comment period addresses certain provisions of the Tax Relief and Health Care Act of 2006, as well as making other proposed changes to Medicare Part B payment policy. We are making these changes to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. This final rule with comment period also discusses refinements to resource-based practice expense (PE) relative value units (RVUs); geographic practice cost indices (GPCI) changes; malpractice RVUs; requests for additions to the list of telehealth services; several coding issues including additional codes from the 5-Year Review; payment for covered outpatient drugs and biologicals; the competitive acquisition program (CAP); clinical lab fee schedule issues; payment for renal dialysis services; performance standards for independent diagnostic testing facilities; expiration of the physician scarcity area (PSA) bonus payment; conforming and clarifying changes for comprehensive outpatient rehabilitation facilities (CORFs); a process for updating the drug compendia; physician self referral issues; beneficiary signature for ambulance transport services; durable medical equipment (DME) update; the chiropractic services demonstration; a Medicare economic index (MEI) data change; technical corrections; standards and requirements related to therapy services under Medicare Parts A and B; revisions to the ambulance fee schedule; the ambulance inflation factor for CY 2008; and amending the e-prescribing exemption for computer-generated facsimile transmissions. We are also finalizing the calendar year (CY) 2007 interim RVUs and are issuing interim RVUs for new and revised procedure codes for CY 2008.

As required by the statute, we are announcing that the physician fee schedule update for CY 2008 is −10.1 percent, the initial estimate for the sustainable growth rate for CY 2008 is −0.1 percent, and the conversion factor (CF) for CY 2008 is $34.0682.

DATES:

Effective Date:

The provisions of this final rule with comment period are effective January 1, 2008, except for the amendments to § 409.17 and § 409.23 which are effective July 1, 2008, and the amendments to § 423.160 which is effective January 1, 2009.

Comment Date:

Comments will be considered if we receive them at one of the addresses provided below, no later than 5 p.m. e.s.t. on December 31, 2007.

ADDRESSES:

In commenting, please refer to file code CMS-1385-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

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

Electronically.

You may submit electronic comments on specific issues in this regulation to

http://www.cms.hhs.gov/eRulemaking.

Click on the link “Submit electronic comments on CMS regulations with an open comment period.” (Attachments should be in Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft Word.)

By mail.

You may mail written comments (one original and two copies) to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1385-FC, P.O. Box 8020, Baltimore, MD 21244-8020.

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

By express or overnight mail.

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

By hand or courier.

If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to one of the following addresses. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7197 in advance to schedule your arrival with one of our staff members.

Room 445-G, Hubert H. Humphrey (HHH) Building, 200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-1850.

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

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

Submission of comments on paperwork requirements.

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

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Pam West, (410) 786-2302 for issues related to practice expense and comprehensive outpatient rehabilitation facilities.

Rick Ensor, (410) 786-5617 for issues related to practice expense methodology.

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

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

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

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

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

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

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

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

Kate Tillman (410) 786-9252 or Brijit Burton (410) 786-7364 for issues related to the drug compendia.

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

Lisa Ohrin (410) 786-4565 or Joanne Sinsheimer (410) 786-4620 for issues related to physician self-referral rules.

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

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

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

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

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

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

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

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

SUPPLEMENTARY INFORMATION:

Submitting Comments:

We welcome comments from the public on the following issues: Interim Relative Value Units (RVUs) for selected codes identified in Addendum C and the physician self-referral designated health services (DHS) procedures listed in Addendum I. You can assist us by referencing the file code [CMS-1385-FC] and the specific “issue identifier” that precedes the section on which you choose to comment.

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received:

http://www.cms.hhs.gov/eRulemaking.

Click on the link “Electronic Comments on CMS Regulations” on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

This

Federal Register

document is also available from the

Federal Register

online database through Government Printing Office Access a service of the U.S. Government Printing Office. The Web site address is:

http://www.access.gpo.gov/nara/index.html.

Information on the physician fee schedule can also be found on the CMS homepage. You can access this data by using the following directions:

1. Go to the following Web site:

http://www.cms.hhs.gov/PhysicianFeeSched/.

2. Select “PFS Federal Regulation Notices.”

To assist readers in referencing sections contained in this preamble, we are providing the following table of contents. Some of the issues discussed in this preamble affect the payment policies, but do not require changes to the regulations in the

Code of Federal Regulations.

Information on the regulation's impact appears throughout the preamble and is not exclusively in section VI.

Table of Contents

I. Background

A. Development of the Relative Value System

B. Components of the Fee Schedule Payment Amounts

C. Most Recent Changes to Fee Schedule

II. Provisions of the Final Rule Related to the Physician Fee Schedule

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

1. Current Methodology

2. PE Proposals for CY 2008

B. Geographic Practice Cost Indices (GPCIs)

1. GPCI Update

2. Payment Localities

C. Malpractice (MP) RVUs (TC/PC issue)

D. Medicare Telehealth Services

E. Specific Coding Issues Related to PFS

1. Reduction in the Technical Component (TC) Payment for Imaging Services Under the PFS to the Outpatient Department (OPD) Payment Amount

2. Application of Multiple Procedure Payment Reduction for Mohs Micrographic Surgery (CPT Codes 17311 Through 17315)

3. Payment for Intravenous Immune Globulin (IVIG) Add On Code for Preadmission Related Services

4. Reporting of Cardiac Rehabilitation Services

F. Part B Drug Payment

1. Average Sales Price (ASP) Issues

2. Competitive Acquisition Program (CAP) Issues

G. Issues Related to the Clinical Lab Fee Schedule

1. Date of Service for the Technical Component (TC) of Physician Pathology Services (§ 414.510)

2. New Clinical Diagnostic Laboratory Test (§ 414.508)

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

1. Growth Update to the Drug Add-On Adjustment to the Composite Rates

2. Update to the Geographic Adjustment to the Composite Rates

I. Independent Diagnostic Testing Facility (IDTF) Issues

1. Revisions of Existing IDTF Performance Standards

2. New IDTF Standards

J. Expiration of MMA Section 413 Provisions for Physician Scarcity Area (PSA)

K. Comprehensive Outpatient Rehabilitation Facility (CORF) Issues

1. Requirements for Coverage of CORF Services Plan of Treatment (§ 410.105(c))

2. Included Services (§ 410.100)

3. Physician Services (§ 410.100(a))

4. Clarifications of CORF Respiratory Therapy Services

5. Social and Psychological Services

6. Nursing Care Services

7. Drugs and Biologicals

8. Supplies and DME

9. Clarifications and Payment Updates for Other CORF Services

10. Cost Based Payment (§ 413.1)

11. Payment for Comprehensive Outpatient Rehabilitation Facility (CORF) Services

12. Vaccines

L. Compendia for Determination of Medically Accepted Indications for Off Label Uses of Drugs and Biologicals in an Anti-Cancer Chemotherapeutic Regimen (§ 414.930)

1. Background

2. Process for Determining Changes to the Compendia List

M. Physician Self Referral Issues

1. General

2. Changes to Reassignment and Physician Self Referral Rules Relating to Diagnostic Tests (Anti Markup Provision)

N. Beneficiary Signature for Ambulance Transport Services

O. Update to Fee Schedules for Class III DME for CYs 2007 and 2008

1. Background

2. Update to Fee Schedule

P. Discussion of Chiropractic Services Demonstration

Q. Technical Corrections

1. Particular Services Excluded From Coverage (§ 411.15(a))

2. Medical Nutrition Therapy (§ 410.132(a))

3. Payment Exception: Pediatric Patient Mix (§ 413.184)

4. Diagnostic X ray Tests, Diagnostic Laboratory Tests, and Other Diagnostic Tests: Conditions (§ 410.32(a)(1))

R. Other Issues

1. Recalls and Replacement Devices

2. Therapy Standards and Requirements

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

S. Division B of the Tax Relief and Health Care Act of 2006—Medicare Improvements and Extension Act of 2006 (Pub. L. 109-432) (MIEA-TRHCA)

1. Section 101(b)—Physician Quality Reporting Initiative (PQRI)

2. Section 110—Reporting of Hemoglobin or Hematocrit for Part B Cancer Anti-Anemia Drugs (§ 414.707(b))

3. Section 104—Extension of Treatment of Certain Physician Pathology Services Under Medicare

4. Section 201—Extension of Therapy Cap Exception Process

5. Section 101(d)—Physician Assistance and Quality Initiative (PAQI) Fund

III. Revisions to the Payment Policies of Ambulance Services Under the Fee Schedule for Ambulance Services; Ambulatory Inflation Factor Update for CY 2007

A. History of Medicare Ambulance Services

1. Statutory Coverage of Ambulance Services

2. Medicare Regulations for Ambulance Services

3. Transition to National Fee Schedule

B. Ambulance Inflation Factor (AIF) During the Transition Period

C. Ambulance Inflation Factor (AIF) for CY 2008

D. Revisions to the Publication of the Ambulance Fee Schedule (§ 414.620)

IV. Refinement of Relative Value Units for Calendar Year 2008 and Response to Public Comments on Interim Relative Value Units for 2007

A. Summary of Issues Discussed Related to the Adjustment of Relative Value Units

B. Process for Establishing Work Relative Value Units for the Physician Fee Schedule

C. 5 Year Review of Work RVUs

1. Additional Codes from the 5-Year Review of Work RVUs

2. Anesthesia Coding (Part of 5-Year Review)

3. Budget Neutrality Adjustment

D. Work Relative Value Unit Refinements of Interim Relative Value Units (Interim 2007 Codes)

E. Establishment of Interim Work Relative Value Units for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System Codes (HCPCS) for 2008 (Includes Table Titled “American Medical Association Specialty Relative Value Update Committee and Health Care Professionals Advisory Committee Recommendations and CMS's Decisions for New and Revised 2008 CPT Codes”)

F. Discussion of Codes and RUC/HCPAC Recommendations

G. Additional Coding Issues

H. Establishment of Interim PE RVUs for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System (HCPCS) Codes for 2008

V. Physician Self-Referral Prohibition: Annual Update to the List of CPT/HCPCS Codes

VI. Physician Fee Schedule Update for CY 2008

A. Physician Fee Schedule Update

B. The Percentage Change in the Medicare Economic Index (MEI)

C. The Update Adjustment Factor (UAF)

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

A. Medicare Sustainable Growth Rate

B. Physicians' Services

C. Preliminary Estimate of the SGR for 2008

D. Revised Sustainable Growth Rate for 2007

E. Final Sustainable Growth Rate for 2006

F. Calculation of 2008, 2007, and 2006 Sustainable Growth Rates

VIII. Anesthesia and Physician Fee Schedule Conversion Factors for CY 2008

A. Physician Fee Schedule Conversion Factor

B. Anesthesia Fee Schedule Conversion Factor

IX. Telehealth Originating Site Facility Fee Payment Amount Update

X. Provisions of the Final Rule

XI. Waiver of Proposed Rulemaking and Delay in Effective Date

XII. Collection of Information Requirements

XIII. Response to Comments

XIV. Regulatory Impact Analysis

Regulation Text

Addendum A—Explanation and Use of Addendum B

Addendum B—2008 Relative Value Units and Related Information Used in Determining Medicare Payments for 2007

Addendum C—Codes With Interim RVUS

Addendum D—2008 Geographic Adjustment Factors (GAFs)

Addendum E—2008 Geographic Practice Cost Indices (GPCIs) by State and Medicare Locality

Addendum F—CPT/HCPCS Imaging Codes Defined by Section 5102(b) of the DRA

Addendum G—FY 2008 Wage Index for Urban Areas Based on CBSA Labor Market Areas

Addendum H—FY 2008 Wage Index Based on CBSA Labor Market Areas for Rural Areas

Addendum I—Updated List of CPT/HCPCS Codes Used To Describe Certain Designated Health Services Under the Physician Self-Referral Provision

Acronyms

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

AAA Abdominal aortic aneurysm

AAP Average acquisition price

ACOTE Accreditation Council for Occupational Therapy Education

ACR American College of Radiology

AFROC Association of Freestanding Radiation Oncology Centers

AHFS-DI American Hospital Formulary Service—Drug Information

AHRQ Agency for Healthcare Research and Quality (HHS)

AIF Ambulance inflation factor

AMA American Medical Association

AMA-DE American Medical Association Drug Evaluations

AMP Average manufacturer price

AOTA American Occupational Therapy Association

APC Ambulatory payment classification

APTA American Physical Therapy Association

ASA American Society of Anesthesiologists

ASC Ambulatory surgical center

ASP Average sales price

ASTRO American Society for Therapeutic Radiology and Oncology

ATA American Telemedicine Association

AWP Average wholesale price

BBA Balanced Budget Act of 1997 (Pub. L. 105-33)

BBRA [Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000

BLS Bureau of Labor Statistics

BMD Bone mineral density

BMI Body mass index

BMM Bone mass measurement

BN Budget neutrality

BSA Body surface area

CAD Computer aided detection

CAH Critical access hospital

CAP Competitive acquisition program

CBSA Core-Based Statistical Area

CEM Cardiac event monitoring

CF Conversion factor

CFR Code of Federal Regulations

CMA California Medical Association

CMS Centers for Medicare & Medicaid Services

CNS Clinical nurse specialist

CORF Comprehensive Outpatient Rehabilitation Facility

COTA Certified Occupational Therapy Assistant

CPEP Clinical Practice Expert Panel

CPI Consumer Price Index

CPI-U Consumer price index for urban customers

CPT (Physicians') Current Procedural Terminology (4th Edition, 2002, copyrighted by the American Medical Association)

CRT-D Cardiac resynchronization therapy defibrillator

CT Computed tomography

CTA Computed tomographic angiography

CY Calendar year

DEXA Dual energy x-ray absorptiometry

DHS Designated health services

DME Durable medical equipment

DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies

DO Doctor of Osteopathy

DRA Deficit Reduction Act of 2005 (Pub. L. 109-432)

E/M Evaluation and management

ECI Employment cost index

EHR Electronic health record

EPC [Duke] Evidence-based Practice Centers

EPO Erythopoeitin

ESRD End stage renal disease

F&C Facts and Comparisons

FAW Furnish as written

FAX Facsimile

FDA Food and Drug Administration (HHS)

FMR Fair market rents

FQHC Federally qualified health center

Federal Register

GAF Geographic adjustment factor

GAO General Accounting Office

GII Global Insight, Inc.

GPO Group purchasing organization

GPCI Geographic practice cost index

HCPAC Health Care Professional Advisory Committee

HCPCS Healthcare Common Procedure Coding System

HCRIS Healthcare Cost Report Information System

HIPAA Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191)

HHA Home health agency

HHS [Department of] Health and Human Services

HIT Health information technology

HMO Health maintenance organization

HPSA Health Professional Shortage Area

HRSA Health Resources Services Administration (HHS)

HUD [Department of] Housing and Urban Development

ICD Implantable cardioverter-defibrillator

ICF Intermediate care facilities

IDTF Independent diagnostic testing facility

IFC Interim final rule with comment period

IOTED International Occupational Therapy Eligibility Determination

IPPE Initial preventive physical examination

IPPS Inpatient prospective payment system

IV Intravenous

IVIG Intravenous immune globulin

IWPUT Intra-service work per unit of time

JCAAI Joint Council of Allergy, Asthma, and Immunology

LPN Licensed practical nurse

MA Medicare Advantage

MA-PD Medicare Advantage Prescription Drug Plans

MD Medical doctor

MedCAC Medicare Evidence Development and Coverage Advisory Committee (formerly the Medicare Coverage Advisory Committee (MCAC))

MedPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (That is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA)

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173)

MNT Medical nutrition therapy

MP Malpractice

MRA Magnetic resonance angiography

MRI Magnetic resonance imaging

MSA Metropolitan statistical area

MSP Medicare Secondary Payer

MSVP Multi-specialty visit package

NBCOT National Board for Certification in Occupational Therapy, Inc.

NCCN National Comprehensive Cancer Network

NCPDP National Council for Prescription Drug Programs

NCQDIS National Coalition of Quality Diagnostic Imaging Services

NDC National drug code

NEMC New England Medical Center

NISTA National Institute of Standards and Technology Act

NLA National limitation amount

NP Nurse practitioner

NPP Nonphysician practitioners

NQF National Quality Forum

NTTAA National Technology Transfer and Advancement Act of 1995 (Pub. L. 104-113)

OACT [CMS'] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act

OIG Office of Inspector General

OMB Office of Management and Budget

OPD Outpatient Department

OPPS Outpatient prospective payment system

OPT Outpatient physical therapy

OSCAR Online Survey and Certification and Reporting

PA Physician assistant

PC Professional component

PCF Patient compensation fund

PDP Prescription Drug Plan

PE Practice Expense

PE/HR Practice expense per hour

PEAC Practice Expense Advisory Committee

PECOS Provider Enrollment, Chain, and Ownership System

PERC Practice Expense Review Committee

PET Positron emission tomography

PFS Physician Fee Schedule

PLI Professional liability insurance

PPI Producer price index

PPS Prospective payment system

PQRI Physician Quality Reporting Initiative

PRA Paperwork Reduction Act

PSA Physician scarcity areas

PT Physical therapy

PT/INR Prothrombin time, international normalized ratio

RFA Regulatory Flexibility Act

RHC Rural health clinic

RIA Regulatory impact analysis

RN Registered nurse

RT Respiratory therapist

RUC [AMA's Specialty Society] Relative (Value) Update Committee

RVU Relative value unit

SBA Small Business Administration

SGR Sustainable growth rate

SLP Speech—language pathology

SLPs Speech—language pathologists

SMS [AMA's] Socioeconomic Monitoring System

SNF Skilled nursing facility

STS Society of Thoracic Surgeons

TA Technology Assessment

TC Technical Component

TENS Transcutaneous electric nerve stimulator

TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)

USP-DI United States Pharmacopoeia-Drug Information

WAC Wholesale acquisition cost

WAMP Widely available market price

Wet AMD Exudative age-related macular degeneration

WFOT World Federation of Occupational Therapists

I. Background

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

A. Development of the Relative Value System

1. Work RVUs

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

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

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

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

2. Practice Expense Relative Value Units (PE RVUs)

Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103-32), enacted on October 31, 1994, amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physician's service beginning in 1998. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.

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

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

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

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

Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) directed the Secretary of Health and Human Services (the Secretary) to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component. On May 3, 2000, we published the interim final rule (65 FR 25664) that set forth the criteria for the submission of these supplemental PE survey data. The criteria were modified in response to comments received, and published in the

Federal Register

(65 FR 65376) as part of a November 1, 2000 final rule. The PFS final rules published in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended the period during which we would accept these supplemental data through March 1, 2005.

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

3. Resource-Based Malpractice (MP) RVUs

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

4. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review RVUs no less often than every 5 years. The first 5-Year Review of the physician work RVUs was effective in 1997, published on November 22, 1996 (61 FR 59489). The second 5-Year Review went into effect in 2002, published in the CY 2002 PFS final rule (66 FR 55246). The third 5-Year Review of physician work RVUs went into effect on January 1, 2007 and was published in the CY 2007 PFS final rule with comment period (71 FR 69624) (although we note that certain additional proposals relating to the third 5-Year Review are addressed in the CY 2008 PFS proposed rule and in this final rule with comment period).

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

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

5. Adjustments to RVUs are Budget Neutral

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

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

B. Components of the Fee Schedule Payment Amounts

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

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

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

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

C. Most Recent Changes to the Fee Schedule

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

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

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

In accordance with section 1848(d)(1)(E)(i) of the Act, we also announced that the PFS update for CY 2007 is −5.0 percent, the initial estimate for the sustainable growth rate (SGR) for CY 2007 is 1.8 percent and the CF for CY 2007 is $35.9848. However, subsequent to publication of the CY 2007 PFS final rule with comment period, section 101(a) of Division B, Title I of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432) (MIEA-TRHCA), which was enacted on December 20, 2006, amended section 1848(d) of the Act. [Division B of the Tax Relief and Health Care Act of 2006 is entitled Medicare and Other Health Provisions and its short title is the Medicare Improvements and Extension Act of 2006. Therefore, the law is hereinafter referred to as “MIEA-TRHCA”.] As a result of this statutory change, the CF of $37.8975 was maintained for CY 2007.

II. Provisions of the Final Rule Related to the Physician Fee Schedule

In response to the CY 2008 PFS proposed rule (72 FR 38122), we received approximately 27,000 comments. We received comments from individual physicians, health care workers, professional associations and societies, and beneficiaries. The majority of the comments addressed the proposals related to anesthesia coding and the 5-Year Review, the physician self-referral provisions and the technical correction to § 410.32(a)(1) concerning an exception to the requirement that diagnostic services (including x-rays) must be ordered by the treating physician. To the extent that comments were outside the scope of the proposed rule, they are not addressed in this final rule with comment period.

RVU changes implemented through this final rule with comment are subject to the $20 million limitation on annual adjustments contained in section 1848(c)(2)(B)(ii)(II) of the Act. After reviewing the comments and determining the policies we would implement, we have estimated the costs and savings of these policies and discuss in detail the effects of these changes in the Regulatory Impact Analysis in section XIV. For the convenience of the reader, the headings for the policy issues correspond to the headings used in the CY 2008 PFS proposed rule (72 FR 38122). More detailed background information for each issue can be found in the CY 2008 PFS proposed rule.

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

Practice expense (PE) is the portion of the resources used in furnishing the service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act.

Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to develop a methodology for a resource-based system for determining PE RVUs for each physician's service. Until that time, PE RVUs were based on historical allowed charges. This legislation required that the revised PE methodology must consider the staff, equipment, and supplies used in the provision of various medical and surgical services in various settings beginning in 1998. The Secretary has interpreted this to mean that Medicare payments for each service would be based on the relative PE resources typically involved with furnishing the service.

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

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

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

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

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

For CY 2007, we implemented a new methodology for calculating PE RVUs. Under this new methodology, we use the same data sources for calculating PE, but instead of using the “top-down” approach to calculate the direct PE RVUs, under which the aggregate direct and indirect costs for each specialty are allocated to each individual service, we now utilize a “bottom-up” approach to

calculate the direct costs. Under the “bottom-up” approach, we determine the direct PE by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically required to furnish each service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are based on our review of recommendations received from the AMA's Relative Value Update Committee (RUC). For a more detailed explanation of the PE methodology see the Five-Year Review of Work RVUs Under the PFS and Proposed Changes to the PE Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).

1. Current Methodology

a. Data Sources for Calculating Practice Expense

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

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

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

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

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

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

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

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

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

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

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

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

b. Allocation of PE to Services

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

(i)

Direct costs.

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

(ii)

Indirect costs.

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

• We apply a specialty-specific indirect percentage factor to the direct expenses to recognize the varying proportion that indirect costs represent of total costs by specialty. For a given service, the specific indirect percentage factor to apply to the direct costs for the purpose of the indirect allocation is calculated as the weighted average of the ratio of the indirect to direct costs (based on the survey data) for the specialties that furnish the service. For example, if a service is furnished by a single specialty with indirect PEs that were 75 percent of total PEs, the indirect percentage factor to apply to the direct costs for the purposes of the indirect

allocation would be (0.75/0.25) = 3.0. The indirect percentage factor is then applied to the service level adjusted indirect PE allocators.

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

Note:

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

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

c. Facility/Nonfacility Costs

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

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

Diagnostic services are generally comprised of two components; a professional component (PC) and a technical component (TC), which may be furnished independently or by different providers. When services have TC, PC, and global components that can be billed separately, the payment for the global component equals the sum of the payment for the TC and PCs. This is a result of using a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global components, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global components, PC, and TCs for a service. (The direct PE RVUs for the TC and PCs sum to the global under the bottom-up methodology.)

e. Transition Period

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

f. PE RVU Methodology

The following is a description of the PE RVU methodology.

(i) Setup File

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

(ii) Calculate the Direct Cost PE RVUs

Sum the Costs of Each Direct Input

Step 1:

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

Apply a BN Adjustment to the Direct Inputs

Step 2:

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

Step 3:

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

Step 4:

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

Step 5:

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

(iii) Create the Indirect PE RVUs

Create Indirect Allocators

Step 6:

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

Step 7:

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

Step 8:

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

RVU, the clinical PE RVU and the work RVU.

For most services the indirect allocator is:

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

There are two situations where this formula is modified:

• If the service is a global service (that is, a service with global, professional and technical components), then the indirect allocator is:

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

• If the clinical labor PE RVU exceeds the work RVU (and the service is not a global service), then the indirect allocator is:

indirect percentage * (direct PERVU/direct percentage) + clinical PE RVU.

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

For presentation purposes in the examples in Table 1, the formulas were divided into two parts for each service. The first part does not vary by service and is

the indirect percentage * (direct PE RVU/direct percentage).

The second part is either the work RVU, clinical PE RVU, or both depending on whether the service is a global service and whether the clinical PE RVU exceeds the work RVU (as described earlier in this step.)

Apply a BN Adjustment to the Indirect Allocators

Step 9:

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

Step 10:

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

Step 11:

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

Calculate the Indirect Practice Cost Index

Step 12:

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

Step 13:

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

Step 14:

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

Step 15:

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

Step 16:

Calculate the indirect practice cost index at the service level to ensure the capture of all indirect costs. Calculate a weighted average of the practice cost index values for the specialties that furnish the service. Note: For services with TC and PCs, we calculate the indirect practice cost index across the global components, PCs and TCs. Under this method, the indirect practice cost index for a given service (for example, echocardiogram) does not vary by the PC, TC and global components.

Step 17:

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

(iv) Calculate the Final PE RVUs

Step 18:

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

Step 19:

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

(v) Setup File Information

•

Specialties excluded from rate-setting calculation:

For the purposes of calculating the PE RVUs, we exclude certain specialties such as midlevel practitioners paid at a percentage of the PFS, audiology, and low volume specialties from the calculation. These specialties

are

included for the purposes of calculating the BN adjustment.

•

Crosswalk certain low volume physician specialties:

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

•

Physical therapy utilization:

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

•

Identify professional and technical services not identified under the usual TC and 26 modifier:

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

•

Payment modifiers:

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

•

Work RVUs:

The setup file contains the work RVUs from this final rule with comment period.

(vi) Equipment Cost Per Minute =

The equipment cost per minute is calculated as:

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

Where:

minutes per year

= maximum minutes per year if usage were continuous (that is, usage = 1); 150,000 minutes.

usage

= equipment utilization assumption; 0.5.

price

= price of the particular piece of equipment.

interest rate

= 0.11.

life of equipment

= useful life of the particular piece of equipment.

maintenance

= factor for maintenance; 0.05.

Table 1.—Calculation of PE RVUs Under Methodology for Selected Codes

Step

Source

Formula

99213

Office visit, est nonfacility

33533

CABG, arterial, single facility

71020

Chest x-ray nonfacility

71020TC

Chest x-ray nonfacility

7102026

Chest x-ray nonfacility

93000

ECG, complete nonfacility

93005

ECG, tracing nonfacility

93010

ECG, report nonfacility

(1) Labor cost (Lab)

Step 1

AMA

$13.32

$77.52

$5.74

$6.12

(2) Supply cost (Sup)

Step 1

AMA

$2.98

$7.34

$3.39

$1.19

(3) Equipment cost (Eqp)

Step 1

AMA

$0.19

$0.65

$8.17

$0.12

(4) Direct cost (Dir)

Step 1

=(1)+(2)+(3)

$16.50

$85.51

$17.31

$7.43

$7.60

(5) Direct adjustment (Dir Adj)

Steps 2-4

See footnote

0.592

(6) Adjusted labor

Steps 2-4

=Lab * Dir Adj

=(1) * (5)

$7.89

$45.89

$3.40

$3.62

(7) Adjusted supplies

Steps 2-4

=Sup * Dir Adj

=(2) * (5)

$1.77

$4.35

$2.01

$0.71

(8) Adjusted equipment

Steps 2-4

=Eqp *Dir Adj

=(3) * (5)

$0.12

$0.39

$4.84

$0.07

(9) Adjusted direct

Steps 2-4

=(6)+(7)+(8)

$9.77

$50.62

$10.25

$4.40

(10) Conversion Factor (CF)

Step 5

MFS

$34.0682

(11) Adj. labor cost converted

Step 5

=(Lab * Dir Adj)/CF

=(6)/(10)

0.23

1.35

0.10

0.11

(12) Adj. supply cost converted

Step 5

=(Sup * Dir Adj)/CF

=(7)/(10)

0.05

0.13

0.06

0.02

(13) Adj. equip cost converted

Step 5

=(Eqp * Dir Adj)/CF

=(8)/(10)

0.00

0.01

0.14

0.00

(14) Adj. direct cost converted

Step 5

=(11)+(12)+(13)

0.29

1.49

0.30

0.13

(15) Wrk RVU * Wrk Scaler

Setup File

MFS

0.8806

0.81

29.62

0.19

0.00−

0.19

0.15

0.00

0.15

(16) Dir_pct

Steps 6, 7

Surveys

33.8%

32.6%

40.7%

37.7%

(17) Ind_pct

Steps 6, 7

Surveys

66.2%

67.4%

59.3%

62.3%

(18) Ind. Alloc. formula (1st part)

Step 8

See Step 8

((14)/(16)) * (17)

(19) Ind. Alloc. (1st part)

Step 8

See (18)

0.56

3.07

0.44

0.21

(20) Ind. Alloc. formulas (2nd part)

Step 8

See Step 8

(15)

(15)+(11)

(11)

(15)

(15)+(11)

(11)

(15)

(21) Ind. Alloc. (2nd part)

Step 8

See (20)

0.81

29.62

0.29

0.10

0.19

0.26

0.11

0.15

(22) Indirect Allocator (1st+2nd)

Step 8

=(19)+(21)

1.37

32.70

0.73

0.54

0.19

0.47

0.32

0.15

(23) Indirect Adjustment (Ind Adj)

Steps 9-11

See footnote

0.362

(24) Adjusted Indirect Allocator

Steps 9-11

=Ind Alloc * Ind Adj

0.50

11.84

0.26

0.19

0.07

0.17

0.12

0.05

(25) Ind. Practice Cost Index (PCI)

Steps 12-16

See Steps 12-16

0.968

0.942

1.054

1.280

(26) Adjusted Indirect

Step 17

= Adj. Ind Alloc * PCI

=(24) * (25)

0.48

11.15

0.28

0.21

0.07

0.22

0.15

0.07

(27) PE RVU

Steps 18-19

=(Adj Dir+Adj Ind) * budn

=((14)+(26)) * budn

0.77

12.64

0.58

0.51

0.07

0.35

0.28

0.07

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.

Comments Related to PE Methodology

Comment:

Several commenters recommend that the unadjusted work RVUs be used in the allocation of the indirect PE RVUs.

Response:

The decision to use the budget neutralized work RVUs in the calculation of indirect PEs appropriately maintains the current relationships between the work, PE, and professional liability payments. We also believe it is important to apply the revised, budget neutralized work RVUs consistently within the PFS framework. It would not be consistent to apply one set of work RVUs for work payments, but a different set for purposes of calculating indirect PEs. Therefore, we will base the calculation of both the work payments and the indirect PE payments on the adjusted work RVUs, and maintain the current overall relationships between work, PE, and professional liability. The PE RVUs in Addendum B and throughout the rest of this rule reflect this policy.

Comment:

Several commenters commended CMS on the bottom up approach to calculating resource based PE RVUs. Commenters expressed gratitude for the transparency and straight forward nature of the revised methodology.

Response:

We appreciate the support for the revised bottom up practice methodology and agree that the bottom up methodology is a more straight forward methodology then its predecessor.

Comment:

Some commenters contend that the approach of basing PE calculations on the weighted average of all specialties furnishing a service is flawed and should be replaced with an approach that bases the specialty weighted factors upon specialties that represent 95 percent of the total utilization of each respective service.

Response:

This issue was fully addressed in the comment and response section of the CY 2007 PFS final rule with comment period (71 FR 69641), and we did not make any further proposals relating to this policy in the CY 2008 PFS proposed rule. Thus, these comments are outside the scope of the CY 2008 PFS proposed rule.

Comment:

One commenter stated that the use of direct PEs in the allocation of indirect PEs unfairly penalizes PC only billers that do not have any direct costs. Additionally, this commenter contends that the use of only the work RVU in the allocation of indirect PEs for this situation underestimates the indirect PEs for PC only billers.

Response:

The resource-based PE methodology uses both the work RVU and the direct cost PE RVU in the allocation of indirect PEs. For PC only billers, which do not have any direct costs, indirect costs will only be allocated based upon the work RVUs. There is no provision within the current methodology to allocate the indirect PEs differently, and we made no proposals in the CY 2008 PFS proposed rule regarding this allocation. Additionally, we note that a review of comments on past regulations confirms that the physician community believes that the work RVUs “over allocate” the indirect PEs. Thus, there appear to be differing views regarding the effect of this allocation. We will continue to allocate the indirect PEs of PC only services on the work RVUs.

Comment:

One commenter recommended that, for procedures that have supply costs in excess of 40 to 50 percent of total direct costs, all supply costs be passed through and exempt from the direct adjustment factor.

Response:

The resource-based PE methodology converts the direct costs for a service, obtained from the direct cost database, into PE RVUs by comparing the service specific aggregate costs to the aggregate pool of costs available for expenditure on direct costs. Because the aggregate direct costs for all services contained in the direct cost database exceed the aggregate pool of available direct dollars, a direct cost adjustment must be applied to scale the database to the pool. Irrespective of the percentage of total direct costs for a specific service represented by supplies, this adjustment will still be applied. If this adjustment were not applied to certain services, the system would either not be budget neutral or RVUs for all other services would have to be reduced to offset these exemptions. We did not make any proposals relating to this adjustment. Moreover, we see no methodological reason to exempt any services regardless of the percentage of their direct costs represented by supplies from the adjustments that apply to all direct costs.

g. Discussion of Equipment Usage Percentage

In the CY 2008 PFS proposed rule (72 FR 38132), we included a discussion about our use of the equipment usage assumption of 50 percent, and stated that we continue to receive requests that we refine this usage percentage. Some groups and individuals state that this usage percentage should be in the range of 70 to 80 percent while others contend that the current utilization rate is too high at 50 percent and should be refined downward to a lower usage percentage.

If the equipment usage percentage is set too high, the result would be insufficient allowance at the service level for the practice costs associated with equipment. If the equipment usage percentage is set too low, the result would be an excessive allowance for the PE costs of equipment at the service level. Although we acknowledged the 50 percent across the board usage rate that we currently apply for all equipment does not capture the actual usage rates for all equipment, we indicated we do not believe that we have sufficient empirical evidence to justify an alternative proposal on this issue. Therefore, we requested that commenters submit information relating to alternative percentages and approaches that differentially classify equipment into mutually exclusive categories with category specific usage rate assumptions. In addition, we requested any empirical data that would assist us in these efforts.

h. Equipment Interest Rate

As part of our calculation of the PE equipment costs, we consider several factors, for example, the useful life of each piece of equipment and the typical interest that would be incurred in the purchase of the equipment. We updated the assigned useful life for all the equipment in our PE input database in the CY 2005 PFS final rule with comment period. However, we have used the same interest rate of 11 percent since the inception of the resource based PE methodology in 1999. There has been much discussion regarding whether this is still the appropriate interest rate to utilize in the calculation of the equipment costs. The majority of comments on the CY 2007 PFS final rule with comment period requested an interest rate of prime plus 2 percent while a small number of commenters requested an interest rate significantly lower than prime plus 2 percent.

In the CY 2008 PFS proposed rule (72 FR 38132), we discussed the basis for the current interest rate of 11 percent and indicated that, based on our analysis of the revised SBA interest rate data, we believe 11 percent continues to be an appropriate assumption; therefore, we stated would retain the interest rate used in the calculation of equipment costs at 11 percent.

Comments Concerning Equipment Usage and Interest Rate

Comment:

Several commenters, including several specialty societies, MedPAC, and the AMA RUC offered recommendations regarding the 11 percent interest rate and the 50 percent utilization rate used to calculate the

price per minute for each piece of equipment. The recommendations received regarding the proposed 11 percent interest rate were generally favorable with the majority of commenters recommending that we monitor the interest rate annually to ensure that the appropriate percentage is utilized in the calculation of the equipment costs.

The commenters' recommendations about making adjustments to the 50 percent utilization rate varied. Certain commenters recommended we do nothing until stronger empirical evidence is available, while other commenters recommended a decrease in the utilization assumptions, and some commenters recommended an increase in the utilization assumption. The particular changes recommended in the utilization assumptions were, in most cases, directly related to a specific code. Virtually all comments received support an on going process of obtaining reliable empirical data to utilize in the calculation of equipment costs in the future.

Response:

As discussed in detail in the CY 2007 PFS final rule with comment period (71 FR 69650), we agree with commenters that both the equipment interest rate and the equipment utilization rate should continue to be examined for accuracy. We are committed to working with all interested parties to define the most accurate utilization and interest rate information for equipment used in the provision of physicians’ services. Since we did not propose a specific change, we will maintain the assumptions of a 50-percent equipment utilization rate and an 11-percent equipment interest rate in the calculation of the PE RVUs published in Addendum B of this final rule with comment period. We will continue to monitor the appropriateness of these assumptions, and evaluate whether changes should be proposed in light of the data available.

Comment:

A few commenters recommended that the equipment utilization rate associated with preventive services be reduced since much of the equipment associated with preventive services is procedure specific and thus not utilized at as high a rate as other medical equipment.

Response:

Similar to our response regarding the equipment utilization rate associated with the entire universe of medical equipment, we do not believe that we have any strong empirical evidence to suggest a change in the current equipment utilization rate associated with preventive services. We are committed to continue working with all interested parties to identify the most accurate utilization rate information for equipment used in the provision of physicians' services.

2. PE Proposals for CY 2008

a. Radiology Practice Expense Per Hour

The American College of Radiology (ACR) presented CMS with information regarding the PE/HR that was used in the PE methodology for radiology in the CY 2007 PFS final rule with comment period. ACR suggested that we change our methodology in a way that would weight the survey data to provide an alternative method of representing large and small practices. We agreed to take their approach to our contractor, the Lewin Group, for further analysis. (We note that the Lewin Group, in its initial analysis of the ACR survey data, had also raised concerns about the representation of small high cost entities in the ACR survey data.) The Lewin Group reviewed ACR's approach and concluded that weighting the ACR survey by practice size more appropriately accounts for the small high cost entities in the final PE/HR. After reviewing both the ACR inquiry and the Lewin response, we also agreed that ACR's approach more appropriately identifies the PE/HR for radiology.

For these reasons, we proposed to revise the PE/HR associated with radiology using the survey data weighted by practice size and included this revised PE/HR in Table 2 of the CY 2008 PFS proposed rule which identified the PE/HR for all specialties.

Comment:

Several commenters, including the AMA's RUC, expressed concern over the proposed increase in the PE/HR for radiology whereby the PE/HR associated with this specialty would be developed based upon a revised practice size weighting methodology. Commenters believed that it is inappropriate to refine the current weighting methodology because: (1) This weighting methodology was not done for all specialties; and (2) some specialties requested to survey their memberships after the deadline to submit supplemental survey data and were denied this opportunity by CMS. Several other commenters commended CMS on their ability to review this potential problem and offer a timely resolution to the affected specialty.

Response:

The American College of Radiology approached CMS with questions regarding the weighting methodology that were used in the development of their PE/HR. Specifically, ACR believed that small high cost practices that primarily furnish professional only services were severely underrepresented in the published PE/HR. Therefore, we forwarded ACR's concerns to our contractor for further review. Upon review of ACR's concerns, our contractor concluded that their initial PE/HR recommendation to CMS was not fully representative of these smaller high cost practices. For this reason, our contractor recommended a revised weighting approach that would fairly represent these small high cost practices. We agree with both the ACR and our contractor and will finalize our proposal to use the revised PE/HR for radiology.

Additionally, we do not believe that these revisions to the PE/HR for radiology constitute a submission of data after the deadline. No new data were submitted. Rather, we view this as a revision to the weighting methodology in order to address a unique situation.

Comment:

Several commenters recommended that all pain management services be crosswalked to the interventional pain management specialty as opposed to using the actual data which currently report the anesthesiology specialty furnishing a significant portion of the pain management services. According to the comments received, anesthesiology is listed as the primary specialty on many pain management services and since the PE/HR associated with anesthesiology is lower than interventional pain management, pain management services are being inappropriately valued.

Response:

Physicians self-designate their respective specialty for purposes of Medicare enrollment. If commenters believe that physicians are incorrectly self-designating their specialty as anesthesiology when it would be more appropriate for them to designate interventional pain management, commenters should work with their respective specialty organizations to ensure physicians appropriately designate the correct specialty. If the specialty of a certain percentage of the physicians furnishing the pain management service is actually anesthesiology, we believe that weighting the various PE/HR for all specialties that furnish these services, as we currently do, is the appropriate methodology to establish the final PE/HR for pain management services.

Comment:

One commenter recommends that only the PE/HR associated with ophthalmology be used in the establishment of RVUs for CPT code 66984,

Extracapsular cataract removal with insertion of intraocular lens prosthesis (one stage procedure), manual or mechanical technique (e.g., irrigation and aspiration or

phacoemulsification).

The commenter contends that the 14 percent of the utilization that is associated with optometry is in error as optometrist would only be involved in the post-operative care of these patients and not the surgical procedure.

Response:

Although we did not make any proposals in the CY 2008 PFS proposed rule regarding this issue, we agree that, generally, optometrists will not be involved in the surgical procedure. As stated by the commenter, and supported by the utilization data, there are a significant number of services for which optometrists are involved in the post-operative care of CPT code 66984. The resource-based PE methodology appropriately adjusts for those services identified with modifier 55 (post-operative care only). Since there are PEs associated with the post-operative care of CPT code 66984, and since we adjust the utilization for those services that are identified as the post-operative care only of CPT code 66984, we believe the current methodology appropriately reflects the correct weighted specialty mix associated with this service.

Comment:

One commenter recommended that the PE/HR for CPT codes 22862,

Revision including replacement of total disc arthroplasty (artificial disc) anterior approach, lumbar, single interspace,

and 22865,

Removal of total disc arthroplasty (artificial disc) anterior approach, lumbar, single interspace,

be crosswalked to orthopedic surgery as opposed to the all physician PE/HR. The commenter contended this is similar to the crosswalk change from all physicians to orthopedic surgery that was reflected in the PE methodology in the proposed rule for CPT code 22857,

Total disc arthroplasty (artificial disc), anterior approach, including discectomy to prepare interspace (other than for decompression), lumbar, single interspace.

Response:

CPT codes 22862 and 22865 were new for CY 2007 and absent specific information with respect to the specialty performing the services, we had crosswalked these codes to the all physician PE/HR. We agree with the commenter that these codes are of a similar nature to CPT code 22857. They are part of the same orthopedic family of codes and should be treated consistently when applying the PE methodology. Therefore, we will assign the orthopedic surgery PE/HR to CPT codes 22862 and 22865 as opposed to the all physician PE/HR.

Comment:

Several commenters conveyed support for the Physician Practice Information Survey which is currently being administered throughout the nation and encouraged CMS to use this practice cost information to update the current PE/HR data that is being utilized in the development of resourced-based PE RVUs.

Response:

The Physician Practice Information Survey is a practice cost survey that is being conducted by the AMA with support from various specialty societies and CMS. We look forward to analyzing the results of the AMA data collection efforts for possible inclusion in the resource-based PE methodology in future rulemaking cycles.

b. RUC Recommendations for Direct PE Inputs and Other PE Input Issues

In the CY 2008 PFS proposed rule (72 FR 38133), we proposed the following concerning direct PE inputs.

(i) RUC Recommendations

In 2004, the AMA's Relative Value Update Committee (RUC) established a new committee, the Practice Expense Review Committee (PERC), to assist the RUC in recommending direct PE inputs (clinical staff, supplies, and equipment) for new and existing CPT codes, a process that was previously accomplished by the Practice Expense Advisory Committee (PEAC).

The PERC reviewed the PE inputs for nearly 300 existing codes at its meetings held in February 2007 and April 2007. (A list of these reviewed codes can be found in Addendum C of the CY 2008 PFS proposed rule.)

In the CY 2007 PFS final rule with comment period, we addressed several issues concerning direct PE inputs and encouraged specialty societies to pursue further review of these inputs through the RUC/PERC process. The following discussions summarize the PERC recommendations regarding these issues:

Cardiac Catheterization Procedures

As discussed in the CY 2008 PFS proposed rule, the PERC considered recommendations for new or updated PE inputs for the family of CPT codes 93501 through 93556 for cardiac catheterization. The American College of Cardiology (ACC), in cooperation with the Society of Cardiac Angiography and Interventions (SCA&I) and the Cardiovascular Outpatient Center Alliance (COCA), developed PE inputs for the nonfacility setting for 13 of the 28 CPT codes in this family.

We proposed to accept the PERC recommendations for the direct PE inputs for the nonfacility setting for the CPT codes 93501, 93505, 93508, 93510, 93526, 93539, 93540, 93542, 93543, 93544, 93545, 93555, and 93556.

In addition, we proposed that the PE for the following CPT codes will not be valued or applicable to the nonfacility setting: 93503, 93511, 93514, 93524, 93527, 93528, 93529, 93530, 93531, 93532, 93533, 93561, 93562, 93571, and 93572.

Comment:

We received comments from the ACC and the SCA&I thanking us for our consideration of the PERC recommendations for 13 CPT codes for cardiac catheterization procedures performed in the nonfacility setting and for accepting their request not to establish nonfacility PE RVUs for the remaining 15 procedures in the cardiac catheterization family.

Response:

We appreciate the commenters' support and have accepted the PERC recommendations for the 13 cardiac catheterization procedures and have changed our PE database to reflect the PE inputs. For the 15 remaining codes, we will finalize the proposal and attach the “NA” indicator to them.

Comment:

We received comments from COCA, a national organization representing nonfacility medical cardiology practices that conducted a “Direct Cost Study” purporting to demonstrate that the major problem with the 2006 RUC estimates of direct PE costs for nonfacility outpatient cardiac catheterization was an inadequate list of direct patient care activities. In addition, COCA contends that the total RUC estimates of clinical labor time were so low as to lack credibility. The commenter contends that a significant amount of the data from its Direct Cost Study were not incorporated into the PE recommendations that were jointly prepared and presented at the April 2007 RUC meeting with ACC and SCA&I for the cardiac catheterization procedures. In addition to the inadequate clinical labor inputs, the commenter believes that the RUC process does not allow for the inclusion of safety devices, such as crash carts, as direct PE inputs because these are not used in the typical case; rather, these are considered indirect PE. COCA has requested that we review the data from the Direct Cost Study and revise the current proposed PE RVUs for these procedures to values that reflect more appropriately the direct and indirect costs of providing these services. As an alternative solution, COCA asks that we tie reimbursement for these services to a reasonable percentage of the hospital APC.

We also heard from many cardiology practices that provide cardiac catheterizations in the nonfacility

setting. They had similar comments and indicated their support for COCA's request that we review the cost study data and revise the PE RVUs to more appropriately value the cardiac catheterization procedures when performed in the nonfacility setting.

Response:

While we understand COCA's and the other commenters' concerns about the decrease in the PE RVUs for the cardiac catheterization procedures, we want to clarify that the PE inputs for these procedures were fully considered by the RUC process. The RUC has identified standard descriptions of clinical staff activities that the specialty societies follow as they prepare their recommendations for direct PE inputs believed to be typical to a service and the RUC has established standard values for some of these clinical activities. The RUC does not deviate from accepted standard unless the specialty society presents compelling evidence to substantiate that the variance is typical to the practice for each procedure. In the past, the RUC has recommended, and we agreed, that the crash cart would be included as equipment necessary to perform the services of cardiopulmonary resuscitation, CPT 92950, but is not necessary to perform other services, even though many physicians have purchased and maintain crash carts as part of their medical practices. Since the crash cart is only specified as required for use in CPT 92950, it is considered as indirect PE for all other procedures. We note that COCA's request in the alternative to make payment for these procedures based on a percentage of the OPPS APC is not feasible. The PFS and the OPPS APC payment amounts are determined by different payment methodologies that are specified in the statute. We rely on the RUC process to assist us in establishing the typical PE inputs that are necessary to provide physician services. This is because the specialty-developed PE recommendations that are presented to the RUC are all subject to the same multi-specialty scrutiny. We agree with the PERC's direct PE recommendations for the 13 cardiac catheterization codes in the nonfacility setting and we will accept the RUC PE recommendations for these 13 procedures. However, we are sympathetic to the concerns raised by COCA and echoed by other commenters about the extent to which the data from the Direct Cost Study were considered in the RUC process and we ask that the RUC provide another opportunity for the review of the direct PE inputs for these cardiac catheterization procedures to ensure that the data from the COCA Direct Cost Study is afforded appropriate and adequate consideration.

Obstetric/Gynecologic PE

As discussed in the CY 2008 PFS proposed rule, we agreed with the PERC recommendation to add a non-sterile sheet (drape) 40 in by 60 in (supply code SB006) priced at $0.222 to the pelvic exam pack resulting in the new price of $1.172. This change affected 236 CPT codes for obstetric/gynecologic services containing the pelvic exam pack. We also proposed to accept the PERC recommendations to standardize the equipment used in post-operative visits to include both a power table and fiberoptic light in the PE database for 70 obstetric/gynecologic codes.

Comment:

We received a comment from the society representing gynecologic oncologists commending us for making the above changes to the pelvic exam pack and for standardizing the equipment used in follow-up visits. The society believes these changes enable gynecologic oncologists to account for the additional costs incurred in their practice specialty.

Response:

We appreciate the specialty society's comments and we will adopt the PERC recommended inputs as proposed.

Dual Energy X-Ray Absorptiometry (DEXA)

The PERC recommended revisions to the direct PE inputs for CPT codes 77080, 77081, and 77082 to comply with established PERC standards, and more appropriately reflect the resources used to furnish these services. We agreed with these PERC recommendations.

Comment:

We received several comments thanking us for accepting the RUC's PE recommendations for the DEXA codes. We also received comments from several device manufacturers and specialty societies representing gynecologists, endocrinologists, rheumatologists, and radiologists informing us that the PE recommendations passed by the RUC, which we had proposed to accept in the proposed rule, contained a mistake as to the correct DEXA equipment that is typically used to perform the procedure represented by CPT code 77080. The RUC's PE recommendations listed the DEXA equipment as that using a “pencil beam” technology, priced at $41,000. However, the correct DEXA equipment used for CPT 77080 uses the “fan-beam” technology and is priced at $85,000.

Response:

We were sympathetic to the concerns expressed by the commenters about the listing of the incorrect DEXA equipment, and we worked with the RUC staff to arrange for this equipment error to be reconsidered by the RUC at its September 2007 meeting. The RUC agreed to the specialty society's recommended change in the DXA equipment for CPT 77080. We agree with the recommendations from the specialty societies and the RUC and we have corrected our PE database to reflect that the fan-beam DEXA equipment is typically used for CPT 77080. In addition, a price of $3,000, with documentation, was presented for the spinal phantom used in this procedure. We have also accepted this price and have changed the PE database accordingly.

Comment:

We received many comments expressing concerns about the cuts to the PE RVUs for these DEXA services. These commenters believe the cuts are a result of the new PE methodology and may result in access problems for patients because physicians will no longer be able to afford to provide these services in the office setting. One commenter asked us to identify and make available to the public the inputs used to derive the indirect PE RVUs.

Response:

We are aware that the PE RVUs for these DEXA services were negatively impacted by the change in the PE methodology, as were those for many other services in which the previous PE RVUs were not based on the PE resources used to furnish the service. Because the new PE methodology now utilizes these resources, it is important to make certain that the PE direct inputs actually reflect the typical resources that are used to provide each service. The methodology for determining the indirect PE RVUs, including a description of each step in the calculation, is detailed earlier in this section. We share the commenters concerns about beneficiary access to DEXA services and will continue to monitor this issue.

Computer-Aided Detection (CAD) Codes

The specialty society for radiological services reviewed the direct inputs for CPT codes 77051 and 77052 and recommended that no changes to the PE inputs were needed. The PERC concurred with this decision and we are in agreement.

Comment:

We received a comment from the society representing radiologists conveying their appreciation for accepting the unchanged direct PE inputs for CAD services.

Response:

We appreciate the commenter's support and will maintain the PE inputs as proposed.

Nuclear Medicine Services

The specialty society representing nuclear medicine and the PERC recommended that the direct PE inputs for 2 CPT codes contained CPEP inputs and needed to be updated to agree with 2004 PEAC-approved inputs. However, in reviewing the PE database, we discovered that there were 4 other related codes which also had CPEP inputs which should be updated. We made the appropriate adjustments to substitute the PEAC inputs for the CPEP for CPT codes 78600, 78607, 78206, 78647, 78803 and 78807.

The specialty society also noted that for 7 CPT codes, revision of x-ray related supplies was required, including the number of x-ray films, developer solution, and film jackets. The PERC forwarded these recommendations and we made the appropriate changes to the PE database for the following CPT codes: 78600, 78601, 78605, 78606, 78607, 78610 and 78615.

Comment:

The specialty society representing nuclear medicine expressed appreciation for acceptance of their recommended inputs and indicated it will continue to monitor the nuclear medicine codes and provide inputs and refinements as necessary and appropriate.

Response:

We appreciate the specialty society's comments and we will adopt the PERC recommended inputs as proposed.

Transcatheter Placement of Stent(s)

At the request of the specialty societies representing radiology and interventional radiology, the PERC considered and approved direct PE inputs for the nonfacility setting for 3 CPT codes, 37205, 37206, and 75960, for transcatheter placement of stent(s). Among the supplies, a “vascular stent deployment system”, valued at $1,645, was noted by the society as the typical stent used for CPT codes 37205 and 37206 requiring 2 such stents for the placement in the initial vessel and 1 stent for each subsequent vessel, respectively. We reviewed a published clinical research study that was forwarded by the specialty society. The study indicated that 1 stent was typical for the procedure of CPT code 37205. As discussed in the CY 2008 PFS proposed rule (72 FR 38134), absent any further verification from the specialty, we included only 1 stent in the PE database for this code.

Comment:

Commenters, representing specialty societies for radiology, interventional radiology and vascular surgery appreciated the proposal assigning direct PE inputs for the nonfacility setting for these three CPT codes. However, these commenters expressed concern that the number of stents had been reduced. One commenter agreed that two stents may not be typical but requested guidance on how the cost of the additional stent could be billed; another of the commenters asked that we reconsider this decision or at a minimum include the “average” of 1.5 stents. One of the commenters also noted that several studies clearly establish that these peripheral stent services are safely performed in the nonfacility environment, with nearly all of the procedures in the studies resulting in short observation stays, typically of less than 4 hours.

Response:

Based on a review of the literature and other information provided by the commenters we will revise the PE database for CPT code 37205 to reflect 1.5 stents.

Comment:

Two commenters, representing manufacturers, expressly urged us to consider the safety issues surrounding the proposal to value these procedures in the nonfacility setting and believe that this conflicts with the decision to exclude these procedures from the ambulatory surgical center (ASC) list. One of these commenters acknowledged that, while we have no specific policy to identify which procedures can be safely performed in a physician's office, we do have some safety standards for ASCs. The commenter requested that the ASC standards be extended to the physician office. This commenter also referenced studies that demonstrate complications can be associated with these procedures, and suggested that these risks need to be addressed by appropriate safety or quality standards.

Response:

We appreciate the commenters' viewpoint. However, as the commenters acknowledged, we have no established policy to designate procedures that can be “safely” performed in the physician office setting. The purpose of the PFS is to establish proper payment for procedures furnished by physicians and other health professionals. Several medical specialty societies recommended the valuation of these services in the nonfacility setting, which suggests to us that these procedures are being furnished in nonfacility settings on a regular basis. These societies provided the recommended PE inputs involved in furnishing the typical service in a nonfacility setting, and these inputs were reviewed, accepted and recommended by the RUC. We also note that, as indicated in the previous comment, one commenter provided literature from studies to support that these services are safely performed in the nonfacility environment. Because it appears these procedures are being furnished regularly in nonfacility settings, we believe it is appropriate to value them for payment in those settings. Therefore, we will value these procedures in the nonfacility setting as proposed.

Comment:

One commenter noted that payment for CPT code 75960, the supervision and interpretation service associated with the 2 CPT codes discussed above for the transcatheter placement of stent(s), is still shown as carrier-priced in the Addendum of the proposed rule.

Response:

We regret the error. The Addendum and PFS database have been corrected to reflect the appropriate RVUs.

(ii) Remote Cardiac Event Monitoring

In the CY 2007 PFS final rule with comment period, direct PE inputs for remote cardiac event monitoring (CEM) services represented by CPT codes 93012, 93225, 93226, 93231, 93232, 93270, 93271, 93733, and 93736 were revised on an interim basis to reflect the unique circumstances surrounding the provision of these services. Unlike most physicians' services, CEM services are furnished primarily by specialized IDTFs that, due to the nature of CEM services, must operate on a 24/7 basis. The specialty group representing suppliers that furnish CEM services believes that these services require additional direct PE inputs, such as telephone line charges associated with trans-telephonic transmissions and fees associated with providing Web access for storage and transmission of clinical information to the patient's physician. We continue to work with the specialty group regarding the specific direct PE inputs, as well as the components for the indirect PE allocation, based on surveys conducted by the specialty group. To clarify and further the results of our discussions with and information provided by, the specialty group, we requested comments in the CY 2008 PFS proposed rule on the appropriateness of the above-mentioned direct PE inputs. In addition, we invited comments on any additional direct inputs and components of the indirect PE allocations which would be appropriate for these services, along with supporting documentation to justify their inclusion for PE purposes.

Comment:

We received comments from medical societies, provider organizations and a device manufacturer thanking us for working with these organizations to develop direct PE for

these services that do not fit the typical physician service model. Several comments supported the specific PE proposals supplied by the specialty group representing providers that furnish CEM services, and urged us to adopt them. A medical society representing cardiologists requested to work with us and the remote CEM provider groups to gather and review any additional necessary data prior to adoption of additional direct PE inputs.

The CEM provider group specifically proposed that we add telephone transmission costs to the direct PE inputs for CPT codes for CEM, 93012 and 93271 and the CPT codes for pacemaker monitoring, 93733, and 93736. The group also identified expenses for Web-based storage, maintenance and access to clinical information to be allocated to the CEM and pacemaker monitoring CPT codes, as well as the holter monitoring CPT codes 93226 and 93232. In addition to these supply PE recommendations, the CEM provider group proposed equipment time-in-use increases for the holter monitors, cardiac event monitors and for INR monitors (which are discussed later in this section).

Response:

We carefully reviewed the information supplied by all of the commenters and believe that it would be valuable for the commenters to work together, including the cardiology specialty society, before we establish further direct PE inputs for these cardiac monitoring services. In addition, we would like to make the CEM providers aware that it appears the assignment we made in CY 2007 of 43,200 time-in-use minutes for the looping CEM monitor used in CPT code 93271 (typically used for a 30-day period) pays back the cost of this CEM monitor, that is valued at $995, in less than 5 months, even though the CEM monitor has an established 4-year useful life. As we discuss later in the Prothrombin Time, International Normalized Ratio (PT/INR) section, we believe that the time-in-use assigned to any one device should not exceed its useful life. We will review this time-in-use assignment for CEM monitors during our CY 2009 rulemaking.

(iii) Prothrombin Time, International Normalized Ratio (PTI/NR)

As discussed in the CY 2008 PFS proposed rule, based on comments received and subsequent discussions with entities that furnish these PT/INR services, we adjusted the time in use for the home monitor equipment for G0249

Provision of test materials and equipment for home INR monitoring to patient with mechanical heart valve(s) who meets Medicare coverage criteria; includes provision of materials for use in the home and reporting pwiof [prothrombin] test results to physician; per four tests

to 1440 minutes to reflect that the monitor is dedicated for use 24 hours a day and unavailable for others receiving this service. We invited comments on this change, as well as comments on any additional direct inputs which would be appropriate to this service, along with supporting documentation to justify their inclusion for PE purposes.

Comment:

We received comments from specialty societies, provider groups, and individuals expressing their appreciation of our attempt to correct the problem concerning the application of PE methodology for the PT/INR service, but noted their concern that changing the INR home monitor time-in-use minutes from 32 to 1440 does not have a rational basis nor does it provide for an adequate recoupment of the cost of the device. These commenters requested that we assign a more realistic figure to capture the 28-day period that the patient is required to use the monitor. One commenter noted that using the current 1440 minutes, it would take 11.7 years to recoup the $2000 price of the equipment which has an assigned life of 4 years. The commenters suggested several alternative methodologies to calculate the time-in-use for the INR monitor. One method suggests multiplying the 1-day time, 1440 minutes, by 4, which represents the number of tests conducted in the 28-day period, to equal 5,760 minutes. This method would take 3 years to get back the $2000 value of the INR monitor. Another proposal suggests multiplying the 1-day 1440 minutes by 28 days which is the actual time the patient has the equipment. This method yields 40,300 minutes and the commenter admittedly states this method greatly overestimates the value of the INR monitor because it would take just 5 months to recoup the $2000 price. One commenter suggested that we simply amortize the price of the equipment, $2,000, over the useful life of 4 years. Another commenter's suggestion uses the annual minutes figure of 150,000 that we use in our formula for deriving per minute equipment costs, and divides it by 28 (days) to arrive at 5,753 minutes. This method recoups the INR monitor price in 3 years.

Other commenters voiced concerns about the valuation of the INR home monitor and offered alternatives to capture the cost of the device. One commenter suggested that we treat the cost of the INR home monitor as a one-time upfront cost and include this price in HCPCS code G0248 that is used to report the demonstration of the INR monitor to the patient, at the initial use. Another commenter recommended that the INR home monitor be removed from the PE for both G0248 and G0249 and be considered under the DME benefit.

Response:

We understand the concerns expressed by the commenters and appreciate their suggested alternatives that we could use to more appropriately cover the costs of the INR home monitor. Further, we agree that the 1440 minutes we assigned for CY 2007 seems too low considering that the patient uses the INR home monitor for 28 days, not just one. After reviewing all of the suggested alternatives, we eliminated the two proposals asking us to change the mechanism of payment for the INR home monitor. We, therefore, considered the various suggestions for establishing a more appropriate time-in-use value for the INR home monitor. We believe the proposal that best reflects the policy we use to determine the time-in-use for equipment items where the actual minutes-in-use exceed the assigned useful life is the commenter's suggestion to amortize the $2000 INR monitor over its 4-year life. Using this method, 4,315 minutes is the necessary time-in-use figure to recover the purchase price of the equipment in 4 years. We will replace the 1440 minutes assigned for CY 2007 with 4,315 minutes as the time-in-use for the INR home monitor and will change the PE database accordingly.

(iv) Positron Emission Tomography (PET) Codes Clinical Labor Time

We received comments from the specialty society representing nuclear medicine regarding a discrepancy in the clinical labor time for CPT codes 78811, 78812, and 78813 which are PET codes for tumor imaging. The specialty noted that the clinical labor time indicated in the PE database differs by 7 minutes from the time that was previously recommended by the PERC in April 2004. We agreed with the specialty society that the PE database labor inputs for these 3 PET codes are incorrect and we made the appropriate adjustments to the PE database.

Comment:

The specialty society representing nuclear medicine expressed appreciation for acceptance of its recommended inputs and indicated it will continue to monitor the nuclear medicine codes and provide inputs and refinements as necessary and appropriate.

Response:

We thank the specialty society for reviewing the direct inputs for their related procedures in the PE

database that we post as a download with each proposed and final rule on our Web site (

www.cms.hhs.gov/PhysicianFeeSchedule/PFSFRN

). We will adopt the recommended inputs as proposed.

(v) Nuclear Medicine PE Supplies

The specialty society representing nuclear medicine commented that the PE database currently contains supply items that are inappropriate for certain procedures and provided the information to make the corrections. For respiratory imaging procedures represented by CPT codes 78587, 78591, 78593, 78594, 78630, 78660, 78291, and 78195, the specialty society noted specific IV supply items to be deleted from procedures where they are not required. For a thyroid imaging procedure represented by CPT code 78020, x-ray supply items were recommended for deletion. In addition, the society recommended adding supply items for respiratory imaging procedures, including nose clips, masks, and nebulizer kits, as appropriate, to CPT codes 78584, 78585, 78591, 78593, 78594, 78586, 78587, 78588, and 78596. For a kidney function study represented by CPT code 78725, injection supply items were noted as missing and the specialty society requested that these be added. We proposed to accept these direct PE input corrections and revised our PE database accordingly.

Comment:

The specialty society voiced its gratitude for the acceptance of their recommended inputs.

Response:

We thank the specialty society for its interest in assuring the accuracy of the PE inputs in the procedures provided by their members. We will adopt the PERC recommended inputs as proposed.

(vi) Arthroscopic Procedure Nonfacility Inputs

In the CY 2008 PFS proposed rule (72 FR 38135), we included a discussion about the establishment of nonfacility direct PE inputs for the arthroscopic procedures represented by CPT codes 29805, 29830, 29840, 29870, and 29900. Absent specific recommendations from the RUC and because some physicians are already performing these procedures in the office setting, we specifically requested comments regarding the appropriateness of establishing nonfacility PE inputs for these arthroscopic procedures when they are provided in the office setting. We also invited comments as to the specific direct PE inputs, following the RUC approved standardized format, that are typical in the provision of each above listed arthroscopic procedure furnished in the physician's office. We indicated we will review these comments to determine whether or not it is appropriate to propose on an interim basis PE inputs for these codes in the nonfacility setting in our final rule.

Comment:

We received comments from the specialty society representing orthopedic surgeons in opposition to the establishment of nonfacility PE for the arthroscopic procedures because they believe these procedures are not safely performed in the office setting. The specialty society indicated that one of these codes, CPT 29900,

Arthroscopy, metacarpophalangeal joint, diagnostic, includes synovial biopsy,

was surveyed by the RUC in April 2001 and, at that time, the RUC recommended this service only as a facility-based procedure. The RUC supported the AAOS concerns and recommended that the PE RVUs for the nonfacility setting remain designated as “NA.” The specialty society believes that if the arthroscopic procedures were valued in the nonfacility setting, untrained physicians may begin to perform them and, as a result, patients will face significant risks. The specialty society believes that only credentialed physicians should perform these procedures and that this process can only be ensured in the facility-based setting. The specialty society also asserts the facility-based setting is the safest setting for these procedures because it affords the physician more clinical options for dealing with any complications that may arise. In addition, if the procedure is furnished in the nonfacility setting, there would be no way to address any treatable lesion that is found and a patient would need to be seen in the facility setting to undergo a second procedure.

Because the specialty society's position was established by an expert panel, the society states that it will reconsider its position if evidence is presented establishing the safety and efficacy of these procedures in the office setting and if a method is established to ensure that only qualified physicians perform these procedures in the office setting.

We also received comments from orthopedic practices and individual physicians—the majority of which indicated they are members of the orthopedic specialty society—all stating that they are currently performing these procedures in the nonfacility setting. These comments requested that we establish PE inputs for the arthroscopic procedures because this would allow patients greater access to these services in more convenient settings and, because it would establish payment that would more fairly compensate them for the resources they use to provide these services in the office location. A product manufacturer supported the views of the physicians who requested the establishment of nonfacility PE for the nonfacility setting.

These physicians note that the safety of the in-office procedures is well documented in the literature, and provided us with citations of articles going back to the mid-1990s. We also received suggested PE inputs including clinical labor, supplies and equipment that are typically used when these procedures are provided in the nonfacility setting.

Response:

We appreciate the concern expressed by the commenters opposing the establishment of PE for the office setting and are sympathetic to those supporting the assignment of PE for these codes. We are also dismayed that the parties involved on each side of this issue have not been able to resolve these issues to date. We have decided that the most prudent course of action is to defer proposing nonfacility inputs for these arthroscopic procedures in this final rule. We are hopeful that the specialty society and its physician colleagues who provide these services in the nonfacility setting will be able to discuss the issues of mutual concern regarding the safety of performing these procedures in the office setting. We are hopeful that this issue can be resolved and that the physicians performing these services in the nonfacility setting will be given the opportunity to have a multi-specialty review by the RUC. We are aware that this decision to refer this issue back to the specialty society and the RUC postpones the establishment of nonfacility PE values for these procedures until CY 2009, at the soonest, and that a review by the RUC process is not guaranteed. However, given the apparent level of dissension within the specialty, we believe that the specialty society, its physician colleagues, and the RUC should first be given an opportunity to resolve these important issues.

(vii) Nonfacility Inputs for CPT Code 52327

As discussed in the CY 2008 PFS proposed rule we indicated that the society representing urologists requested that we remove all of the nonfacility PE inputs for CPT code 52327,

Cystourethroscopy (including ureteral catheterization); with subureteric injection of implant material

. The specialty society reasoned that the nonfacility PE value is inappropriate since the procedure is never performed in the physician office;

it is specific to the pediatric population; and, as such, is always performed with general anesthesia. We agreed with the specialty society that this procedure is incorrectly valued for the nonfacility setting and proposed to accept its recommendation to remove the nonfacility direct PE inputs, revising the PE database accordingly.

Comment:

The specialty society thanked us for accepting its recommendation to remove the nonfacility PE for this procedure. However, the society indicated that a review of the PE database on our Web site indicated that these inputs were still included and suggested that they be deleted.

Response:

We appreciate the commenter's attention to detail and have removed the PE inputs from the PE database.

(viii) Maxillofacial Prosthetics

We have been working with the society representing maxillofacial prosthetists since 2005 to establish nonfacility direct inputs for the prosthetic services represented by the CPT code series, 21076 through 21087. The current PE database reflects the labor, supplies, and equipment needed to perform each procedure. However, we do not have pricing information and documentation for many supply items. The society provided information and documentation for equipment prices, but because specific time-in-use information was not provided, we developed time in use in 2006 for each equipment item in each procedure. For CY 2007, these equipment inputs were utilized under the new PE methodology to calculate the nonfacility PE RVUs for these procedures. Although we have asked the specialty society to provide the supply pricing information and time in use data for each equipment item for each procedure, we have not received the requested information to date. Consequently, unless such information is provided, the PE database will continue to have no prices associated with these supplies. Therefore, in the CY 2008 PFS proposed rule, we proposed to cap the time in use for each equipment item at 25 minutes until specific information is received regarding the actual time in use. Tables listing the needed information for were included in the proposed rule.

Comment:

The specialty society representing the maxillofacial prosthetists supplied us with some of the requested information. The society provided us with the time-in-use data for every piece of equipment for each of the procedures in the CPT code series 21076 through 21087. The specialty also provided prices for the supply items used in this code series; however, it did not provide any documentation to support these prices.

Response:

We appreciate the information provided by the specialty, especially that in relation to the equipment time-in-use. The recommended equipment times were compared with the total clinical labor time for each procedure and times that were greater were reduced to equal the labor time, in accordance with our usual allocation policy. Capping the equipment time-in-use to match the labor time affected 4 pieces of equipment in every procedure including: the dental chair, ceiling light, air compressor, and delivery unit. For 3 of these codes, the time-in-use for a 5th piece of equipment, the washout and curing unit, was also capped. We will accept the specialty's equipment time-in-use information, with the aforementioned variances, and have changed the PE database accordingly.

We regret that documentation for the supply prices was not forwarded. We did, however, receive a catalog documented pricing for articulating paper/ribbon that was submitted by a different specialty in reference to another CPT code, and have entered this price in the PE database for 8 of the 10 codes in this family, as appropriate. The specialty is reminded that our policy for accepting prices for supplies or equipment in the PE database requires the submission of acceptable documentation, the definition of which is specified below the table that appeared in the proposed rule listing the outstanding prices for supply items needing documentation. We will continue to work with the specialty as it collects and forwards this important information.

(ix) Requests for Increases in Supply Prices

We received a request from the specialty society for obstetrics and gynecology to increase the price of supply item (kit, hysteroscopic tubal implant for sterilization) for CPT code 58565,

Hysteroscopy, surgical; with bilateral fallopian tube cannulation to induce occlusion by placement of permanent implants

for this code which was created for CY 2005. This hysteroscopic implant kit is priced at $980 and the specialty is now requesting a price of $1,245, providing an invoice for documentation. The specialty reports that the higher price is attributed to a manufacturer change in design and materials, and submitted the manufacturer's documents supporting these changes that were used to secure FDA approval. Therefore, we proposed to accept the new price of $1,245 for the hysteroscopic implant kit due to the changes made in the modified model.

Comment:

We did not receive comments on this proposal.

Response:

We will finalize our proposed price of $1,245 for the hysteroscopic implant kit and will amend our PE database, as appropriate.

(x) Supply and Equipment Items Needing Specialty Input

We have identified certain supply and equipment items for which we were unable to verify the pricing information (see Table 2: Supply Items Needing Specialty Input for Pricing and Table 3: Equipment Items Needing Specialty Input for Pricing). In our CY 2008 PFS proposed rule, we listed both supply and equipment items for which pricing documentation was needed from the medical specialty societies and, for many of these items, we received sufficient documentation containing specific descriptors and pricing information in the form of catalog listings, vendor Web pages, invoices, and manufacturer quotes. We have accepted the documented prices for many of these items and these prices are reflected in the PE RVUs in Addendum B of this final rule with comment period. For the items listed in Tables 2 and 3, we are requesting that commenters provide pricing information on items in these tables along with acceptable documentation, as noted in the footnote to each table, to support recommended prices. For supplies or equipment that have previously appeared on this list, and for which we received no or inadequate documentation, we proposed to delete these items unless we receive adequate information to support current pricing by the conclusion of the comment period for this proposed rule.

In Tables 4 and 5, we have listed new supplies and equipment from the new CPT codes for CY 2008 that are discussed elsewhere in this final rule with comment period. These items have been added to the PE database and, where priced, are reflected in the PE RVUs in Addendum B.

Table 2.—Supply Items Needing Specialty Input for Pricing

Code

2006/7 Description

Unit

Unit price

Primary associated

specialties

Associated

*CPT code(s)

Prior item

status on

table

Commenter response

and CMS action

2008

item

status

refer to

note(s)

SC088

Fistula needle, dialysis, 17g

Item

Dermatology

36522

Yes

Documentation received. Revised description per specialty's comments. Price accepted at $1.62

Gas, argon, cryoablation

Urology, Radiology, Interventional Radiology

50395

New Item

A, E

Gas, helium, cryoablation

Urology, Radiology, Interventional Radiology

50395

New Item

A, E

SD140

Pressure bag

item

8.925

Cardiology

93501, 93508, 93510, 93526

Yes

Documentation received. Price accepted at $19.00

SL119

Sealant spray

Radiation Oncology

77333

Yes

No comments received

SD213

Tubing, sterile, non-vented (fluid administration)

item

1.99

Cardiology

93501, 93508, 93510, 93526

Yes

Documentation received. Price accepted at $0.949

Stent, vascular, deployment system

Kit

$1,645

Radiology, Interventional Radiology

37205, 37206

Yes

Documentation received. Price retained at $1,645

Catheter, Kumpe

Item

Radiology, Interventional Radiology

50385, 50386

New item

A, E

Disposable aspirating syringe

Oral and Maxillofacial Surgery

21073

New item

A, E

Guidewire, angle tip (Terumo), 180 cm

Radiology, Interventional Radiology

50385, 50386

New item

A, E

Snare, Nitinol (Amplatz)

Item

Radiology, Interventional Radiology

50385, 50386

New item

A, E

Note: Acceptable documentation includes—Detailed description (including system components), source, and current pricing information, such as copies of catalog pages, hard copy from specific Web pages, invoices, and quotes (letter format okay) from manufacturer, vendors or distributors. Unacceptable documentation includes—phone numbers and addresses of manufacturer, vendors or distributors, Web site links without pricing information, etc.

Note A: Additional documentation required. Need detailed description (including kit contents), source, and current pricing information (including pricing per specified unit of measure in database). Accept copies of catalog pages or hard copy from specific Web pages. Phone numbers or addresses of manufacturer, vendors or distributors are not acceptable documentation.

Note B: No/Insufficient received. Retained price in database on an interim basis. Forward acceptable documentation promptly.

Note C: Submitted price accepted.

Note D: Deleted per comment or CMS.

Note E: 2007/8 price retained on an interim basis. Forward acceptable documentation promptly.

Table 3.—Equipment Items Needing Specialty Input for Pricing and Proposed Deletions

Code

2006/7 Description

2007/8 Price

Primary specialties associated with item

*CPT code(s) associated with item

Prior status on table

Commenter response and CMS action

2008 Item status refer to note(s)

EQ269

Ambulatory blood pressure monitor

3000

Cardiology

93784, 93786, 93788

Yes

Documentation provided. Price accepted is $1525 (Did not accept $395 warranty cost.)

Camera mount—floor

2300

Dermatology

96904

Yes

Specialty to submit, asap

A, E

Cross slide attachment

500

Dermatology

96904

Yes

Specialty to submit, asap

A, E

Dermal imaging software

4500

Dermatology

96904

Yes

Documentation provided. Price accepted at $4500

Dermoscopy attachments

650

Dermatology

96904

Yes

Documentation provided. Price accepted at $650 ( average of the cost of the two items provided)

EQ008

ECG signal averaging system w-P waves and late potentials software

8,250

Cardiology, IM

93278

Yes

Documentation provided. Revised description to better describe system. Price accepted at 17,900

A, E

Instrument, microdissection

Pathology

88380

New Item

A, E

Lens, macro, 35-70mm

Dermatology

96904

Yes

Deleted item as price is less than $500 per documentation received

Plasma pheresis machine

37,900

Radiology, Dermatology

36481, G0341

Yes

Revised description based on comments received that light source was not part of item. Documentation requested

ED039

Psychology Testing Equipment

Psychology

96101, 96102

Yes

Specialty to submit, asap

ER070

Portal imaging system (w/PC work station and software)

377,319

Radiation oncology

77421

Yes

Documentation provided. Price accepted at $489,940 ( average of the cost of the two items provided)

Strobe, 400 watts (Studio) (2)

1500

Dermatology

96904

Yes

Documentation requested

Cryosurgery system (for tumor ablation)

Urology, Radiology, Interventional Radiology

50593

New item

A, E

Note B: No/Insufficient received. Retained price in database on an interim basis. Forward acceptable documentation promptly.

Note C: Submitted price accepted.

Note D: Deleted per comment or CMS.

Note E: 2007/8 price, where specified, retained on an interim basis. Forward acceptable documentation promptly.

Table 4.—Practice Expense Supply Item Additions for CY 2008

Equip

code

Supply description

Unit

Unit price

*CPT code(s) associated with item

Supply category

Blade, sharp pointed surgical

item

0.73

88381

Cutters, closures.

Buffer, lysis

0.46

88381

Lab.

Caps, Capsure Macro LCM

4.54

88380

Lab.

Catheter, balloon, lacrimal

item

306

68816

Accessory.

Catheter, Kumpe

item

50385, 50386

Accessory.

Disposable aspirating syringe

21073

Ethanol, 95%

0.0033

88380, 88381

Lab.

Fee, image analysis

item

99174

Office supply.

Gas, argon, cryoablation

50593

Accessory.

Gas, helium, cryoablation

50593

Accessory.

Gastrostomy. Low profile replacement button (Mic-Key)

item

43760

Accessory.

Gastrostomy. Stoma measuring device (Mic-Key)

item

43760

Accessory.

Glycerol, 3%

0.001

88380, 88381

Lab.

Guidewire, angle tip (Terumo), 180 cm

item

50385, 50386

Accessory.

IV infusion set, Sof-set (Minimed)

item

11.50

90769, 90771

Hypodermic, IV.

Methylene blue stain

0.178

88380

Lab.

Probe, cryoablation, renal

item

1175

50593

Accessory.

Rnase-free water

0.85

88381

Lab.

Slide, microscope, sterile

item

88380, 88381

Lab.

Snare, Nitinol (Amplatz)

item

50385, 50386

Accessory.

Swab, patient prep, 1.5 ml (chloraprep)

item

1.04

36592

Pharmacy, NonRx.

Tube, jejunsostomy

item

195

49441, 49446, 49451 and 49452

Accessory.

Price verification needed. Item(s) added to table of supplies requiring specialty input.

Table 5.—Practice Expense Equipment Item Additions for CY 2008

Equip

code

Equipment description

Life

Unit price

*CPT code(s) associated with item

Equipment