Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, DME Face to Face Encounters, Elimination of the Requirement for Termination of Non-Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013; Hospital Outpatient Prospective and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; Quality Improvement Organization Regulations; Proposed Rules

Federal RegisterJul 30, 2012

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 414, 415, 421, 423, 425, 486, and 495

[CMS-1590-P]

RIN 0938-AR11

Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, DME Face to Face Encounters, Elimination of the Requirement for Termination of Non-Random Prepayment Complex Medical Review and Other Revisions to Part B for CY 2013; Hospital Outpatient Prospective and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting Program; Quality Improvement Organization Regulations; Proposed Rules

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This major proposed rule addresses changes to the physician fee schedule, payments for Part B drugs, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. It would also implement provisions of the Affordable Care Act by establishing a face-to-face encounter as a condition of payment for certain durable medical equipment (DME) items. In addition, it would implement statutory changes regarding the termination of non-random prepayment review under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Finally, this proposed rule also includes a discussion regarding the Chiropractic Services Demonstration program.

DATES:

Comment date:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on September 4, 2012.

ADDRESSES:

In commenting, please refer to file code CMS-1590-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (please choose only one of the ways listed):

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov

. Follow the instructions for “submitting a comment.”

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1590-P, P.O. Box 8013, Baltimore, MD 21244-8013.

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

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1590-P, 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 before the close of the comment period to either of the following addresses:

a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

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

b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members.

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

FOR FURTHER INFORMATION CONTACT:

Corinne Axelrod, (410) 786-5620, for any physician payment issue not identified below.

Ryan Howe, (410) 786-3355, for issues related to practice expense methodology and direct practice expense inputs, telehealth services, and issues related to primary care and care coordination.

Sara Vitolo, (410) 786-5714, for issues related to potentially misvalued services, malpractice RVUs, molecular pathology, and payment for new preventive service HCPCS G-codes.

Ken Marsalek, (410) 786-4502, for issues related to the multiple procedure payment reduction and payment for the technical component of pathology services.

Michael Moore, (410) 786-6830, for issues related to geographic practice cost indices and the sustainable growth rate.

Pam West, (410) 786-2302, for issues related to therapy services.

Chava Sheffield, (410) 786-2298, for issues related to certified registered nurse anesthetists.

Roberta Epps, (410) 786-4503, for issues related to portable x-ray.

Anne Tayloe-Hauswald, (410) 786-4546, for issues related to ambulance fee schedule and Part B drug payment.

Amanda Burd, (410) 786-2074, for issues related to the DME provisions.

Debbie Skinner, (410) 786-7480, for issues related to non-random prepayment complex medical review.

Latesha Walker, (410) 786-1101, for issues related to ambulance coverage-physician certification statement.

Alexandra Mugge, (410) 786-4457, for issues related to physician compare.

Christine Estella, (410) 786-0485, for issues related to the physician quality reporting system, incentives for e-prescribing, and Medicare shared savings program.

Pauline Lapin, (410) 786-6883, for issues related to the chiropractic services demonstration budget neutrality issue.

Gift Tee, (410) 786-9316, for issues related to the Physician Feedback Reporting Program and Value-Based Payment Modifier.

Jamie Hermansen, (410) 786-2064, for issues related to Medicare coverage for hepatitis B vaccine.

Andrew Morgan, (410) 786-2543, for issues related to e-prescribing under Medicare Part D.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

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

http://www.regulations.gov

. Follow the search instructions on that Web site to view public comments.

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

Table of Contents

I. Executive Summary and Background

II. Provisions of the Proposed Rule

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

B. Potentially Misvalued Codes Under the Physician Fee Schedule

C. Malpractice RVUs

D. Geographic Practice Cost Indices (GPCIs)

E. Medicare Telehealth Services for the Physician Fee Schedule

F. Extension of Payment for Technical Component of Certain Physician Pathology Services

G. Therapy Services

H. Primary Care and Care Coordination

I. Payment for Molecular Pathology Services

J. Payment for New Preventive Services HCPCS G Codes

K. Certified Registered Nurse Anesthetists and Chronic Pain Management Services

L. Ordering of Portable X-Ray Services

III. Other Provisions of the Proposed Regulation

A. Ambulance Fee Schedule

B. Part B Drug Payment: Average Sales Price (ASP) Issues

C. Durable Medical Equipment (DME) Face-to-Face Encounters and Written Orders Prior to Delivery

D. Elimination of the Requirement for Termination of Non-Random Prepayment Complex Medical Review

E. Ambulance Coverage-Physician Certification Statement

F. Physician Compare Web site

G. Physician Payment, Efficiency, and Quality Improvements—Physician Quality Reporting System

H. Electronic Prescribing (eRx) Incentive Program

I. Medicare Shared Savings Program

J. Discussion of Budget Neutrality for the Chiropractic Services Demonstration

K. Physician Value-Based Payment Modifier and the Physician Feedback Reporting Program

L. Medicare Coverage of Hepatitis B Vaccine

M. Updating Existing Standards for E-Prescribing Under Medicare Part D and Lifting the LTC Exemption

IV. Technical Corrections

A. Waiver of Deductible for Surgical Services Furnished on the Same Date as a Planned Screening Colorectal Cancer Test and Colorectal Cancer Screening Test Definition

V. Collection of Information Requirements

VI. Response to Comments

VII. Regulatory Impact Analysis

Acronyms

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

AHRQ [HHS] Agency for Healthcare Research and Quality

AMA American Medical Association

AMA RUC AMA [Specialty Society] Relative [Value] Update Committee

ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)

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

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

BIPA [Medicare, Medicaid, and SCHIP] Benefits Improvement Protection Act of 2000 (Pub. L. 106-554)

BLS Bureau of Labor Statistics

BN Budget neutrality

CAH Critical access hospital

CBSA Core-Based Statistical Area

CF Conversion factor

CFC Conditions for Coverage

CFR Code of Federal Regulations

CNS Clinical nurse specialist

CoPs Conditions of Participation

CORF Comprehensive Outpatient Rehabilitation Facility

CPI Consumer Price Index

CPT [Physicians] Current Procedural Terminology

CRNA Certified registered nurse anesthetist

CY Calendar year

DHS Designated health services

DME Durable medical equipment

DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies

DOTPA Development of Outpatient Therapy Payment Alternatives

DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)

E/M Evaluation and management

EHR Electronic health record

EMTALA Emergency Medical Treatment and Active Labor Act (part of the Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. L. 99-272)

eRx Electronic prescribing

FFS Fee-for-service

Federal Register

GAF Geographic adjustment factor

GAO [U.S.] Government Accountability Office

GPRO Group Practice Reporting Option

GPCI Geographic practice cost index

HAC Hospital-acquired conditions

HCPCS Healthcare Common Procedure Coding System

HHA Home health agency

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

HIT Health information technology

HITECH Health Information Technology for Economic and Clinical Health Act (Title IV of Division B of the Recovery Act, together with Title XIII of Division A of the Recovery Act)

HPSA Health Professional Shortage Area

ICD International Classification of Diseases

IMRT Intensity Modulated Radiation Therapy

IOM Internet-only Manual

IPCI Indirect practice cost index

IPPS Inpatient prospective payment system

IWPUT Intra-service work per unit of time

MAC Medicare Administrative Contractor

MCTRJCA Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96)

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

MedPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

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

MIPPA Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275)

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

MMEA Medicare and Medicaid Extenders Act of 2010 (Pub. L. 111-309)

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173)

MP Malpractice

MPPR Multiple procedure payment reduction

MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)

NP Nurse practitioner

NPP Nonphysician practitioner

OACT [CMS] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act (Pub. L. 101-239)

OIG [HHS] Office of Inspector General

PA Physician assistant

PC Professional component

PE Practice expense

PE/HR Practice expense per hour

PERC Practice Expense Review Committee

PFS Physician Fee Schedule

PGP [Medicare] Physician Group Practice

PLI Professional liability insurance

PPS Prospective payment system

PQRS Physician Quality Reporting System

PRA Paperwork Reduction Act

PPTRA Physician Payment and Therapy Relief Act of 2010 (Pub. L. 111-286)

PVBP Physician and Other Health Professional Value-Based Purchasing Workgroup

RAC [Medicare] Recovery Audit Contractor

RFA Regulatory Flexibility Act

RIA Regulatory impact analysis

RVU Relative value unit

SBRT Stereotactic body radiation therapy

SGR Sustainable growth rate

TC Technical component

TIN Tax identification number

TPTCCA Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L.112-78)

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

VBP Value-based purchasing

Addenda Available Only Through the Internet on the CMS Web site

In the past, the Addenda referred to throughout the preamble of our annual PFS proposed and final rules with comment period were included in the printed

Federal Register

. However, effective with the CY 2012 PFS proposed rule, the PFS Addenda no longer appear in the

Federal Register

. Instead these Addenda to the annual proposed and final rules with comment period will be available only through the Internet. The PFS Addenda along with other supporting documents and tables referenced in this proposed rule with comment period are available through the Internet on the CMS Web site at

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

. Click on the link on the left side of the screen titled, “PFS Federal Regulations Notices” for a chronological list of PFS

Federal Register

and other related documents. For the CY 2013 PFS proposed rule with comment period, refer to item CMS-1590-P. Readers who experience any problems accessing any of the Addenda or other documents referenced in this proposed rule with comment period and posted on the CMS Web site identified above should contact Corinne Axelrod at (410) 786-5620.

CPT (Current Procedural Terminology) Copyright Notice

Throughout this proposed rule, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2011 American Medical Association. All Rights Reserved. CPT is a registered trademark of the American Medical Association (AMA). Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

I. Executive Summary and Background

A. Executive Summary

1. Purpose

This major proposed rule would revise payment polices under the Medicare Physician Fee Schedule (PFS) and make other policy changes related to Medicare Part B payment. These changes would be applicable to services furnished in CY 2013. It also would implement provisions of the Affordable Care Act by establishing a face-to-face encounter as a condition of payment for certain durable medical equipment (DME) items. In addition, it would implement statutory changes regarding the termination of non-random prepayment review.

2. Summary of the Major Provisions

The Social Security Act (Act) requires us to establish payments under the PFS based on national uniform relative value units (RVUs) and the relative resources used in furnishing a service. The Act requires that national RVUs be established for physician work, practice expense (PE), and malpractice (MP) expense. In this major proposed rule, we propose payment rates for CY 2013 for the PFS, payments for Part B drugs, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. It also proposes to implement provisions of the Affordable Care Act by establishing a face-to-face encounter as a condition of payment for certain durable medical equipment (DME) items, and by removing certain regulations regarding the termination of non-random prepayment review. It also proposes new claims-based data reporting requirements for therapy services to implement a provision in the Middle Class Tax Relief and Jobs Creation Act (MCTRCA). In addition, this rule proposes:

• Potentially Misvalued Codes to be Evaluated.

• Additional Multiple Procedure Payment Reductions (MPPR).

• Expanding Medicare Telehealth Services.

• Regulatory Changes regarding Payment for Technical Component of Certain Physician Pathology Services to Conform to Statute.

• Primary Care and Care Coordination Service.

• Payment rates for Newly Covered Preventive Services.

• Definition of Anesthesia and Related Care in the Certified Registered Nurse Anesthetists Benefit.

• Ordering Requirements for Portable X-ray Services.

• Updates to the Ambulance Fee Schedule.

• Part B Drug Payment Rates.

• Ambulance Coverage-Physician Certification Statement.

• Updating the—

++ Physician Compare Web site.

++ Physician Quality Reporting System.

++ Electronic Prescribing (eRx) Incentive Program.

++ Medicare Shared Savings Program.

• Providing Budget Neutrality Discussion on the Chiropractic Demonstration.

• Physician Value-Based Payment Modifier and the Physician Feedback Reporting Program.

• Medicare Coverage of Hepatitis B Vaccine.

• Updating Existing Standards for e-prescribing under Medicare Part D and Lifting the LTC Exemption.

3. Summary of Costs and Benefits

The statute requires that we establish by regulation each year payment amounts for all physicians' service. These payment amounts are required to be adjusted to reflect the variations in the costs of providing services in different geographic areas. The statute also requires that annual adjustments to PFS RVUs not cause annual estimated expenditures to differ by more than $20 million from what they would have been had the adjustments not been made. If adjustments to RVUs would cause expenditures to change by more than $20 million, we must make adjustments to preserve budget neutrality.

Several proposed changes would affect the specialty distribution of Medicare expenditures. This proposed rule reflects the Administration's priority on improving payment for primary care services. Overall, payments for primary care specialties would increase and payments to select other specialties would decrease due to several changes in how we propose to calculate payments for CY 2013. Primary care payments would increase because of a proposed payment for managing a beneficiary's care when the beneficiary is discharged from an inpatient hospital, a SNF, an outpatient hospital observation, partial hospitalization services, or a community mental health center. Primary care payments also would increase due to redistributions from proposed reductions in payments for other specialties. Because of the budget-neutral nature of this system, proposed decreases in payments in one service result in proposed increases in payments in others.

Payments to primary care specialties are also impacted by the completion of the 4-year transition to new PE RVUs using the new Physician Practice Information Survey (PPIS) data that was adopted in the CY 2010 PFS final rule with comment period. The projected impacts of using the new PPIS data are generally consistent with the impacts discussed in the CY 2012 final rule with comment period (76 FR 72452).

Proposed changes in how we calculate payment when certain services are furnished together would result in reductions in total payments projected to cardiologists and ophthalmologists. Capital-intensive specialties are projected to decrease due to proposed

changes in how the interest rate used in the PE calculation is estimated. Also, under our potentially misvalued codes initiative, we propose to adjust the payment rates for two common radiation oncology treatment delivery methods, intensity-modulated radiation treatment (IMRT), and stereotactic body radiation therapy (SBRT) to reflect more realistic time projections based upon publicly available data. The combined effect of the PPIS transition and the latter two proposals would be a reduction in payments to radiation therapy centers and radiation oncology.

B. Background

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

1. Development of the Relative Value System

a. Work RVUs

The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 101-239), and OBRA 1990, (Pub. L. 101-508). The final rule published on November 25, 1991 (56 FR 59502) set forth the fee schedule for payment for physicians' services beginning January 1, 1992. Initially, only the physician work RVUs were resource-based, and the PE and MP 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, with appropriate adjustment of the conversion factor (CF), in a manner to assure that fee schedule amounts for anesthesia services are consistent with those for other services of comparable value. We established a separate CF for anesthesia services, and we continue to utilize time units as a factor in determining payment for these services. As a result, there is a separate payment methodology for anesthesia services.

We establish physician work RVUs for new and revised codes based, in part, on our review of recommendations received from the American Medical Association/Specialty Society Relative Value Update Committee (AMA RUC).

b. Practice Expense Relative Value Units (PE RVUs)

Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physicians' service beginning in 1998. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.

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

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

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

Separate PE RVUs are established for procedures that can be furnished in both a nonfacility setting, such as a physician's office, and a facility setting, such as a hospital outpatient department (HOPD). The difference between the facility and nonfacility RVUs reflects the fact that a facility typically receives separate payment from Medicare for its costs of furnishing the service, apart from payment under the PFS. The nonfacility RVUs reflect all of the direct and indirect PEs of furnishing 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 direct PE RVUs from the top-down to the bottom-up methodology beginning in CY 2007. We adopted a 4-year transition to the new PE RVUs. This transition was completed in CY 2010. Direct PE RVUs were calculated for CY 2013 using this methodology, unless otherwise noted.

In the CY 2010 PFS final rule with comment period, we updated the practice expense per hour (PE/HR) data that are used in the calculation of PE RVUs for most specialties (74 FR 61749). For this update, we used the Physician Practice Information Survey

(PPIS) conducted by the AMA. The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) using a survey instrument and methods highly consistent with those of the SMS and the supplemental surveys used prior to CY 2010. We note that in CY 2010, for oncology, clinical laboratories, and independent diagnostic testing facilities (IDTFs), we continued to use the supplemental survey data to determine PE/HR values (74 FR 61752). Beginning in CY 2010, we provided for a 4-year transition for the new PE RVUs using the updated PE/HR data. In CY 2013, the final year of the transition, PE RVUs are calculated based on the new data.

c. Resource-Based Malpractice RVUs

Section 4505(f) of the BBA amended section 1848(c) of the Act requires that we implement resource-based MP RVUs for services furnished on or after CY 2000. The resource-based MP RVUs were implemented in the PFS final rule with comment period 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.

d. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review all RVUs no less often than every 5 years. Prior to CY 2013, we conducted periodic reviews of work RVUs and PE RVUs independently.

The First Five-Year Review of Work RVUs was published on November 22, 1996 (61 FR 59489) and was effective in 1997. The Second Five-Year Review of Work RVUs was published in the CY 2002 PFS final rule with comment period (66 FR 55246) and was effective in 2002. The Third Five-Year Review of Work RVUs was published in the CY 2007 PFS final rule with comment period (71 FR 69624) and was effective on January 1, 2007. The Fourth Five-Year Review of Work RVUs was published in the CY 2012 PFS final rule with comment period (76 FR 73026).

Initially refinements to the direct PE inputs relied on input from the AMA RUC-established the Practice Expense Advisory Committee (PEAC). Through March 2004, the PEAC provided recommendations to CMS for more than 7,600 codes (all but a few hundred of the codes included in the AMAs Current Procedural Terminology (CPT) codes). As part of the CY 2007 PFS final rule with comment period (71 FR 69624), we implemented a new bottom-up methodology for determining resource-based PE RVUs and transitioned the new methodology over a 4-year period. A comprehensive review of PE was undertaken prior to the 4-year transition period for the new PE methodology from the top-down to the bottom-up methodology, and this transition was completed in CY 2010. In CY 2010, we also incorporated the new PPIS data to update the specialty-specific PE/HR data used to develop PE RVUs, adopting a 4-year transition to PE RVUs developed using the PPIS data.

In the CY 2012 PFS final rule with comment period (76 FR 73057), we finalized a proposal to consolidate reviews of work and PE RVUs under section 1848(c)(2)(B) of the Act and reviews of potentially misvalued codes under section 1848(c)(2)(K) of the Act into one annual process.

In the CY 2005 PFS final rule with comment period (69 FR 66236), we implemented the first Five-Year Review of the MP RVUs (69 FR 66263). Minor modifications to the methodology were addressed in the CY 2006 PFS final rule with comment period (70 FR 70153). The second Five-Year Review and update of resource-based malpractice RVUs was published in the CY 2010 PFS final rule with comment period (74 FR 61758) and was effective in CY 2010.

In addition to the Five-Year Reviews, beginning for CY 2009, CMS and the AMA RUC have identified and reviewed a number of potentially misvalued codes on an annual basis based on various identification screens. This annual review of work and PE RVUs for potentially misvalued codes was supplemented by the amendments to Section 1848 of the Act, as enacted by section 3134 of the Affordable Care Act, which requires the agency to periodically identify, review and adjust values for potentially misvalued codes with an emphasis on the following categories: (1) Codes and families of codes for which there has been the fastest growth; (2) codes or families of codes that have experienced substantial changes in PEs; (3) codes that are recently established for new technologies or services; (4) multiple codes that are frequently billed in conjunction with furnishing a single service; (5) codes with low relative values, particularly those that are often billed multiple times for a single treatment; (6) codes which have not been subject to review since the implementation of the fee schedule (the so-called “Harvard valued codes”); and (7) other codes determined to be appropriate by the Secretary.

e. Application of Budget Neutrality to Adjustments of RVUs

Budget neutrality (BN) typically requires that expenditures not increase or decrease as a result of changes or revisions to policy. However, section 1848(c)(2)(B)(ii)(II) of the Act requires adjustment only if the change in expenditures resulting from the annual revisions to the PFS exceeds a threshold amount. Specifically, adjustments in RVUs for a year may not cause total PFS payments to differ by more than $20 million from what they would have been if the adjustments were not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions to the RVUs would 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.

2. Components of the Fee Schedule Payment Amounts

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

RVUs are converted to dollar amounts through the application of a CF, which is calculated by CMS' Office of the Actuary (OACT).

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

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

3. Most Recent Changes to the Fee Schedule

The CY 2012 PFS final rule with comment period (76 FR 73026) implemented changes to the PFS and other Medicare Part B payment policies. It also finalized many of the CY 2011 interim RVUs and implemented interim RVUs for new and revised codes for CY 2012 to ensure that our payment systems are updated to reflect changes in medical practice and the relative values of services. The CY 2012 PFS final rule with comment period also addressed other policies including certain statutory provisions including provisions of the Affordable Care Act and the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008.

In the CY 2012 PFS final rule with comment period, we announced the

following for CY 2012: the total PFS update of −27.4 percent; the initial estimate for the sustainable growth rate (SGR) of −16.9 percent; and the conversion factor (CF) of $24.6712. These figures were calculated based on the statutory provisions in effect on November 1, 2011, when the CY 2012 PFS final rule with comment period was issued.

A correction notice was issued (77 FR 227) to correct several technical and typographical errors that occurred in the CY 2012 PFS final rule with comment period.

On December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA) (Pub. L. 112-78) was signed into law. Section 301 of the TPTCCA specified a zero percent update to the PFS claims from January 1, 2012 through February 29, 2012. As a result, the CY 2012 PFS conversion factor was revised to $34.0376 for claims with dates of service on or after January 1, 2012 through February 29, 2012. In addition, TPTCCA extended several provisions affecting Medicare services furnished on or after January 1, 2012 through February 29, 2012, including:

• Section 303—the 1.0 floor on the physician work geographic practice cost index;

• Section 304—the exceptions process for outpatient therapy caps;

• Section 305—the payment to independent laboratories for the TC of physician pathology services furnished to certain hospital patients, and

• Section 307—the five percent increase in payments for mental health services.

On February 22, 2012, the MCTRJCA was signed into law. Section 3003 extended the zero percent PFS update to the remainder of CY 2012. As a result of the MCTRJCA, the CY 2012 PFS CF was maintained as $34.0376 for claims with dates of service on or after March 1, 2012 through December 31, 2012. In addition:

• Section 3004 of MCTRJCA extended the 1.0 floor on the physician work geographic practice cost index through December 31, 2012;

• Section 3006 continued payment to independent laboratories for the TC of physician pathology services furnished to certain hospital patients through June 30, 2012; and

• Section 3005 extended the exceptions process for outpatient therapy caps through CY 2012 and made several other changes related to therapy claims and caps.

On March 1, 2012, as required by Section 1848(d)(1)(E) of the Act, we submitted to the Medicare Payment Advisory Committee (MedPAC) an estimate of the SGR and conversion factor applicable to Medicare payments for physicians' services for CY 2013. The actual values used to compute physician payments for CY 2013 will be based on later data and are scheduled to be published by November 1, 2012 as part of the CY 2013 PFS final rule.

II. Provisions of the Proposed Rule

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

1. Overview

Practice expense (PE) is the portion of the resources used in furnishing the service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act. Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required us to develop a methodology for a resource-based system for determining PE RVUs for each physician's service. We develop PE RVUs by looking at the direct and indirect physician practice resources involved in furnishing each service. Direct expense categories include clinical labor, medical supplies, and medical equipment. Indirect expenses include administrative labor, office expense, and all other expenses. The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service-specific PE RVUs. In addition, we note that section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs for a year may not cause total PFS payments to differ by more than $20 million from what they would have otherwise been if the adjustments were not made. Therefore, if revisions to the RVUs cause expenditures to change by more than $20 million, we make adjustments to ensure that expenditures do not increase or decrease by more than $20 million. We refer readers to the CY 2010 PFS final rule with comment period (74 FR 61743 through 61748) for a more detailed explanation of the PE methodology.

2. Practice Expense Methodology

a. Direct Practice Expense

We use a “bottom-up” approach to determine the direct PE by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically involved with furnishing 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 RUC. For a detailed explanation of the bottom-up direct PE methodology, including examples, we refer readers to the Five-Year Review of Work Relative Value Units Under the PFS and Proposed Changes to the Practice Expense Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).

b. Indirect Practice Expense per Hour Data

We use survey data on indirect PEs incurred per hour worked in developing the indirect portion of the PE RVUs. Prior to CY 2010, we primarily used the practice expense per hour (PE/HR) by specialty that was obtained from the AMA's Socioeconomic Monitoring Surveys (SMS). The AMA administered a new survey in CY 2007 and CY 2008, the Physician Practice Expense Information Survey (PPIS), which was expanded (relative to the SMS) to include nonphysician practitioners (NPPs) paid under the PFS.

The PPIS is a multispecialty, nationally representative, PE survey of both physicians and NPPs using a consistent survey instrument and methods highly consistent with those used for the SMS and the supplemental surveys. The PPIS gathered information from 3,656 respondents across 51 physician specialty and healthcare professional groups. We believe the PPIS is the most comprehensive source of PE survey information available to date. Therefore, we used the PPIS data to update the PE/HR data for almost all of the Medicare-recognized specialties that participated in the survey for the CY 2010 PFS.

When we began using the PPIS data beginning in CY 2010, we did not change the PE RVU methodology itself or the manner in which the PE/HR data are used in that methodology. We only updated the PE/HR data based on the new survey. Furthermore, as we explained in the CY 2010 PFS final rule with comment period (74 FR 61751), because of the magnitude of payment reductions for some specialties resulting from the use of the PPIS data, we finalized a 4-year transition (75 percent old/25 percent new for CY 2010, 50 percent old/50 percent new for CY 2011, 25 percent old/75 percent new for CY 2012, and 100 percent new for CY 2013) from the previous PE RVUs to the PE RVUs developed using the new PPIS data.

Section 1848(c)(2)(H)(i) of the Act requires us to use the medical oncology supplemental survey data submitted in 2003 for oncology drug administration services. Therefore, the PE/HR for medical oncology, hematology, and hematology/oncology reflects the continued use of these supplemental survey data.

We do not use the PPIS data for reproductive endocrinology and spine surgery since these specialties currently are not separately recognized by Medicare, nor do we have a method to blend these data with Medicare-recognized specialty data. Similarly, we do not use the PPIS data for sleep medicine since there is not a full year of Medicare utilization data for that specialty.

Supplemental survey data on independent labs, from the College of American Pathologists, were implemented for payments in CY 2005. Supplemental survey data from the National Coalition of Quality Diagnostic Imaging Services (NCQDIS), representing independent diagnostic testing facilities (IDTFs), were blended with supplementary survey data from the American College of Radiology (ACR) and implemented for payments in CY 2007. Neither IDTFs nor independent labs participated in the PPIS. Therefore, we continue to use the PE/HR that was developed from their supplemental survey data.

Consistent with our past practice, the previous indirect PE/HR values from the supplemental surveys for medical oncology, independent laboratories, and IDTFs were updated to CY 2006 using the MEI to put them on a comparable basis with the PPIS data.

Previously, we have established PE/HR values for various specialties without SMS or supplemental survey data by crosswalking them to other similar specialties to estimate a proxy PE/HR. For specialties that were part of the PPIS for which we previously used a crosswalked PE/HR, we instead use the PPIS-based PE/HR. We continue previous crosswalks for specialties that did not participate in the PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for portable x-ray suppliers from radiology to IDTF, a more appropriate crosswalk because these specialties are more similar to each other for physician time.

For registered dietician services, the resource-based PE RVUs have been calculated in accordance with the final policy that crosswalks the specialty to the “All Physicians” PE/HR data, as adopted in the CY 2010 PFS final rule with comment period (74 FR 61752) and discussed in more detail in the CY 2011 PFS final rule with comment period (75 FR 73183).

There were five specialties whose utilization data were newly incorporated into ratesetting for CY 2012. In accordance with the final policies adopted in the CY 2012 final rule with comment period (76 FR 73036), we use proxy PE/HR values for these specialties by crosswalking values from other, similar specialties as follows: Speech Language Pathology from Physical Therapy; Hospice and Palliative Care from All Physicians; Geriatric Psychiatry from Psychiatry; Intensive Cardiac Rehabilitation from Cardiology, and Certified Nurse Midwife from Obstetrics/gynecology.

For CY 2013, there are two specialties whose utilization data will be newly incorporated into ratesetting. We are proposing to use proxy PE/HR values for these specialties by crosswalking values from other specialties that furnish similar services as follows: Cardiac Electrophysiology from Cardiology; and Sports Medicine from Family Practice. These proposed changes are reflected in the “PE HR” file available on the CMS Web site under the supporting data files for the CY 2013 PFS proposed rule at

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

As provided in the CY 2010 PFS final rule with comment period (74 FR 61751), CY 2013 is the final year of the 4-year transition to the PE RVUs calculated using the PPIS data. Therefore, the CY 2013 proposed PE RVUs were developed based entirely on the PPIS data, with the exceptions described in this section.

c. Allocation of PE to Services

To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.

(1) Direct Costs

The relative relationship between the direct cost portions of the PE RVUs for any two services is determined by the relative relationship between the sum of the direct cost resources (that is, the clinical staff, equipment, and supplies) typically involved with furnishing the services. The costs of these resources are calculated from the refined direct PE inputs in our PE database. For example, if one service has a direct cost sum of $400 from our PE database and another service has a direct cost sum of $200, the direct portion of the PE RVUs of the first service would be twice as much as the direct portion of the PE RVUs for the second service.

(2) Indirect Costs

Section II.A.2.b. of this proposed rule describes the current data sources for specialty-specific indirect costs used in our PE calculations. We allocated the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the greater of either the clinical labor costs or the physician work RVUs. We also incorporated the survey data described earlier in the PE/HR discussion. The general approach to developing the indirect portion of the PE RVUs is described as follows:

• For a given service, we use the direct portion of the PE RVUs calculated as previously described and the average percentage that direct costs represent of total costs (based on survey data) across the specialties that furnish the service to determine an initial indirect allocator. For example, if the direct portion of the PE RVUs for a given service was 2.00 and direct costs, on average, represented 25 percent of total costs for the specialties that furnished the service, the initial indirect allocator would be 6.00 since 2.00 is 25 percent of 8.00 and 6.00 is 75 percent of 8.00.

• We then add the greater of the work RVUs or clinical labor portion of the direct portion of the PE RVUs to this initial indirect allocator. In our example, if this service had work RVUs of 4.00 and the clinical labor portion of the direct PE RVUs was 1.50, we would add 6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50 clinical labor portion) to get an indirect allocator of 10.00. In the absence of any further use of the survey data, the relative relationship between the indirect cost portions of the PE RVUs for any two services would be determined by the relative relationship between these indirect cost allocators. For example, if one service had an indirect cost allocator of 10.00 and another service had an indirect cost allocator of 5.00, the indirect portion of the PE RVUs of the first service would be twice as great as the indirect portion of the PE RVUs for the second service.

• We next incorporate the specialty-specific indirect PE/HR data into the calculation. As a relatively extreme example for the sake of simplicity, assume in our previous example that, based on the survey data, the average indirect cost of the specialties furnishing the first service with an allocator of 10.00 was half of the average indirect cost of the specialties furnishing the second service with an indirect allocator of 5.00. In this case, the indirect portion of the PE RVUs of

the first service would be equal to that of the second service.

d. Facility and Nonfacility Costs

For procedures that can be furnished in a physician's office, as well as in a hospital or facility setting, we establish two PE RVUs: facility and nonfacility. The methodology for calculating PE RVUs is the same for both the facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because Medicare makes a separate payment to the facility for its costs of furnishing a service, the facility PE RVUs are generally lower than the nonfacility PE RVUs.

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

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

f. PE RVU Methodology

For a more detailed description of the PE RVU methodology, we refer readers to the CY 2010 PFS final rule with comment period (74 FR 61745 through 61746).

(1) Setup File

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

(2) Calculate the Direct Cost PE RVUs

Sum the costs of each direct input.

Step 1:

Sum the direct costs of the inputs for each service. Apply a scaling adjustment to the direct inputs.

Step 2:

Calculate the current aggregate pool of direct PE costs. This is the product of the current aggregate PE (aggregate direct and indirect) RVUs, the CF, and the average direct PE percentage from the survey data.

Step 3:

Calculate the aggregate pool of direct costs. This is the sum of the product of the direct costs for each service from Step 1 and the utilization data for that service.

Step 4:

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

Step 5:

Convert the results of Step 4 to an RVU scale for each service. To do this, divide the results of Step 4 by the CF. Note that the actual value of the CF used in this calculation does not influence the final direct cost PE RVUs, as long as the same CF is used in Step 2 and Step 5. Different CFs will result in different direct PE scaling factors, but this has no effect on the final direct cost PE RVUs since changes in the CFs and changes in the associated direct scaling factors offset one another.

(3) Create the Indirect Cost PE RVUs

Create indirect allocators.

Step 6:

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

Step 7:

Calculate direct and indirect PE percentages at the service level by taking a weighted average of the results of Step 6 for the specialties that furnish the service. Note that for services with TCs and PCs, the direct and indirect percentages for a given service do not vary by the PC, TC, and global components.

Step 8:

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

For most services the indirect allocator is: Indirect percentage * (direct PE RVUs/direct percentage) + work RVUs.

There are two situations where this formula is modified:

• If the service is a global service (that is, a service with global, professional, and technical components), then the indirect allocator is: Indirect percentage (direct PE RVUs/direct percentage) + clinical PE RVUs + work RVUs.

• If the clinical labor PE RVUs exceed the work RVUs (and the service is not a global service), then the indirect allocator is: indirect percentage (direct PE RVUs/direct percentage) + clinical PE RVUs.

(

Note:

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

For presentation purposes in the examples in Table 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 RVUs/direct percentage).

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

Apply a scaling adjustment to the indirect allocators.

Step 9:

Calculate the current aggregate pool of indirect PE RVUs by multiplying the current aggregate pool of PE RVUs by the average indirect PE percentage from the survey data.

Step 10:

Calculate an aggregate pool of indirect PE RVUs for all PFS services by adding the product of the indirect PE allocators for a service from Step 8 and the utilization data for that service.

Step 11:

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

Calculate the indirect practice cost index.

Step 12:

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

Step 13:

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

Step 14:

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

Step 15:

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

Step 16:

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

Step 17:

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

(4) Calculate the Final PE RVUs

Step 18:

Add the direct PE RVUs from Step 6 to the indirect PE RVUs from Step 17 and apply the final PE budget neutrality (BN) adjustment.

The final PE BN adjustment is calculated by comparing the results of Step 18 to the current pool of PE RVUs. This final BN adjustment is required in order to redistribute RVUs from step 18 to all PE RVUs in the PFS and because certain specialties are excluded from the PE RVU calculation for ratesetting purposes, but all specialties are included for purposes of calculating the final BN adjustment. (See “Specialties excluded from ratesetting calculation” later in this section.)

(5) Setup File Information

•

Specialties excluded from ratesetting calculation:

For the purposes of calculating the PE RVUs, we exclude certain specialties, such as certain nonphysician practitioners paid at a percentage of the PFS and low-volume specialties, from the calculation. These specialties are included for the purposes of calculating the BN adjustment. They are displayed in Table 1.

Table 1—Specialties Excluded From Ratesetting Calculation

Specialty code

Specialty description

Ambulatory surgical center.

Nurse practitioner.

Medical supply company with certified orthotist.

Medical supply company with certified prosthetist.

Medical supply company with certified prosthetist-orthotist.

Medical supply company not included in 51, 52, or 53.

Individual certified orthotist.

Individual certified prosthetist.

Individual certified prosthetist-orthotist.

Individuals not included in 55, 56, or 57.

Ambulance service supplier, e.g., private ambulance companies, funeral homes, etc.

Public health or welfare agencies.

Voluntary health or charitable agencies.

Mass immunization roster biller.

Radiation therapy centers.

All other suppliers (e.g., drug and department stores).

Unknown supplier/provider specialty.

Certified clinical nurse specialist.

Competitive Acquisition Program (CAP) Vendor.

Optician.

Physician assistant.

Hospital.

SNF.

Intermediate care nursing facility.

Nursing facility, other.

HHA.

Pharmacy.

Medical supply company with respiratory therapist.

Department store.

Supplier of oxygen and/or oxygen related equipment.

Pedorthic personnel.

Medical supply company with pedorthic personnel.

We are proposing to calculate the specialty mix for low volume services (fewer than 100 billed services in the previous year) using the same methodology we use for non-low volume services. We previously have used the survey data from the dominant specialty for these low volume services. However, because these services have such low utilization, the dominant specialty tends to change from year to year. We are proposing to calculate a specialty mix for these services rather than use the dominant specialty in order to smooth year-to-year fluctuations in PE RVUs due to changes in the dominant specialty.

•

Crosswalk certain low volume physician specialties:

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

•

Physical therapy utilization:

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

•

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

Flag the services that are PC and TC services, but do not use TC and 26 modifiers (for example, electrocardiograms). This flag associates the PC and TC with the associated global code for use in creating the indirect PE RVUs. For example, the professional service, CPT code 93010 (Electrocardiogram, routine ECG with at least 12 leads; interpretation and report only), is associated with the global service, CPT code 93000 (Electrocardiogram, routine ECG with at least 12 leads; with interpretation and report).

•

Payment modifiers:

Payment modifiers are accounted for in the creation of the file consistent with

current payment policy as implemented in claims processing. 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. Similarly, for those services to which volume adjustments are made to account for the payment modifiers, time adjustments are applied as well. For time adjustments to surgical services, the intraoperative portion in the physician time file is used; where it is not present, the intraoperative percentage from the payment files used by Medicare contractors to process Medicare claims is used instead. Where neither is available, we use the payment adjustment ratio to adjust the time accordingly. Table 2 details the manner in which the modifiers are applied.

Table 2—Application of Payment Modifiers to Utilization Files

Modifier

Description

Volume adjustment

Time adjustment

80, 81, 82

Assistant at Surgery

16%

Intraoperative portion.

Assistant at Surgery—Physician Assistant

14% (85% * 16%)

Intraoperative portion.

50 or LT and RT

Bilateral Surgery

150%

150% of physician time.

Multiple Procedure

50%

Intraoperative portion.

Reduced Services

50%

50%.

Discontinued Procedure

50%

50%.

Intraoperative Care only

Preoperative + Intraoperative Percentages on the payment files used by Medicare contractors to process Medicare claims

Preoperative + Intraoperative portion.

Postoperative Care only

Postoperative Percentage on the payment files used by Medicare contractors to process Medicare claims

Postoperative portion.

Co-surgeons

62.5%

50%.

Team Surgeons

33%

33%.

We also make adjustments to volume and time that correspond to other payment rules, including special multiple procedure endoscopy rules and multiple procedure payment reductions (MPPR) including the proposed ophthalmology and cardiovascular diagnostic services MPPR discussed in section II.B.4. of this proposed rule. We note that section 1848(c)(2)(B)(v) of the Act exempts certain reduced payments for multiple imaging procedures and multiple therapy services from the budget-neutrality calculation under section 1848(c)(2)(B)(ii)(II) of the Act. These multiple procedure payment reductions are not included in the development of the relative value units.

For anesthesia services, we do not apply adjustments to volume since the average allowed charge is used when simulating RVUs and therefore includes all discounts. A time adjustment of 33 percent is made only for medical direction of two to four cases since that is the only occasion where time units are duplicative.

•

Work RVUs:

The setup file contains the work RVUs from this proposed rule.

(6) Equipment Cost Per Minute

The equipment cost per minute is calculated as:

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

Where:

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

usage = 0.5 is the standard equipment utilization assumption; 0.75 for certain expensive diagnostic imaging equipment (see 74 FR 61753 through 61755 and section II.A.3. of the CY 2011 PFS final rule with comment period).

price = price of the particular piece of equipment.

interest rate = sliding scale (see proposal below)

life of equipment = useful life of the particular piece of equipment.

maintenance = factor for maintenance; 0.05.

The interest rate we have previously used was proposed and finalized during rulemaking for CY 1998 PFS (62 FR 33164). In the CY 2012 proposed rule (76 FR 42783), we solicited comment regarding reliable data on current prevailing loan rates for small businesses. In response to that request, the AMA RUC recommended that rather than applying the same interest rate across all equipment, CMS should consider a “sliding scale” approach which varies the interest rate based on the equipment cost, useful life, and SBA (Small Business Administration) maximum interest rates for different categories of loan size and maturity. The maximum interest rates for SBA loans are as follows:

• Fixed rate loans of $50,000 or more must not exceed Prime plus 2.25 percent if the maturity is less than 7 years, and Prime plus 2.75 percent if the maturity is 7 years or more.

• For loans between $25,000 and $50,000, maximum rates must not exceed Prime plus 3.25 percent if the maturity is less than 7 years, and Prime plus 3.75 percent if the maturity is 7 years or more.

• For loans of $25,000 or less, the maximum interest rate must not exceed Prime plus 4.25 percent if the maturity is less than 7 years, and Prime plus 4.75 percent, if the maturity is 7 years or more.

The current Prime rate is 3.25 percent.

Based on that recommendation, for CY 2013, we are proposing to use a “sliding scale” approach based on the current SBA maximum interest rates for different categories of loan size (price of the equipment) and maturity (useful life of the equipment). Additionally, we are proposing to update this assumption through annual PFS rulemaking to account for fluctuations in the Prime rate and/or changes to the SBA's formula to determine maximum allowed interest rates.

The effects of this proposal on direct equipment inputs are reflected in the CY 2013 proposed direct PE input database, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

. Additionally, we note that the proposed PE RVUs included in Addendum B to this proposed rule reflect the RVUs that result from application of this proposal.

BILLING CODE 4120-01-P

EP30JY12.000

EP30JY12.001

BILLING CODE 4120-01-C

3. Changes to Direct PE Inputs for Specific Services

In this section, we discuss other specific CY 2013 proposals and changes related to direct PE inputs for specific services. We note that we will address comments on the interim direct PE inputs established in the CY 2012 PFS final rule with comment period in the CY 2013 PFS final rule.

a. Equipment Minutes for Interrogation Device Evaluation Services

It has come to our attention that the pacemaker follow-up system (EQ138) associated with two interrogation device management service codes does not have minutes allocated in the direct PE input database. Based on our analysis of these services, we believe that 10 minutes should be allocated to the equipment for each of the following CPT codes: 93294 (Interrogation device evaluation(s) (remote), up to 90 days; single, dual, or multiple lead pacemaker system with interim physician analysis, review(s) and report(s)), and 93295 (Interrogation device evaluation(s) (remote), up to 90 days; single, dual, or multiple lead implantable cardioverter-defibrillator system with interim physician analysis, review(s) and report(s)). Therefore, we are proposing to modify the direct PE input database to allocate 10 minutes to the pacemaker follow-up system for CPT codes 93294 and 93295.

The proposed CY 2013 direct PE input database reflects these changes and is available on the CMS Web site under the supporting data files for the CY 2013 PFS proposed rule with comment period at

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

. We also note that the proposed PE RVUs included in Addendum B to this proposed rule reflect the RVUs that result from application of this proposal.

b. Clinical Labor for Pulmonary Rehabilitation Services (HCPCS Code G0424)

It has come to our attention that the direct PE input database includes 15 minutes of clinical labor time in the nonfacility setting allocated for a CORF social worker/psychologist (L045C) associated with HCPCS code G0424 (Pulmonary rehabilitation, including exercise (includes monitoring), one hour, per session, up to two sessions per day). Based on our analysis of this service, we believe that these 15 minutes should be added to the 15 minutes currently allocated to the Respiratory Therapist (L042B) associated with this service. Therefore, we are proposing to modify the direct PE input database to allocate 15 additional minutes to the Respiratory Therapist (L042B) (for a total of 30 minutes) and delete the CORF social worker/psychologist (L045C) associated with HCPCS code G0424.

The proposed CY 2013 direct PE input database reflects these changes and is available on the CMS Web site under the supporting data files for the CY 2013 PFS proposed rule with comment period at

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

. We also note that the proposed PE RVUs included in Addendum B to this proposed rule reflect the RVUs that result from application of this proposal.

c. Transcranial Magnetic Stimulation Services

For CY 2011, the CPT Editorial Panel converted Category III CPT codes 0160T and 0161T to Category I status (CPT codes 90867 (Therapeutic Repetitive Transcranial Magnetic Stimulation (TMS) treatment; initial, including cortical mapping, motor threshold determination, delivery and management), and 90868 (Therapeutic Repetitive Transcranial Magnetic Stimulation (TMS) treatment; subsequent delivery and management, per session)), which were contractor priced on the PFS. For CY 2012, the CPT Editorial Panel modified CPT codes 90867 and 90868, and created CPT code 90869 ((Therapeutic Repetitive Transcranial Magnetic Stimulation (TMS) treatment; subsequent motor threshold re-determination with delivery and management.) In the CY 2012 PFS final rule with comment period, we established interim final values based on refinement of RUC recommended work RVUs, direct PE inputs, and malpractice risk factor crosswalks for these services (76 FR 73201).

Subsequent to the development of interim final PE RVUs, it came to our attention that the application of our usual PE methodology resulted in anomalous PE values for these services. As we explain in section II.A.2.c.2 of this proposed rule with comment period, for a given service, we use the direct costs associated with a service (clinical staff, equipment, and supplies) and the average percentage that direct costs represent of total costs (based on survey data) across the specialties that furnish the service to determine an initial indirect allocator.

For services almost exclusively furnished by one specialty, the average percentage of indirect costs relative to direct costs would ordinarily be used to determine the initial indirect allocator. For specialties that typically incur significant direct costs relative to indirect costs, the initial indirect allocator for their services is generally lower than for the specialties that typically incur lower direct costs relative to indirect costs. Relative to direct costs, the methodology generally allocates a greater proportion of indirect PE to services furnished by psychiatrists, for example, than to services furnished by specialties that typically incur significant direct costs, such as radiation oncologists. In the case of the TMS, however, the direct costs incurred by psychiatrists reporting the codes far exceed the direct costs typical to any other service predominantly furnished by psychiatrists. This drastic difference in the direct costs of TMS relative to most other services furnished by psychiatrists results in anomalous PE values since code-level indirect PE allocation relies on typical resource costs for the specialties that furnish the service. In other words, the amount of indirect PE allocated to TMS services is based on the proportion of indirect expense to direct expense that is typical of other psychiatric services, and is not on par with other services that require similar investments in capital equipment and high-cost, disposable supplies.

Historically, we have contractor-priced services with resource costs that cannot be appropriately valued within the generally applicable PE methodology used to price services across the PFS. Because there is no mechanism to develop appropriate payment rates for these services within our current methodology, we are proposing to contractor price these codes for CY 2013.

d. Spinal Cord Stimulation Trial Procedures in the Nonfacility Setting

Stakeholders have recently brought to our attention that CPT code 63650 (Percutaneous implantation of neurostimulator electrode array, epidural) is frequently furnished in the physician office setting but is not priced in that setting. We note that the valuation of a service under the PFS in particular settings does not address whether those services are medically reasonable and necessary in the case of individual patients, including being furnished in a setting appropriate to the patient's medical needs and condition. However, because these services are being furnished in the nonfacility setting, we believe that CPT code 63650 should be reviewed to establish appropriate nonfacility inputs. We propose to review CPT code 63650 and request recommendations from the AMA RUC and other public commenters

on the appropriate physician work RVUs (as measured by time and intensity), and facility and nonfacility direct PE inputs for this service. We understand that disposable leads comprise a significant resource cost for this service and are currently separately reportable to Medicare for payment purposes when the service is furnished in the physician office setting. Disposable medical supplies are not considered prosthetic devices paid under the Durable Medical Equipment, Prosthetic/Orthotic, and Supplies (DMEPOS) fee schedule and generally are incorporated as nonfacility direct PE inputs to PE RVUs. We seek comment on establishing nonfacililty PE RVUs for CPT code 63650.

B. Potentially Misvalued Codes Under the Physician Fee Schedule

1. Valuing Services Under the PFS

To value services under the PFS, section 1848(c) of the Act requires the Secretary to determine relative values for physicians' services based on three components: work; practice expense (PE); and malpractice. Section 1848(c)(1)(A) of the Act defines the work component to include “the portion of the resources used in furnishing the service that reflects physician time and intensity in furnishing the service.” In addition, section 1848(c)(2)(C)(i) of the Act specifies that “the Secretary shall determine a number of work relative value units (RVUs) for the service based on the relative resources incorporating physician time and intensity required in furnishing the service.”

As discussed in detail in sections I.B.1.b. and I.B.1.c. of this proposed rule, the statute also defines the PE and malpractice components and provides specific guidance in the calculation of the RVUs for each of these components. Section 1848(c)(1)(B) of the Act defines the PE component as “the portion of the resources used in furnishing the service that reflects the general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising practice expenses.” Section 1848(c)(1)(C) of the Act defines the malpractice component as “the portion of the resources used in furnishing the service that reflects malpractice expenses in furnishing the service.” Sections 1848 (c)(2)(C)(ii) and (iii) of the Act specify that PE and malpractice expense RVUs shall be determined based on the relative PE/malpractice expense resources involved in furnishing the service.

Section 1848(c)(2)(B) of the Act directs the Secretary to conduct a periodic review, not less often than every 5 years, of the RVUs established under the PFS. On March 23, 2010, the Affordable Care Act was enacted, further requiring the Secretary to periodically identify and review potentially misvalued codes and make appropriate adjustments to the relative values of those services identified as being potentially misvalued. Section 3134(a) of the Affordable Care Act added a new section 1848(c)(2)(K) to the Act, which requires the Secretary to periodically identify potentially misvalued services using certain criteria and to review and make appropriate adjustments to the relative values for those services. Section 3134(a) of the Affordable Care Act also added a new section 1848(c)(2)(L) to the Act which requires the Secretary to develop a process to validate the RVUs of certain potentially misvalued codes under the PFS, identified using the same criteria used to identify potentially misvalued codes, and to make appropriate adjustments.

As discussed in section I.B.1.a. of this proposed rule, each year we develop and propose appropriate adjustments to the RVUs, taking into account the recommendations provided by the American Medical Association Specialty Society Relative Value Scale Update Committee (AMA RUC), the Medicare Payment Advisory Commission (MedPAC), and others. For many years, the AMA RUC has provided us with recommendations on the appropriate relative values for new, revised, and potentially misvalued PFS services. We review these recommendations on a code-by-code basis and consider these recommendations in conjunction with analyses of data sources, such as claims data, to inform the decision-making process as authorized by the law. We may also consider analyses of physician time, work RVUs, or direct PE inputs using other data sources, such as Department of Veteran Affairs (VA) National Surgical Quality Improvement Program (NSQIP), the Society for Thoracic Surgeons (STS), and the Physician Quality Reporting Initiative (PQRI) databases. In addition to considering the most recently available data, we also assess the results of physician surveys and specialty recommendations submitted to us by the AMA RUC. We conduct a clinical review to assess the appropriate RVUs in the context of contemporary medical practice. We note that section 1848(c)(2)(A)(ii) of the Act authorizes the use of extrapolation and other techniques to determine the RVUs for physicians' services for which specific data are not available, in addition to taking into account the results of consultations with organizations representing physicians. In accordance with section 1848(c) of the Act, we determine appropriate adjustments to the RVUs, explain the basis of these adjustments, and respond to public comments in the PFS proposed and final rules.

2. Identifying, Reviewing, and Validating the RVUs of Potentially Misvalued Services on the PFS

a. Background

In its March 2006 Report to the Congress, MedPAC noted that “misvalued services can distort the price signals for physicians' services as well as for other health care services that physicians order, such as hospital services.” In that same report MedPAC postulated that physicians' services under the PFS can become misvalued over time for a number of reasons: For example, MedPAC stated, “when a new service is added to the PFS, it may be assigned a relatively high value because of the time, technical skill, and psychological stress that are often required to furnish that service. Over time, the work required for certain services would be expected to decline as physicians become more familiar with the service and more efficient in furnishing it.” That is, the amount of physician work needed to furnish an existing service may decrease as physicians build experience furnishing that service. Services can also become overvalued when PEs decline. This can happen when the costs of equipment and supplies fall, or when equipment is used more frequently than is estimated in the PE methodology, reducing its cost per use. Likewise, services can become undervalued when physician work increases or PEs rise. In the ensuing years since MedPAC's 2006 report, additional groups of potentially misvalued services have been identified by the Congress, CMS, MedPAC, the AMA RUC, and other stakeholders.

In recent years, CMS and the AMA RUC have taken increasingly significant steps to address potentially misvalued codes. As MedPAC noted in its March 2009 Report to Congress, in the intervening years since MedPAC made the initial recommendations, “CMS and the AMA RUC have taken several steps to improve the review process.” Most recently, section 1848(c)(2)(K)(ii) of the Act (as added by section 3134(a) of the Affordable Care Act) directed the Secretary to specifically examine, as determined appropriate, potentially

misvalued services in seven categories as follows:

• Codes and families of codes for which there has been the fastest growth;

• Codes and families of codes that have experienced substantial changes in PEs;

• Codes that are recently established for new technologies or services;

• Multiple codes that are frequently billed in conjunction with furnishing a single service;

• Codes with low relative values, particularly those that are often billed multiple times for a single treatment;

• Codes which have not been subject to review since the implementation of the PFS (the so-called `Harvard-valued codes'); and

• Other codes determined to be appropriate by the Secretary.

Section 1848(c)(2)(K)(iii) of the Act also specifies that the Secretary may use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services. In addition, the Secretary may conduct surveys, other data collection activities, studies, or other analyses, as the Secretary determines to be appropriate, to facilitate the review and appropriate adjustment of potentially misvalued services. This section also authorizes the use of analytic contractors to identify and analyze potentially misvalued codes, conduct surveys or collect data, and make recommendations on the review and appropriate adjustment of potentially misvalued services. Additionally, this section provides that the Secretary may coordinate the review and adjustment of any RVU with the periodic review described in section 1848(c)(2)(B) of the Act. Finally, section 1848(c)(2)(K)(iii)(V) of the Act specifies that the Secretary may make appropriate coding revisions (including using existing processes for consideration of coding changes) which may include consolidation of individual services into bundled codes for payment under the PFS.

In addition to these requirements, section 3003 (b)(1) of the Middle Class Tax Cut and Job Creation Act of 2012 (Pub. L. 112-96), requires that the Secretary conduct a study that examines options for bundled or episode-based payment to cover physicians' services currently paid under the PFS under section 1848 of the Act for one or more prevalent chronic conditions or episodes of care for one or more major procedures. In conducting the study, the Secretary shall consult with medical professional societies and other relevant stakeholders. Additionally, the study shall include an examination of related private payer payment initiatives. This section also requires that not later than January 1, 2013, the Secretary submit to certain committees of the Congress a report on the study. The report shall include recommendations on suitable alternative payment options for services paid under the PFS and on associated implementation requirements.

Bundling is one method for structuring payment that can improve payment accuracy and efficiency, assuming the bundling proposal has considered the payment system, context, and included services. Current work on bundling to date has targeted specific codes and sets of codes. Specifically, our ongoing work identifying, reviewing, and validating the RVUs of potentially misvalued services on the PFS will support the development of this report. As detailed above, through the potentially misvalued codes initiative we are currently identifying for review codes that are frequently billed together and codes with low relative values billed in multiples. Many of the codes identified through these screens have been referred to the CPT Editorial Panel for the development of a comprehensive or bundled code, and several bundled codes have already been created and valued. Additionally, in section II.B.2.d. of this CY 2013 PFS proposed rule, we discuss improving the value of the global surgical package and request public comment on methods of obtaining accurate and current data on E/M services furnished as part of global surgical procedures. This information on measuring post-operative work in our current payment bundles also will inform our report to the Congress. We will continue to examine options for bundled or episode-based payments and will include our recommendations and implementation options in our report to the Congress submitted no later than January 1, 2013.

b. Progress in Identifying and Reviewing Potentially Misvalued Codes

In accordance with our statutory mandate, we have identified and reviewed numerous potentially misvalued codes in all seven of the categories specified in section 1848(c)(2)(K)(ii) of the Act, and we plan to continue our work examining potentially misvalued codes in these areas over the upcoming years. In the current process, we identify potentially misvalued codes for review, and request recommendations from the AMA RUC and other public commenters on revised work RVUs and direct PE inputs for those codes. The AMA RUC, through its own processes, identifies potentially misvalued codes for review, and through our public nomination process for potentially misvalued codes established in the CY 2012 PFS final rule, other individuals and stakeholder groups submit nominations for review of potentially misvalued codes as well.

Since CY 2009, as a part of the annual potentially misvalued code review and Five-Year Review process, we have reviewed over 1,000 potentially misvalued codes to refine work RVUs and direct PE inputs. We have adopted appropriate work RVUs and direct PE inputs for these services as a result of these reviews.

Our prior reviews of codes under the potentially misvalued codes initiative have included codes in all seven categories specified in section 1848(c)(2)(K)(ii) of the Act, listed above. A more detailed discussion of the extensive prior reviews of potentially misvalued codes is included in the CY 2012 PFS final rule with comment period (76 FR 73052 through 73055).

In last year's PFS proposed rule (CY 2012), we identified potentially misvalued codes in the category of “Other codes determined to be appropriate by the Secretary,” referring a list of the highest PFS expenditure services, by specialty, that had not been recently reviewed (76 FR 73059 through 73068). In the CY 2012 final rule with comment period we finalized policy to consolidate the review of physician work and PE at the same time (76 FR 73055 through 73958), and established a process for the annual public nomination of potentially misvalued services to replace the Five-Year review process (76 FR 73058 through 73059). Below we discuss proposals that support our continuing efforts to appropriately identify, review, and adjust values for potentially misvalued codes.

c. Validating RVUs of Potentially Misvalued Codes

In addition to identifying and reviewing potentially misvalued codes, section 3134(a) of the Affordable Care Act added section 1848(c)(2)(L) of the Act, which specifies that the Secretary shall establish a formal process to validate RVUs under the PFS. The validation process may include validation of work elements (such as time, mental effort and professional judgment, technical skill and physical effort, and stress due to risk) involved with furnishing a service and may include validation of the pre-, post-, and intra-service components of work. The Secretary is directed, as part of the validation, to validate a sampling of the work RVUs of codes identified through

any of the seven categories of potentially misvalued codes specified by section 1848(c)(2)(K)(ii) of the Act. Furthermore, the Secretary may conduct the validation using methods similar to those used to review potentially misvalued codes, including conducting surveys, other data collection activities, studies, or other analyses as the Secretary determines to be appropriate to facilitate the validation of RVUs of services.

In the CY 2011 PFS proposed rule (75 FR 40068) and CY 2012 PFS proposed rule (76 FR 42790), we solicited public comments on possible approaches, methodologies, and data sources that we should consider for a validation process. A summary of the comments along with our responses are included in the CY 2011 PFS final rule with comment period (75 FR 73217) and the CY 2012 PFS final rule with comment period (73054 through 73055). In CY 2012 we intend to enter into a contract to assist us in validating RVUs of potentially misvalued codes that will explore a model for the validation of physician work under the PFS, both for new and existing services. We plan to discuss this model further in future rulemaking.

d. Improving the Valuation of the Global Surgical Package

(1) Background

We applied the concept of payment for a global surgical package under the PFS at its inception on January 1, 1992 (56 FR 59502). For each global surgical procedure, we establish a single payment, which includes payment for a package of all related services typically furnished by the surgeon furnishing the procedure during the global period. Each global surgery is paid on the PFS as a single global surgical package. Each global surgical package payment rate is based on the work necessary for the typical surgery and related pre- and post-operative work. The global period may include 0, 10, or 90 days of post-operative care, depending on the procedure. For major procedures, those with a 90-day global period, the global surgical package payment also includes the day prior to the day of surgery.

Some global surgical packages have been valued by adding the RVU of the surgical procedure and all pre- and post-operative evaluation and management (E/M) services included in the global period. Others have been valued using magnitude estimation, in which case, the overall RVU for the surgical package was determined without factoring in the specific RVUs associated with the E/M services in the global period. The number and level of E/M services identified with a global surgery payment are based on the typical case. Even though a surgical package may have been developed with several E/M services included, a physician is not required to furnish each pre- or post-operative visit to bill for the global surgical package.

Similar to other bundled services on the PFS, when a global surgery code is billed, the bundled pre- and post-operative care is not separately payable; surgeons or other physicians billing a surgical procedure, cannot separately bill for the E/M services that are included in the global surgical package.

(2) Measuring Post-Operative Work

The use of different methodologies for valuing global surgical packages since 1992 has created payment rates with a wide range of E/M services included within the post-operative period. This is especially true among those with 90-day global periods. More recently reviewed codes tend to have fewer E/M services in the global period, and the work RVUs of those E/M services are often accounted for in the value for the global surgical package. The value of less recently reviewed global surgeries frequently do not appear to include the full work RVUs of each E/M service in the global surgical package, and the numbers of E/M services included in the post-operative period can be inconsistent within a family of procedures. For example, there is significant variation in the number and level of E/M services included in two transplantation procedures in Table 4. Pre-, intra-, and post-operative times, including the number of post-operative visits, for each global surgical package can be found in the physician time file on the CMS Web site at

http://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1253669&intNumPerPage=10

Table 4—Transplantation Procedures Showing a Significant Range in the Number of Included E/M Services

CPT Code

Short descriptor

Work RVU

E/M services included in global period

99213

99231

99238

99291

Total E/M Work RVU

50360

Transplantation of kidney

40.90

64.13

47135

Transplantation of liver

83.64

6.79

In 2005, the HHS Office of Inspector General (OIG) examined whether global surgical packages are appropriately valued. In its report on eye and ocular surgeries, “National Review of Evaluation and Management Services Included in Eye and Ocular Adnexa Global Surgery Fees for Calendar Year 2005” (A-05-07-00077), the OIG reviewed a sample of 300 eye and ocular surgeries, and counted the actual number of face-to-face services in the surgeons' medical records to establish whether the surgeon furnished post-operative E/M services. The OIG findings show that surgeons typically furnished fewer E/M services in the post-operative period than were identified with the global surgical package payment for each procedure. A smaller percentage of surgeons furnished more E/M services than were identified with the global surgical package payment. The OIG could only review the number of face-to-face services and was not able to review the level of E/M services that the surgeons furnished due to a lack of documentation in surgeons' medical records. The OIG concluded that the RVUs for the global surgical package are too high because they include the work of E/M services that are not typically furnished within the global period for the reviewed procedures.

Following the 2005 report, the OIG continued to investigate E/M services furnished during the global surgical period. In May 2012, the OIG published a report titled “Musculoskeletal Global Surgery Fees Often Did Not Reflect the Number of Evaluation and Management Services Provided” (A-05-09-00053). For this investigation, the OIG sampled 300 musculoskeletal global surgeries and again found that, for the majority of sampled surgeries, physicians furnished fewer E/M services than were identified as part of the global period for that service. Once again, a smaller percentage of surgeons furnished more E/M services than were identified with the global surgical package payment.

The OIG concluded that the RVUs for the global surgical package are too high because they include the work of E/M services that are not typically furnished within the global period for the reviewed procedures.

In both reports, the OIG recommended that we adjust the number of E/M services identified with the global surgical payments to reflect the number of E/M services that are actually being furnished. Under the PFS, we do not ask surgeons to report bundled services on their claim when billing for the global surgical package as we do providers furnishing bundled services under other Medicare payment systems. Since it is not necessary for a surgeon to identify the level and code of the E/M services actually furnished during the global period, there is very limited documentation on the frequency or level of post-operative services. Without sufficient documentation, a review of the medical record cannot accurately determine the number or level of E/M services furnished in the post-operative period.

As noted above, section 1848(c)(2)(K) of the Act (as added by section 3134 of the Affordable Care Act), which essentially codified the potentially misvalued codes initiative, requires that the Secretary identify and review potentially misvalued services with an emphasis on several categories, and recognizes the Secretary's discretion to identify additional potentially misvalued codes. Several of the categories of potentially misvalued codes support better valuation of global surgical package codes. We have made efforts to prioritize the review of RVUs for services on the PFS that have not been reviewed recently or for services where there is a potential for misuse. One of the priority categories for review of potentially misvalued codes is services that have not been subject to review since the implementation of the PFS (the so-called “Harvard-valued codes”). In the CY 2009 PFS proposed rule, we requested that the AMA RUC engage in an ongoing effort to review the remaining Harvard-valued codes, focusing first on the high-volume, low intensity codes (73 FR 38589). For the Fourth Five-Year Review (76 FR 32410), we requested that the AMA RUC review services that have not been reviewed since the original implementation of the PFS with utilization greater than 30,000 (Harvard-valued—Utilization > 30,000). In section II.B.3 of this proposed rule, we propose to review Harvard-valued services with annual allowed charges that total at least $10,000,000 (Harvard-valued—Allowed charges ≥ $10,000,000), and request recommendations from the AMA RUC and other public commenters on appropriate values for these services.

Of the more than 1,000 identified potentially misvalued codes, just over 650 are surgical services with a global period of 0, 10, or 90 days. We have completed our review of 450 of these potentially misvalued surgical codes. These efforts are important, but we believe the usual review process does not go far enough to assess whether the valuation of global surgical packages reflects the number and level of post-operative services that are typically furnished. To support our statutory obligation to identify and review potentially misvalued services and to respond to the OIG's concern that global surgical package payments are misvalued, we believe that we should begin gathering more information on the E/M services that are typically furnished with surgical procedures. Information regarding the typical work involved in surgical procedures with a global period is necessary to evaluate whether certain surgical procedures are appropriately valued. While the AMA RUC reviews and recommends RVUs for services on the PFS, we complete our own assessment of those recommendations, and may adopt different RVUs. However, for procedures with a global period, the lack of claims data and documentation restrict our ability to review and assess the appropriateness of their RVUs.

We are seeking comments on methods of obtaining accurate and current data on E/M services furnished as part of a global surgical package. We are especially interested in and invite comments on a claims-based data collection approach that would include reporting E/M services furnished as part of a global surgical package, as well as other valid, reliable, generalizable, and robust data to help us identify the number and level of E/M services typically furnished in the global surgical period for specific procedures. We will carefully weigh all comments received as we consider ways to appropriately review values for global surgical packages.

3. CY 2013 Identification and Review of Potentially Misvalued Services

a. Public Nomination of Potentially Misvalued Codes

In the CY 2012 PFS final rule, we finalized a public nomination process for potentially misvalued codes (76 FR 73058). Under the previous Five-Year Reviews, the public nominated potentially misvalued codes for review. To allow for public input and to preserve the public's ability to identify and nominate potentially misvalued codes for review under our annual potentially misvalued codes initiative, we established a process by which the public can submit codes, along with documentation supporting the need for review, on an annual basis. Stakeholders may nominate potentially misvalued codes for review by submitting the code with supporting documentation during the 60-day public comment period following the release of the annual PFS final rule with comment period. Supporting documentation for codes nominated for the annual review of potentially misvalued codes may include the following:

• Documentation in the peer reviewed medical literature or other reliable data that there have been changes in physician work due to one or more of the following: Technique; knowledge and technology; patient population; site-of-service; length of hospital stay; and physician time.

• An anomalous relationship between the code being proposed for review and other codes.

• Evidence that technology has changed physician work, that is, diffusion of technology.

• Analysis of other data on time and effort measures, such as operating room logs or national and other representative databases.

• Evidence that incorrect assumptions were made in the previous valuation of the service, such as a misleading vignette, survey, or flawed crosswalk assumptions in a previous evaluation.

• Prices for certain high cost supplies or other direct PE inputs that are used to determine PE RVUs are inaccurate and do not reflect current information.

• Analyses of physician time, work RVU, or direct PE inputs using other data sources (for example, Department of Veteran Affairs (VA) National Surgical Quality Improvement Program (NSQIP), the Society for Thoracic Surgeons (STS), and the Physician Quality Reporting System (PQRS) databases).

• National surveys of physician time and intensity from professional and management societies and organizations, such as hospital associations.

Under this newly established process, after we receive the nominated codes during the 60-day comment period following the release of the annual PFS final rule with comment period, we would evaluate the supporting documentation and assess whether they appear to be potentially misvalued codes appropriate for review under the

annual process. In the following year's PFS proposed rule, we would publish the list of nominated codes, and indicate whether each nominated code will be reviewed as potentially misvalued.

This year is the first year we are considering codes we received through this public nomination process for potentially misvalued codes. In the 60 days following the release of the CY 2012 PFS final rule with comment period, we received nominations and supporting documentation for review of the codes listed in Tables 5 and 6. A total of 36 CPT codes were nominated. The majority of the nominated codes were codes for which we finalized RVUs in the CY 2012 PFS final rule. That is, the RVUs were interim in CY 2011 and finalized for CY 2012, or proposed in either the Fourth Five-Year Review of Work or the CY 2012 PFS proposed rule and finalized for CY 2012. Under this annual public nomination process, we note that it would be highly unlikely that we would determine that a nominated code is appropriate for review under the potentially misvalued codes initiative if it had been reviewed in the years immediately preceding its nomination since we believe that the best information on the level of physician work and PE inputs already would have been available through that recent review. Nonetheless, we evaluated the supporting documentation for each nominated code to ascertain whether the submitted information demonstrated that the code is potentially misvalued.

Table 5—CPT Codes Nominated as Potentially Misvalued in CY 2012 Final Rule Comment Period: Proposed Action

CPT Code

Short descriptor

Last

reviewed For:

CMS proposed action

Regulations.gov

comment search

33282

Implant pat-active ht record

CY 2000

Review and add nonfacility inputs. Not considered potentially misvalued

CMS-2011-0131-1422.

33284

Remove pat-active ht record

CY 2000

Review and add nonfacility inputs. Not considered potentially misvalued

CMS-2011-0131-1422.

77336

Radiation physics consult

CY 2003

(PE Only)

Review as a potentially misvalued code

CMS-2011-0131-1617.

94762

Measure blood oxygen level

CY 2010

(PE Only)

Propose revisions in the CY 2013 PFS proposed rule

CMS-2011-0131-1615; CMS-2011-0131-1412; CMS-2011-0131-1632.

CPT codes 33282 (Implantation of patient-activated cardiac event recorder) and 33284 (Removal of an implantable, patient-activated cardiac event recorder) were nominated for review as potentially misvalued codes. The commenter asserted that CPT codes 33282 and 33284 are misvalued in the nonfacility setting because these CPT codes currently are only priced in the facility setting even though physicians perform these services in the office setting. The commenter requested that we establish appropriate payment for the services when furnished in a physician office. Specifically, they requested that CMS establish nonfacility PE RVUs for these services. We do not consider the lack of pricing in a particular setting as an indicator of a potentially misvalued code. However, given that these services are now furnished in the nonfacility setting, we believe that CPT codes 33282 and 33284 should be reviewed to establish appropriate nonfacility inputs. We note, as did the commenter, that the valuation of a service under the PFS in a particular setting does not address whether those services and the setting in which they are furnished are medically reasonable and necessary for a patient's medical needs and condition. We propose to review CPT codes 33282 and 33284 and request recommendations from the AMA RUC and other public commenters on the appropriate physician work RVUs (as measured by time and intensity), and facility and nonfacility direct PE inputs for these services.

Like CPT codes 33282 and 33284, stakeholders have requested that we establish appropriate payment for CPT code 63650 (Percutaneous implantation of neurostimulator electrode array, epidural) when furnished in an office setting. This request was not submitted as a potentially misvalued code nomination. However, given that these services are now furnished in the nonfacility setting, we believe CPT code 63650 should be reviewed to establish appropriate nonfacility inputs. Please see section II.A.3 (Changes to Direct Inputs for Specific Services) for a discussion of spinal code stimulation trial procedures in the nonfacility setting.

CPT code 77336 (Continuing medical physics consultation, including assessment of treatment parameters, quality assurance of dose delivery, and review of patient treatment documentation in support of the radiation oncologist, reported per week of therapy) was nominated for review as a potentially misvalued code. The commenter asserted that CPT code 77336 is misvalued because changes in the technique for rendering continuing medical physics consultations have resulted in changes to the knowledge required, time, and effort expended, and complexity of technology associated with the tasks performed by the physicist other staff. Additionally the commenter believes that the direct PE inputs no longer accurately reflect the resources used to deliver this service and may be undervalued. CPT code 77336 was last reviewed for CY 2003. After evaluating the detailed supporting information that the commenter provided, we believe there may have been changes in technology and other PE inputs since we last reviewed the service, and that further review is warranted. As such, we propose to review CPT code 77336 as potentially misvalued and request recommendations from the AMA RUC and other public commenters on the direct PE inputs for this service, and physician work RVUs and direct PE inputs for the other services within this family of CPT codes.

CPT code 94762 (Noninvasive ear or pulse oximetry for oxygen saturation; by continuous overnight monitoring (separate procedure)) was nominated for review as a potentially misvalued code. Commenters asserted that CPT code 94762 is misvalued because the time currently allocated to the various direct PE inputs does not accurately reflect current practice. Commenters also asserted that independent diagnostic testing facilities are not appropriately accounted for in the current indirect PE methodology. In response to these

stakeholder concerns, we reviewed the PE inputs for CPT code 94762, which was last reviewed for CY 2010. We believe CPT code 94762 is misvalued, and we are proposing changes to the PE inputs for CY 2013. Following clinical review, we believe that the current time allocated to clinical labor and supplies appropriately reflects current practice. However, we believe that 480 minutes (8 hours) of equipment time for the pulse oximetry recording slot and pulse oximeter with printer are more appropriate for this overnight monitoring procedure code. As such, we are proposing this refinement to the direct PE inputs for CPT code 94762 for CY 2013. These proposed adjustments are reflected in the CY 2013 proposed direct PE input database, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

CPT code 53445 (Insertion of inflatable urethral/bladder neck sphincter, including placement of pump, reservoir, and cuff) was nominated for review as a potentially misvalued code. CPT code 53445 was identified through the site-of-service anomaly potentially misvalued code screen for CY 2008 and is currently interim for CY 2012 and open to public comment. We will consider the content of the potentially misvalued code nomination and supporting documentation for CPT code 53445 as comments on the interim final value, and will address the comments in the CY 2013 PFS final rule with comment period when we address the final value of the CPT code.

For purposes of CY 2013 rulemaking, we do not consider the other nominated codes, listed in Table 6 to be potentially misvalued because these codes were last reviewed and valued for CY 2012 and the supporting documentation did not provide sufficient evidence to demonstrate that the codes should be reviewed as potentially misvalued for CY 2013 or CY 2014. The supporting documentation for these services generally mirrored the public comments previously submitted, to which CMS has already responded.

Table 6—CPT Codes Nominated as Potentially Misvalued in CY 2012 Final Rule Comment Period: No Further Action Proposed

CPT Code

Short descriptor

28820

Amputation of toe.

28825

Partial amputation of toe.

35188

Repair blood vessel lesion.

35612

Artery bypass graft.

35800

Explore neck vessels.

35840

Explore abdominal vessels.

35860

Explore limb vessels.

36819

Av fuse uppr arm basilic.

36825

Artery-vein autograft.

43283

Lap esoph lengthening.

43327

Esoph fundoplasty lap.

43328

Esoph fundoplasty thor.

43332

Transab esoph hiat hern rpr.

43333

Transab esoph hiat hern rpr.

43334

Transthor diaphrag hern rpr.

43335

Transthor diaphrag hern rpr.

43336

Thorabd diaphr hern repair.

43337

Thorabd diaphr hern repair.

43338

Esoph lengthening.

47563

Laparo cholecystectomy/graph.

49507

Prp i/hern init block >5 yr.

49521

Rerepair ing hernia blocked.

49587

Rpr umbil hern block >5 yr.

49652

Lap vent/abd hernia repair.

49653

Lap vent/abd hern proc comp.

49654

Lap inc hernia repair.

49655

Lap inc hern repair comp.

53445*

Insert uro/ves nck sphincter.

60220

Partial removal of thyroid.

60240

Removal of thyroid.

60500

Explore parathyroid glands.

95800

Slp stdy unattended.

* CPT code 53445 is currently interim and open for public comment. We are accepting as public comment the nomination information submitted and will address these comments in the CY 2013 PFS final rule with comment period.

b. Potentially Misvalued Code Lists

As mentioned above, in the last several annual PFS proposed rules we have identified lists of potentially misvalued codes for review. We believe it is imperative that we continue to identify new lists of potentially misvalued codes for review to appropriately identify, review, and adjust values for potentially misvalued codes for CY 2013.

(1) Review of Harvard-Valued Services With Medicare Allowed Charges of $10,000,000 or More

For many years, we have been reviewing `Harvard-valued' CPT codes through the potentially misvalued code initiative. The RVUs for Harvard-valued CPT codes have not been reviewed since they were originally valued in the early 1990s at the beginning of the PFS. While the principles underlying the relative value scale have not changed, over time the methodologies we use for valuing services on the PFS have changed, potentially disrupting the relativity between the remaining Harvard-valued codes and other codes on the PFS. At this time, nearly all CPT codes that were Harvard-valued and had Medicare utilization of over 30,000 allowed services per year have been reviewed. Moving forward, we propose to review Harvard-valued services with Medicare allowed charges of $10 million or greater per year. The CPT codes meeting these criteria have relatively low Medicare utilization (as we have reviewed the services with utilization over 30,000), but account for significant Medicare spending annually and have never been reviewed. We recognize that several of the CPT codes meeting these criteria have already been identified as potentially misvalued through other screens and may currently be scheduled for review for CY 2013. We also recognize that other codes meeting these criteria have been referred by the AMA RUC to the CPT Editorial Panel. In these cases, we are not proposing re-review of these already identified services, but for the sake of completeness, we include them as a part of this category of potentially misvalued services. We recognize that the relatively low Medicare utilization for these services may make gathering information on the appropriate physician work and direct PE inputs difficult. We request recommendations from the AMA RUC and other public commenters, and appreciate efforts expended to provide RVU and input recommendations to CMS for these lower volume services. Because survey sample sizes could be small for these lower volume services, we encourage the use of valid and reliable alternative data sources and methodologies when developing recommended values. In sum, we propose to review Harvard-valued CPT codes with annual allowed charges of $10 million or more as a part of the potentially misvalued codes initiative. Table 7 lists the codes that meet these criteria using CY 2011 Medicare claims data.

Table 7—Harvard-Valued CPT Codes With Annual Allowed Charges ≥$10,000,000

CPT Code

Short descriptor

13152*

Repair of wound or lesion.

27446

Revision of knee joint.

29823

Shoulder arthroscopy/surgery.

36215**

Place catheter in artery.

36245**

Ins cath abd/l-ext art 1st.

43264**

Endo cholangiopancreatograph.

50360

Transplantation of kidney.

52353*

Cystouretero w/lithotripsy.

64450*

N block other peripheral.

64590

Insrt/redo pn/gastr stimul.

66180

Implant eye shunt.

67036

Removal of inner eye fluid.

67917

Repair eyelid defect.

92286**

Internal eye photography.

92982*

Coronary artery dilation.

95860*

Muscle test one limb.

* Scheduled for CY 2012 AMA RUC Review.

** Referred by the AMA RUC to the CPT Editorial Panel.

(2) Review of Services With Stand Alone PE Procedure Time

Improving the accuracy of procedure time assumptions used in PFS ratesetting continues to be a high priority of the potentially misvalued codes initiative. Procedure time is a critical measure of the resources typically used in furnishing particular services to Medicare beneficiaries, and procedure time assumptions are an important component in the development of work and PE RVUs. Discussions in the academic community have indicated that procedure times used for PFS ratesetting are overstated (McCall, N., J. Cromwell,

et al.

(2006). “Validation of physician survey estimates of surgical time using operating room logs.”

Med Care Res Rev

63(6): 764-777. Cromwell, J., S. Hoover,

et al.

(2006). “Validating CPT typical times for Medicare office evaluation and management (E/M) services.”

Med Care Res Rev

63(2): 236-255. Cromwell, J., N. McCall,

et al.

(2010). “Missing productivity gains in the Medicare physician fee schedule: where are they?”

Med Care Res Rev

67(6): 236-255.) MedPAC and others have emphasized the importance of using the best available procedure time information in establishing accurate PFS payment rates. (MedPAC, Report to the Congress: Aligning Incentives in Medicare, June 2010, p. 230)

In recent years, CMS and the AMA RUC have taken steps to consider the accuracy of available data regarding procedure times used in the valuation of the physician work component of PFS payment. Generally, the AMA RUC derives estimates of physician work time from survey responses, and the AMA RUC reviews and analyzes those responses as part of its process for developing a recommendation for physician work. These procedure time assumptions are also used in determining the appropriate direct PE input values used in developing nonfacility PE RVUs. Specifically, physician intra-service time serves as the basis for allocating the appropriate number of minutes within the service period to account for the time used in furnishing the service to the patient. The number of intra-service minutes, or occasionally a particular proportion thereof, is allocated to both the clinical staff that assists the physician in furnishing the service and to the equipment used by either the physician or the staff in furnishing the service. This allocation reflects only the time the beneficiary receives treatment and does not include resources used immediately prior to or following the service. Additional minutes are often allocated to both clinical labor and equipment resources in order to account for the time used for necessary preparatory tasks immediately preceding the procedure or tasks typically performed immediately following it. For codes without physician work, the procedure times assigned to the direct PE inputs for such codes assume that the clinical labor performs the procedure. For these codes, the number of intra-service minutes assigned to clinical staff is independent and not based on any physician intra-service time assumptions. Consequently, the procedure time assumptions for these kinds of services have not been subject to all of the same mechanisms recently used by the AMA RUC and physician community in providing recommendations to CMS, and by CMS in the valuation of the physician work component of PFS payment. These independent clinical labor time assumptions largely determine the RVUs for the procedure. To ensure that procedure time assumptions are as accurate as possible across the Medicare PFS, we believe that codes without physician work should be examined with the same degree of scrutiny as services with physician work.

For CY 2012, a series of radiation treatment services were reviewed as part of the potentially misvalued code initiative. Among these were intensity modulated radiation therapy (IMRT) delivery services and stereotactic body radiation therapy (SBRT) delivery services reported with CPT codes 77418 (Intensity modulated treatment delivery, single or multiple fields/arcs, via narrow spatially and temporally modulated beams, binary, dynamic MLC, per treatment session) and 77373 (Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions), respectively. CPT code 77418 (IMRT treatment delivery) had been identified as potentially misvalued based on Medicare utilization data that indicated both fast growth in utilization and frequent billing with other codes. We identified this code as potentially misvalued in the CY 2009 PFS proposed rule (73 FR 38586). CPT code 77373 (SBRT treatment delivery) had been identified as potentially misvalued by the RUC as a recently established code describing services that use new technologies. There is no physician work associated with either of these codes since other codes are used to bill for planning, dosimetry, and radiation guidance. Both codes are billed per treatment session. Because the physician work associated with these treatments is reported using codes distinct from the treatment delivery, the primary determinant of PE RVUs for these codes is the number of minutes allocated for the procedure time to both the clinical labor (radiation therapist) and the resource-intensive capital equipment included as direct PE inputs.

In the CY 2012 PFS final rule with comment period, we received and accepted without refinement PE recommendations from the AMA RUC for these two codes. (We received the recommendation for CPT code 77418 (IMRT treatment delivery) too late in 2010 to be evaluated for CY 2011 and it was therefore included in the CY 2012 rulemaking cycle.) The AMA RUC recommended minor revisions to the direct PE inputs for the code to eliminate duplicative clinical labor, supplies, and equipment to account for the frequency with which the code was billed with other codes. For CPT code 77373 (SBRT treatment delivery), the RUC recommended no significant changes to the direct PE inputs.

Subsequent to the publication of the final rule, the AMA RUC and other stakeholders informed CMS that the direct PE input recommendation forwarded to CMS for IMRT treatment delivery (CPT code 77418) inadvertently omitted seven equipment items typically used in furnishing the service. These items had been used as direct PE inputs for the code prior to CY 2012. There is broad agreement among stakeholders that these seven equipment items are typically used in furnishing the services described by CPT code 77418. We were unable to reincorporate the items for CY 2012. These omitted items are listed in Table 8. In consideration of the comments from the AMA RUC and other stakeholders, we are proposing to include the seven equipment items omitted from the RUC recommendation for CPT code 77418.

These proposed adjustments are also reflected in the CY 2013 proposed direct PE input database, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

. We note that the proposed PE RVUs included in Addendum B to this proposed rule reflect the RVUs that result from application of these proposals.

Table 8—Equipment Inputs Omitted From RUC Recommendation for CPT Code 77418

[IMRT Treatment Delivery]

Equipment code

Equipment description

ED011

computer system, record and verify.

ED035

video camera.

ED036

video printer, color (Sony medical grade).

EQ139

intercom (incl. master, pt substation, power, wiring).

ER006

IMRT physics tools.

ER038

isocentric beam alignment device.

ER040

laser, diode, for patient positioning (Probe).

It has come to our attention that there are wide discrepancies between the procedure time assumptions used in establishing nonfacility PE RVUs for these services and the procedure times made widely available to Medicare beneficiaries and the general public. Specifically, the direct PE inputs for IMRT treatment delivery (CPT code 77418) reflect a procedure time assumption of 60 minutes. These procedure minutes were first assigned to the code for CY 2002 based on a recommendation from the AMA RUC indicating that the typical treatment time for the IMRT patient was 40 to 70 minutes. The most recent RUC recommendation that CMS received for CY 2012 rulemaking supported the procedure time assumption of 60 minutes.

Information publicly available to Medicare beneficiaries and the general public clearly indicates that IMRT sessions typically last between 10 and 30 minutes. For example, the American Society for Radiation Oncology (ASTRO) publishes a patient fact sheet that explains that for all external beam radiation therapy, including IMRT, “treatment is delivered in a series of daily sessions, each about 15 minutes long.” [“Radiation Therapy for Prostate Cancer: Facts to Help Patients Make an Informed Decision” available for purchase at

www.astro.org/MyASTRO/Products/Product.aspx?AstroID=6901

.] This fact sheet is intended for patients with prostate cancer, the typical diagnosis for Medicare beneficiaries receiving IMRT. Similarly, the American College of Radiology (ACR) and the Radiological Society of North America (RSNA) co-sponsor a Web site for patients called

http://radiologyinfo.org

that states that IMRT “treatment sessions usually take between 10 and 30 minutes.”

The direct PE inputs for SBRT treatment delivery (CPT code 77373) reflect a procedure time assumption of 90 minutes. These procedure minutes were first assigned to the code for CY 2007 based on a recommendation from the AMA RUC. The most recent RUC recommendation that CMS received for CY 2012 rulemaking supported continuing that procedure time assumption.

In 2012, information publicly available to Medicare beneficiaries and the general public states that SBRT treatment typically lasts no longer than 60 minutes. For example, the American College of Radiology (ACR) and the Radiological Society of North America (RSNA) Web site,

http://radiologyinfo.org

, states that SBRT “treatment can take up to one hour.”

Given the importance of the procedure time assumption in the development of RVUs for these services, using the best available information is critical to ensuring that these services are valued appropriately. We have no reason to believe that information medical societies and practitioners offer to their cancer patients regarding the IMRT or SBRT treatment experience is inaccurate or atypical. Therefore, we believe that the typical procedure time for IMRT delivery is between 10 and 30 minutes and that the typical procedure time for SBRT delivery is under 60 minutes. The services are currently valued using procedure time assumptions of 60 and 90 minutes, respectively. We believe these procedure time assumptions, distinct from necessary preparatory or follow-up tasks by the clinical labor, are clearly outdated and need to be updated using the best information available.

While we generally have not used publicly available resources to establish procedure time assumptions, we believe that the procedure time assumptions used in setting payment rates for the Medicare PFS should be derived from the most accurate information available. In the case of these services, we believe that the need to reconcile the vast discrepancies between our existing assumptions and more accurate information outweighs the potential value in maintaining relativity offered by only considering data from one source. We are proposing to adjust the procedure time assumption for IMRT delivery (CPT code 77418) to 30 minutes. We are proposing to adjust the procedure time assumption for SBRT delivery (CPT code 77373) to 60 minutes. These procedure time assumptions reflect the maximum number of minutes reported as typical in publicly available information. We note that in the case of CPT code 77418, the `accelerator, 6-18 MV' (ER010) and the `collimator, multileaf system w-autocrane' (ER017) are used throughout the procedure and currently have no minutes allocated for preparing the equipment, positioning the patient, or cleaning the room. Since these clinical labor tasks are associated with related codes typically reported at the same time, we are also proposing to allocate minutes to these equipment items to account for their use immediately before and following the procedure. All of these proposed adjustments are reflected in the CY 2013 proposed direct PE input database, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

. We also note that the proposed PE RVUs included in Addendum B to this proposed rule reflect the RVUs that result from the application of this proposal. We request recommendations from the AMA RUC and other public commenters on the direct PE inputs for these services.

While we recognize that using these procedure time assumptions will result in payment reductions for these particular services, we believe such changes are necessary to appropriately

value these services. Recent attention from popular media sources like the

Wall Street Journal

(

online.wsj.com/article/SB10001424052748703904804575631222900534954.html

December 7, 2010) and the

Washington Post

(

www.washingtonpost.com/wp-dyn/content/article/2011/02/28/AR2011022805378.html

) February 28, 2011 has encouraged us to consider the possibility that potential overuse of IMRT services may be partially attributable to financial incentives resulting from inappropriate payment rates. In its 2010 Report to Congress, MedPAC referenced concerns that financial incentives may influence how cancer patients are treated. In the context of the growth of ancillary services in physicians' offices, MedPAC recommended that improving payment accuracy for discrete services should be a primary tool used by CMS to mitigate incentives to increase volume (Report to Congress: Aligning Incentives in Medicare, June 2010, p. 225). We note that in recent years, PFS nonfacility payment rates for IMRT treatment delivery have exceeded the Medicare payment rate for the same service paid through the hospital Outpatient Prospective Payment System (OPPS). We believe that such high-volume services that are widely furnished in both nonfacility and facility settings are highly unlikely to be more resource-intensive in freestanding radiation therapy centers or physicians' offices than when furnished in facilities like hospitals that generally incur higher overhead costs, maintain a 24 hour, 7 day per week capacity, are generally paid in larger bundles, and generally furnish services to higher acuity patients than the patients who receive services in physician offices or free-standing clinics. Given that the OPPS payment rates are based on auditable data on hospital costs, we believe the seemingly counterintuitive relationship between the OPPS and nonfacility PFS payment rates reflects inappropriate assumptions within the current direct PE inputs for CPT code 77418. The AMA RUC's most recent direct PE input recommendations reflect the same procedure time assumptions used in developing the recommendations for CY 2002. As we explained above, we do not understand how the AMA RUC can recommend these assumptions in the context of the procedure time information available to the general public. We believe that using procedure time assumptions that reflect the maximum times reported as typical to Medicare beneficiaries will improve the accuracy of those inputs and the resulting nonfacility payment rates.

These two treatment delivery codes are PE only codes and are fairly unique in that the resulting RVUs are largely comprised of resources for staff and equipment based on the minutes associated with clinical labor. There are several other codes on the PFS established through the same methodology. As we previously stated, we believe that the procedure time assumptions for these kinds of services have not been subject to all of the same mechanisms recently used by CMS in the valuation of the physician work component of PFS payment. In light of observations about publicly available procedure times for CPT codes 77418 (IMRT treatment delivery) and 77373 (SBRT treatment delivery) and public awareness of potential adverse financial incentives associated with IMRT treatment delivery in particular, we believe that similar codes are potentially misvalued.

Therefore, consistent with the requirement in section 1848(c)(2)(K)(ii) of the Act to examine other codes determined to be appropriate by the Secretary, we are proposing to review and make adjustments to CPT codes with stand alone procedure time assumptions used in developing nonfacility PE RVUs. These procedure time assumptions are not based on physician time assumptions. We are prioritizing for review CPT codes that have annual Medicare allowed charges of $100,000 or more, include direct equipment inputs that amount to $100 or more, and have PE procedure times of greater than 5 minutes. At this time, we are not including in this category services with payment rates subject to the OPPS cap (as specified in the statute under section 1848(b)(4) of the Act and listed in Addendum G to this proposed rule) or services with PE minutes established through code descriptors. (For example, an overnight monitoring code might contain 480 minutes of monitoring equipment time to account for 8 hours of overnight monitoring.) The CPT codes meeting these criteria appear in Table 9. We recognize that there are other CPT codes that are valued in the same manner. We may consider evaluating those services as potentially misvalued codes in future rulemaking.

For the services in Table 9, we request recommendations from the AMA RUC and other public commenters on the appropriate direct PE inputs for these services. We encourage the use of valid and reliable alternative data sources when developing recommended values, including electronic medical records and other independent data sources. We note that many of the CPT codes in Table 9 have been identified through other potentially misvalued code screens and have been recently reviewed. Given our observed concerns with the inputs for the recently reviewed IMRT and SBRT direct PE inputs discussed above, we believe it is necessary to re-review other recently reviewed services with stand alone PE procedure time.

Table 9—Services With Stand Alone PE Procedure Time

CPT Code

Short descriptor

77280

Set radiation therapy field.

77285

Set radiation therapy field.

77290

Set radiation therapy field.

77301

Radiotherapy dose plan imrt.

77338

Design mlc device for imrt.

77372

Srs linear based.

77373

Sbrt delivery.

77402

Radiation treatment delivery.

77403

Radiation treatment delivery.

77404

Radiation treatment delivery.

77406

Radiation treatment delivery.

77407

Radiation treatment delivery.

77408

Radiation treatment delivery.

77409

Radiation treatment delivery.

77412

Radiation treatment delivery.

77413

Radiation treatment delivery.

77414

Radiation treatment delivery.

77416

Radiation treatment delivery.

77418

Radiation tx delivery imrt.

77600

Hyperthermia treatment.

77785

Hdr brachytx 1 channel.

77786

Hdr brachytx 2-12 channel.

77787

Hdr brachytx over 12 chan.

88348

Electron microscopy.

c. Services With Anomalous Time

Each year when we publish the PFS proposed and final rules, we publish on the CMS Web site several files that support annual PFS rate-setting. One of these supporting files is the physician time file, which lists the physician time associated with the HCPCS codes on the PFS. The physician time file associated with this PFS proposed rule is available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

In our review of potentially misvalued codes and their inputs, we became aware of several HCPCS codes that have anomalous times in our physician time file. Physician work is a measure of physician time and intensity, so there should be no services that have payable physician work RVUs but no physician time in the time file, and there should be no payable services with physician time in the time file and no physician work RVUs. For CY 2013 we are proposing to make the physician time

file changes detailed below to address these anomalous time file entries.

(1) Review of Services With Physician Work and No Listed Physician Time

CPT code 94014 (Patient-initiated spirometric recording per 30-day period of time; includes reinforced education, transmission of spirometric tracing, data capture, analysis of transmitted data, periodic recalibration and physician review and interpretation) has a physician work RVU of 0.52 and is currently listed with 0 physician time. CPT code 94014 is a global service that includes CPT code 94015 (Patient-initiated spirometric recording per 30-day period of time; recording (includes hook-up, reinforced education, data transmission, data capture, trend analysis, and periodic recalibration)) (the technical component), and CPT code 94016 (Patient-initiated spirometric recording per 30-day period of time; physician review and interpretation only) (the professional component). We believe it is appropriate for the physician time of CPT code 94014 to match the physician time of the code's component professional service—CPT code 94016. As such, for CPT code 94014 for CY 2013, we are proposing to assign 2 minutes of pre-service evaluation time, and 20 minutes of intra-service time, which matches the times associated with CPT code 94016. These proposed adjustments are reflected in the physician time file associated with this proposed rule, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

HCPCS codes G0117 (Glaucoma screening for high risk patients furnished by an optometrist or ophthalmologist) and G0118 (Glaucoma screening for high risk patient furnished under the direct supervision of an optometrist or ophthalmologist) both have physician work RVUs (0.45, and 0.17, respectively), but neither code is included in the physician time file. HCPCS codes G0117 and G0118 have a PFS procedure status indicator of T indicating that these services are only paid if there are no other services payable under the PFS billed on the same date by the same provider.

In the CY 2002 PFS final rule (66 FR 55274), we crosswalked the physician work of HCPCS code G0117 from CPT code 99212 (Level 2 office or other outpatient visit, established patient), and we crosswalked the physician work of HCPCS code G0118 from CPT code 99211 (Level 1 office or other outpatient visit, established patient). Based on these finalized physician work crosswalks, we propose to assign HCPCS code G0117 physician times matching CPT code 99212, and HCPCS code G0118 physician times matching CPT code 99211. Specifically, we are proposing 2 minutes of pre-service time, 10 minutes of intra-service time, and 4 minutes of immediate post-service time for HCPCS code G0117, and 5 minutes of intra-service time, and 2 minutes of immediate post-service time for HCPCS code G0118. These proposed adjustments are reflected in the physician time file associated with this proposed rule, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

HCPCS code G0128 (Direct (face-to-face with patient) skilled nursing services of a registered nurse provided in a comprehensive outpatient rehabilitation facility, each 10 minutes beyond the first 5 minutes) currently has a physician work RVU (0.08), but is not listed in the physician time file. After review of this HCPCS code, we do not believe that HCPCS code G0128 describes a service that includes physician work. Time for a registered nurse to furnish the service is included in the PE for the code. As such, for CY 2013, we propose to remove the physician work RVU for HCPCS code G0128. HCPCS code G0128 will continue to have PE and malpractice expense RVUs.

HCPCS codes G0245 (Initial physician evaluation and management of a diabetic patient with diabetic sensory neuropathy resulting in a loss of protective sensation (LOPS) which must include: (1) The diagnosis of LOPS; (2) a patient history; (3) a physical examination that consists of at least the following elements: (a) Visual inspection of the forefoot, hindfoot and toe web spaces; (b) evaluation of a protective sensation; (c) evaluation of foot structure and biomechanics; (d) evaluation of vascular status and skin integrity; and (e) evaluation and recommendation of footwear; and (4) patient education), G0246 (Follow-up physician evaluation and management of a diabetic patient with diabetic sensory neuropathy resulting in a loss of protective sensation (LOPS) to include at least the following: (1) A patient history; (2) a physical examination that includes: (a) Visual inspection of the forefoot, hindfoot and toe web spaces; (b) evaluation of protective sensation; (c) evaluation of foot structure and biomechanics; (d) evaluation of vascular status and skin integrity; and (e) evaluation and recommendation of footwear; and (3) patient education), and G0247 (Routine foot care by a physician of a diabetic patient with diabetic sensory neuropathy resulting in a loss of protective sensation (LOPS) to include, the local care of superficial wounds (that is, superficial to muscle and fascia) and at least the following if present: (1) Local care of superficial wounds; (2) debridement of corns and calluses; and (3) trimming and debridement of nails) have physician work RVUs of 0.88, 0.45, and 0.50, respectively, but are not listed in the physician time file. HCPCS codes G0245, G0246, and G0247 have a procedure status indicator of R on the PFS indicating that coverage of these services is restricted.

In the CY 2003 PFS final rule (67 FR 79990), we crosswalked the physician work of HCPCS code G0245 from CPT code 99202 (Level 2 office or other outpatient visits, new patient), we crosswalked the physician work of HCPCS code G0246 from CPT code 99212, and we crosswalked the physician work of HCPCS code G0257 from CPT code 11040 (Debridement; skin; partial thickness). Based on these finalized physician work crosswalks, we propose to assign HCPCS code G0245 physician times matching CPT code 99202, HCPCS code G0246 physician times matching CPT code 99212, and HCPCS code G0247 physician times matching CPT code 11040. Specifically, for HCPCS code G0245 we are proposing 2 minutes of pre-service time, 15 minutes of intra-service time, and 5 minutes of immediate post-service time. For HCPCS code G0246 we are proposing 2 minutes of pre-service time, 10 minutes of intra-service time, and 4 minutes of immediate post-service time. For HCPCS code G0247 we are proposing 7 minutes of pre-service time, 10 minutes of intra-service time, and 7 minutes of immediate post-service time. These proposed adjustments are reflected in the physician time file associated with this proposed rule, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

HCPCS code G0250 (Physician review, interpretation, and patient management of home INR (International Normalized Ratio) testing for patient with either mechanical heart valve(s), chronic atrial fibrillation, or venous thromboembolism who meets Medicare coverage criteria; testing not occurring more frequently than once a week; billing units of service include 4 tests) has a physician work RVU of 0.18 but is not listed in the physician time file. HCPCS code G0250 has a procedure status indicator of R on the PFS indicating that coverage of this service

is restricted. In the CY 2003 final rule (67 FR 79991), we assigned HCPCS code G0250 a work RVU of 0.18, which corresponds to the work RVU of CPT code 99211. While we did not articulate this as a direct crosswalk in the CY 2003 final rule, after clinical review we believe that HCPCS code G0250 continues to require similar work as CPT code 99211, and should have the same amount of physician time as CPT code 99211. As such, we are proposing to assign HCPCS code G0250 the same physician time as CPT code 99211. Specifically, for HCPCS code G0250 we are proposing 5 minutes of intra-service time and 2 minutes of immediate post-service time. These proposed adjustments are reflected in the physician time file associated with this proposed rule, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

During our annual review of new, revised, and potentially misvalued CPT codes, the assessment of physician time used to furnish a service is an important part of the clinical review when determining the appropriate work RVU for a service. However, the time in the physician time file is not used to automatically adjust the physician work RVUs outside of that clinical review process. As such, the proposed addition of physician time to the HCPCS codes discussed above will have no impact on the current physician work RVUs for these services.

The time data in the physician time file is used in the PE methodology described in section II.A.2. In creating the indirect practice cost index (IPCI), we calculate specialty-specific aggregate pools of indirect PE for all PFS services for that specialty by adding the product of the indirect PE/HR for the specialty, the physician time for the service, and the specialty's utilization for the service across all services furnished by the specialty. The proposed addition of physician time to the HCPCS codes discussed above will affect the aggregate pools of indirect PE at the specialty level. However because the services discussed above have low utilization and low total time, the impact of the physician time changes on the IPCI is negligible, and likely would have a modest impact if any on the PE RVUs at the individual code level.

(2) Review of Services With Stand Alone PE Procedure Time

There are a number of services that have no physician work RVUs, yet include physician time in the physician time file. Many of these services are not payable under the PFS or are contractor priced services where the physician time is not used to nationally price the services on the PFS. We are not proposing to remove the physician time from the time file for these services as the time has no effect on the calculation of RVUs for the PFS. However, there are several CPT codes, listed in Table 10, that are payable under the PFS and have no physician work RVUs yet include time in the physician time file. We are proposing to remove the physician time from the time file for these seven CPT codes. These proposed adjustments are reflected in the physician time file associated with this proposed rule, available on the CMS Web site under the downloads for the CY 2013 PFS proposed rule at

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

Table 10—Payable CPT Codes With Physician Time and No Physician Work

CPT code

Short descriptor

PFS procedure status

CY 2012

total

physician

time

(minutes)

22841

Insert spine fixation device

B (Bundled, not separately payable)

51798

Us urine capacity measure

A (Active, payable)

95990

Spin/brain pump refill & main

A (Active, payable)

96904

Whole body photography

R (Restricted coverage)

96913

Photochemotherapy uv-a or b

A (Active, payable)

97545

Work hardening

R (Restricted coverage)

120

97602

Wound(s) care non-selective

B (Bundled, not separately payable)

As mentioned above and as discussed in section II.A.2. of this proposed rule, to create the IPCI used in the PE methodology, we calculate specialty-specific aggregate pools of indirect PE for all PFS services for that specialty by adding the product of the indirect PE/HR for the specialty, the physician time for the service, and the specialty's utilization for the service across all services performed by the specialty. The proposed removal of physician time from the CPT codes discussed above will affect the aggregate pools of indirect PE at the specialty level. However because the services discussed above have low utilization and/or low total time, the impact of the physician time changes on the IPCI is negligible, and likely would have a modest impact if any on the PE RVUs at the individual code level.

4. Expanding the Multiple Procedure Payment Reduction Policy

Medicare has long employed multiple procedure payment reduction (MPPR) policies to adjust payment to more appropriately reflect reduced resources involved with furnishing the service for certain sets of services frequently furnished together. Under these policies, we reduce payment for the second and subsequent services within the same MPPR category furnished in the same session or same day. These payment reductions reflect efficiencies that typically occur in either the practice expense (PE) or professional work or both when services are furnished together. With the exception of a few codes that are always reported along with another code, the Medicare PFS values services independently to recognize relative resources involved when the service is the only one furnished in a session. While our general policy for MPPRs precedes the Affordable Care Act, this payment policy approach addresses the fourth category of potentially misvalued codes identified in section 1848(c)(2)(K) of the Act, as added by section 3134(a) of the Affordable Care Act, which is “multiple codes that are frequently billed in conjunction with furnishing a single service” (see 75 FR 73216).

For CY 2013, we are proposing to continue our work to recognize resource efficiencies when certain services are furnished together. We are proposing to apply an MPPR to the technical component (TC) of certain diagnostic tests. As discussed in the CY 2012 final rule with comment period (76 FR 73079), we are also proceeding with

applying the current MPPR policy for imaging services to services furnished in the same session by physicians in the same group practice.

a. Background

Medicare has a longstanding policy to reduce payment by 50 percent for the second and subsequent surgical procedures furnished to the same patient by a single physician or physicians in the same group practice on the same day, largely based on the presence of efficiencies in the PE and pre- and post-surgical physician work. Effective January 1, 1995, the MPPR policy, with this same percentage reduction, was extended to nuclear medicine diagnostic procedures (CPT codes 78306, 78320, 78802, 78803, 78806, and 78807). In the CY 1995 PFS final rule with comment period (59 FR 63410), we indicated that we would consider applying the policy to other diagnostic tests in the future.

Consistent with recommendations of MedPAC in its March 2005 Report to the Congress on Medicare Payment Policy, for CY 2006 PFS, we extended the MPPR policy to the TC of certain diagnostic imaging procedures furnished on contiguous areas of the body in a single session (70 FR 70261). This MPPR recognizes that for the second and subsequent imaging procedures furnished in the same session, there are some efficiencies in clinical labor, supplies, and equipment time. In particular, certain clinical labor activities and supplies are not duplicated for subsequent imaging services in the same session and, because equipment time and indirect costs are allocated based on clinical labor time, we also reduced those accordingly.

The imaging MPPR policy originally applied to computed tomography (CT) and computed tomographic angiography (CTA), magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound services within 11 families of codes based on imaging modality and body region and only applied to procedures furnished in a single session involving contiguous body areas within a family of codes, not across families. Additionally, the MPPR policy originally applied to TC-only services and to the TC of global services, and not to professional component (PC) services.

There have been several revisions to this policy since it was originally adopted. Under the current imaging MPPR policy, full payment is made for the TC of the highest paid procedure, and payment for the TC is reduced by 50 percent for each additional procedure subject to this MPPR policy. We originally planned to phase in the imaging MPPR policy over a 2-year period, with a 25 percent reduction in CY 2006 and a 50 percent reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) amended the statute to place a cap on the PFS payment amount for most imaging procedures at the amount paid under the hospital outpatient prospective payment system (OPPS). In view of the new OPPS payment cap added by the DRA, we decided in the PFS final rule with comment period for 2006 that it would be prudent to retain the imaging MPPR at 25 percent while we continued to examine the appropriate payment levels (71 FR 69659). The DRA also exempted reduced expenditures attributable to the imaging MPPR policy from the PFS BN provision. Effective July 1, 2010, section 1848(b)(4)(C) of the Act, as added by section 3135(b)(1) of the Affordable Care Act increased the MPPR on the TC of imaging services under the policy established in the CY 2006 PFS final rule with comment period from 25 to 50 percent. Section 1848(c)(2)(B)(v)(IV) of the Act, as added by section 3135(b)(2) of the Affordable Care Act exempted the reduced expenditures attributable to this further change from the PFS BN provision.

In the July 2009 U.S. Government Accountability Office (GAO) report entitled, “Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved when Services are Provided Together,” the GAO recommended that we take further steps to ensure that fees for services paid under the PFS reflect efficiencies that occur when services are furnished by the same physician to the same beneficiary on the same day. The GAO recommended the following: (1) Expanding the existing imaging MPPR policy for certain services to the PC to reflect efficiencies in physician work for certain imaging services; and (2) expanding the MPPR to reflect PE efficiencies that occur when certain nonsurgical, nonimaging services are furnished together. The GAO report also encouraged us to focus on service pairs that have the most impact on Medicare spending.

In its March 2010 report, MedPAC noted its concerns about mispricing of services under the PFS. MedPAC indicated that it would explore whether expanding the unit of payment through packaging or bundling would improve payment accuracy and encourage more efficient use of services. In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR 33554, respectively), we stated that we planned to analyze nonsurgical services commonly furnished together (for example, 60 to 75 percent of the time) to assess whether an expansion of the MPPR policy could be warranted. MedPAC encouraged us to consider duplicative physician work, as well as PE, in any expansion of the MPPR policy.

Section 1848(c)(2)(K) of the Act specifies that the Secretary shall identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service, and review and make appropriate adjustments to their relative values. As a first step in applying this provision, in the CY 2010 final rule with comment period, we implemented a limited expansion of the imaging MPPR policy to additional combinations of imaging services.

Effective January 1, 2011, the imaging MPPR applies regardless of code family; that is, the policy applies to multiple imaging services furnished within the same family of codes or across families. This policy is consistent with the standard PFS MPPR policy for surgical procedures that does not group procedures by body region. The current imaging MPPR policy applies to CT and CTA, MRI and MRA, and ultrasound procedures furnished to the same patient in the same session, regardless of the imaging modality and is not limited to contiguous body areas.

As we noted in the CY 2011 PFS final rule with comment period (75 FR 73228), while section 1848(c)(2)(B)(v)(VI) of the Act specifies that reduced expenditures attributable to the increase in the imaging MPPR from 25 to 50 percent (effective for fee schedules established beginning with 2010 and for services furnished on or after July 1, 2010) are excluded from the PFS BN adjustment, it does not apply to reduced expenditures attributable to our policy change regarding additional code combinations across code families (non-continguous body areas) that are subject to BN under the PFS. The complete list of codes subject to the CY 2011 MPPR policy for diagnostic imaging services is included in Addendum F.

As a further step in applying the provisions of section 1848(c)(2)(K) of the Act, on January 1, 2011, we implemented an MPPR for therapy services. The MPPR applies to separately payable “always therapy” services, that is, services that are only paid by Medicare when furnished under a therapy plan of care. As we explained in the CY 2011 PFS final rule with comment period (75 FR 73232), the therapy MPPR does not apply to contractor-priced codes, bundled codes,

and add-on codes. The complete list of codes subject to the MPPR policy for therapy services is included in Addendum H.

This MPPR for therapy services was first proposed in the CY 2011 proposed rule (75 FR 44075) as a 50 percent payment reduction to the PE component of the second and subsequent therapy services for multiple “always therapy” services furnished to a single patient in a single day. It applies to services furnished by an individual or group practice or “incident to” a physician's service. However, in response to public comments, in the CY 2011 PFS final rule with comment period (75 FR 73232), we adopted a 25 percent payment reduction to the PE component of the second and subsequent therapy services for multiple “always therapy” services furnished to a single patient in a single day.

Subsequent to publication of the CY 2011 PFS final rule with comment period, section 3 of the Physician Payment and Therapy Relief Act of 2010 (PPTRA) (Pub. L. 111-286) revised the payment reduction percentage from 25 percent to 20 percent for therapy services for which payment is made under a fee schedule under section 1848 (which are services furnished in office settings, or non-institutional services). The payment reduction percentage remains at 25 percent for therapy services furnished in institutional settings. Section 4 of the PPTRA exempted the reduced expenditu

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