Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016

Federal RegisterJul 15, 2015

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 411, 414, 425, 495

[CMS-1631-P]

RIN 0938-AS40

Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This major proposed rule addresses changes to the physician fee schedule, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute.

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 8, 2015.

ADDRESSES:

In commenting, please refer to file code CMS-1631-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

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-1631-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-1631-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:

Donta Henson, (410) 786-1947 for any physician payment issues not identified below.

Gail Addis, (410) 786-4522, for issues related to the refinement panel.

Chava Sheffield, (410) 786-2298, for issues related to practice expense methodology, impacts, conversion factors, target, and phase-in provisions.

Jessica Bruton, (410) 786-5991, for issues related to potentially misvalued code lists.

Geri Mondowney, (410) 786-4584, for issues related to geographic practice cost indices and malpractice RVUs.

Ken Marsalek, (410) 786-4502, for issues related to telehealth services.

Ann Marshall, (410) 786-3059, for issues related to advance care planning, and for primary care and care management services.

Michael Soracoe, (410) 786-6312, for issues related to the valuation and coding of the global surgical packages.

Roberta Epps, (410) 786-4503, for issues related to PAMA section 218(a) policy.

Regina Walker-Wren, (410) 786-9160, for issues related to the “incident to” proposals.

Lindsey Baldwin, (410) 786-1694, for issues related to valuation of moderate sedation and colonoscopy services and portable x-ray transportation fees.

Emily Yoder, (410) 786-1804, for issues related to valuation of radiation treatment services.

Amy Gruber, (410) 786-1542, for issues related to ambulance payment policy.

Corinne Axelrod, (410) 786-5620, for issues related to rural health clinics or federally qualified health centers and payment to grandfathered tribal FQHCs.

Simone Dennis, (410) 786-8409, for issues related to rural health clinics HCPCS reporting.

Edmund Kasaitis (410) 786-0477, for issues related to Part B drugs, biologicals, and biosimilars.

Alesia Hovatter, (410) 786-6861, for issues related to Physician Compare.

Christine Estella, (410) 786-0485, for issues related to the physician quality reporting system and the merit-based incentive payment system.

Alexandra Mugge (410) 786-4457, for issues related to EHR Incentive Program.

Sarah Arceo, (410) 786-2356) or Patrice Holtz, (410-786-5663) for issues related to EHR Incentive Program-CPC initiative and meaningful use aligned reporting.

Christiane LaBonte, (410) 786-7237, for issues related to comprehensive primary care initiative.

Rabia Khan, (410) 786-9328 or Terri Postma, (410) 786-4169, for issues related to Medicare Shared Savings Program.

Kimberly Spalding Bush, (410) 786-3232, or Sabrina Ahmed (410) 786-7499, for issues related to value-based Payment Modifier and Physician Feedback Program.

Frederick Grabau, (410) 786-0206, for issues related to changes to opt-out regulations.

Lisa Ohrin Wilson (410) 786-8852, for issues related to physician self-referral updates.

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

A. Executive Summary

B. Background

II. Provisions of the Proposed Rule for PFS

A. Determination of Practice Expense (PE) Relative Value Units (RVUs)

B. Determination of Malpractice Relative Value Units (RVUs)

C. Potentially Misvalued Services Under the Physician Fee Schedule

D. Refinement Panel

E. Improving Payment Accuracy for Primary Care and Care Management Services

F. Target for Relative Value Adjustments for Misvalued Services

G. Phase-In of Significant RVU Reductions

H. Changes for Computed Tomography (CT) Under the Protecting Access to Medicare Act of 2014 (PAMA)

I. Valuation of Specific Codes

J. Medicare Telehealth Services

K. Incident to Proposals: Billing Physician as the Supervising Physician and Ancillary Personnel Requirements

L. Portable X-Ray: Billing of the Transportation Fee

M. Technical Correction: Waiver of Deductible for Anesthesia Services Furnished on the Same Date as a Planned Screening Colorectal Cancer Test

III. Other Provisions of the Proposed Regulations

A. Proposed Provisions Associated With the Ambulance Fee Schedule

B. Chronic Care Management (CCM) Services for Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

C. Healthcare Common Procedure Coding System (HCPCS) Coding for Rural Health Clinics (RHCs)

D. Payment to Grandfathered Tribal FQHCs That Were Provider-Based Clinics on or Before April 7, 2000

E. Part B Drugs—Biosimilars

F. Productivity Adjustment for the Ambulance, Clinical Laboratory, and DMEPOS Fee Schedules

G. Appropriate Use Criteria for Advanced Diagnostic Imaging Services

H. Physician Compare Web site

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

J. Electronic Clinical Quality Measures (eCQM) and Certification Criteria and Electronic Health Record (EHR) Incentive Program—Comprehensive Primary Care (CPC) Initiative and Medicare Meaningful Use Aligned Reporting

K. Potential Expansion of the Comprehensive Primary Care (CPC) Initiative

L. Medicare Shared Savings Program

M. Value-Based Payment Modifier and Physician Feedback Program

N. Physician Self-Referral Updates

O. Private Contracting/Opt-Out

IV. Collection of Information Requirements

V. Response to Comments

VI. Regulatory Impact Analysis

Regulations Text

Acronyms

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

AAA Abdominal aortic aneurysms

ACO Accountable care organization

AMA American Medical Association

ASC Ambulatory surgical center

ATA American Telehealth Association

ATRA American Taxpayer Relief Act (Pub. L. 112-240)

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)

CAD Coronary artery disease

CAH Critical access hospital

CBSA Core-Based Statistical Area

CCM Chronic care management

CEHRT Certified EHR technology

CF Conversion factor

CG-CAHPS Clinician and Group Consumer Assessment of Healthcare Providers and Systems

CLFS Clinical Laboratory Fee Schedule

CNM Certified nurse-midwife

CP Clinical psychologist

CPC Comprehensive Primary Care

CPEP Clinical Practice Expert Panel

CPT [Physicians] Current Procedural Terminology (

CQM Clinical quality measure

CSW Clinical social worker

CT Computed tomography

CY Calendar year

DFAR Defense Federal Acquisition Regulations

DHS Designated health services

DM Diabetes mellitus

DSMT Diabetes self-management training

eCQM Electronic clinical quality measures

EHR Electronic health record

E/M Evaluation and management

EP Eligible professional

eRx Electronic prescribing

ESRD End-stage renal disease

FAR Federal Acquisition Regulations

FFS Fee-for-service

FQHC Federally qualified health center

FR Federal Register

GAF Geographic adjustment factor

GAO Government Accountability Office

GPCI Geographic practice cost index

GPO Group purchasing organization

GPRO Group practice reporting option

GTR Genetic Testing Registry

HCPCS Healthcare Common Procedure Coding System

HHS [Department of] Health and Human Services

HOPD Hospital outpatient department

HPSA Health professional shortage area

IDTF Independent diagnostic testing facility

IPPS Inpatient Prospective Payment System

IQR Inpatient Quality Reporting

ISO Insurance service office

IWPUT Intensity of work per unit of time

LCD Local coverage determination

MA Medicare Advantage

MAC Medicare Administrative Contractor

MAP Measure Applications Partnership

MAPCP Multi-payer Advanced Primary Care Practice

MAV Measure application validity [process]

MCP Monthly capitation payment

MedPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

MFP Multi-Factor Productivity

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

MMA Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Pub. L. 108-173, enacted on December 8, 2003)

MP Malpractice

MPPR Multiple procedure payment reduction

MRA Magnetic resonance angiography

MRI Magnetic resonance imaging

MSA Metropolitan Statistical Areas

MSPB Medicare Spending per Beneficiary

MSSP Medicare Shared Savings Program

MU Meaningful use

NCD National coverage determination

NCQDIS National Coalition of Quality Diagnostic Imaging Services

NP Nurse practitioner

NPI National Provider Identifier

NPP Nonphysician practitioner

NQS National Quality Strategy

OACT CMS's Office of the Actuary

OBRA '89 Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239)

OBRA '90 Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508)

OES Occupational Employment Statistics

OMB Office of Management and Budget

OPPS Outpatient prospective payment system

OT Occupational therapy

PA Physician assistant

PAMA Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)

PC Professional component

PCIP Primary Care Incentive Payment

PE Practice expense

PE/HR Practice expense per hour

PEAC Practice Expense Advisory Committee

PECOS Provider Enrollment, Chain, and Ownership System

PFS Physician Fee Schedule

PLI Professional Liability Insurance

PMA Premarket approval

PQRS Physician Quality Reporting System

PPIS Physician Practice Expense Information Survey

PT Physical therapy

PY Performance year

QCDR Qualified clinical data registry

QRUR Quality and Resources Use Report

RBRVS Resource-based relative value scale

RFA Regulatory Flexibility Act

RHC Rural health clinic

RIA Regulatory impact analysis

RUC American Medical Association/Specialty Society Relative (Value) Update Committee

RUCA Rural Urban Commuting Area

RVU Relative value unit

SBA Small Business Administration

SGR Sustainable growth rate

SIM State Innovation Model

SLP Speech-language pathology

SMS Socioeconomic Monitoring System

SNF Skilled nursing facility

TAP Technical Advisory Panel

TC Technical component

TIN Tax identification number

UAF Update adjustment factor

UPIN Unique Physician Identification Number

USPSTF United States Preventive Services Task Force

VBP Value-based purchasing

VM Value-Based Payment Modifier

Addenda Available Only Through the Internet on the CMS Web Site

The PFS Addenda along with other supporting documents and tables referenced in this proposed rule are available through the Internet on the CMS Web site at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html

. 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 2016 PFS proposed rule, refer to item CMS-1631-P. Readers who experience any problems accessing any of the Addenda or other documents referenced in this rule and posted on the CMS Web site identified above should contact Donta Henson at (410) 786-1947.

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 2015 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 proposes to revise payment polices under the Medicare Physician Fee Schedule (PFS) and make other policy changes related to Medicare Part B payment. These proposed changes would be applicable to services furnished in CY 2016.

2. Summary of the Major Provisions

The Social Security Act (the Act) requires us to establish payments under the PFS based on national uniform relative value units (RVUs) that account for the relative resources used in furnishing a service. The Act requires that RVUs be established for three categories of resources: Work, practice expense (PE); and malpractice (MP) expense; and, that we establish by regulation each year's payment amounts for all physicians' services paid under the PFS, incorporating geographic adjustments to reflect the variations in the costs of furnishing services in different geographic areas. In this major proposed rule, we establish RVUs for CY 2016 for the PFS, 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, as well as changes in the statute. In addition, this proposed rule includes discussions and proposals regarding:

• Potentially Misvalued PFS Codes.

• Telehealth Services.

• Advance Care Planning Services.

• Establishing Values for New, Revised, and Misvalued Codes.

• Target for Relative Value Adjustments for Misvalued Services.

• Phase-in of Significant RVU Reductions.

• “Incident to” policy.

• Portable X-Ray Transportation Fee.

• Updating the Ambulance Fee Schedule regulations.

• Changes in Geographic Area Delineations for Ambulance Payment.

• Chronic Care Management Services for RHCs and FQHCs.

• HCPCS Coding for RHCs.

• Payment to Grandfathered Tribal FQHCs that were Provider-Based Clinics on or before April 7, 2000.

• Payment for Biosimilars under Medicare Part B.

• Physician Compare Web site.

• Physician Quality Reporting System.

• Medicare Shared Savings Program.

• Electronic Health Record (EHR) Incentive Program.

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

3. Summary of Costs and Benefits

The Act requires that annual adjustments to PFS RVUs may 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. These adjustments can affect the distribution of Medicare expenditures across specialties. In addition, several proposed changes would affect the specialty distribution of Medicare expenditures. When considering the combined impact of work, PE, and MP RVU changes, the projected payment impacts are small for most specialties; however, the impact would be larger for a few specialties.

We have determined that this major proposed rule is economically significant. For a detailed discussion of the economic impacts, see section VII. of this proposed rule.

B. Background

Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Act, “Payment for Physicians' Services.” The system relies on national relative values that are established for work, PE, and MP, which are adjusted for geographic cost variations. These values are multiplied by a conversion factor (CF) to convert the RVUs into payment rates. The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239, enacted on December 19, 1989) (OBRA '89), and the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508, enacted on November 5, 1990) (OBRA '90). The final rule published on November 25, 1991 (56 FR 59502) set forth the first fee schedule used for payment for physicians' services.

We note that throughout this major proposed rule, unless otherwise noted, the term “practitioner” is used to describe both physicians and nonphysician practitioners (NPPs) who are permitted to bill Medicare under the PFS for services furnished to Medicare beneficiaries.

1. Development of the Relative Values

a. Work RVUs

The work RVUs established for the initial fee schedule, which was implemented on January 1, 1992, were developed with extensive input from the physician community. A research team at the Harvard School of Public Health developed the original work RVUs for most codes under a cooperative agreement with the Department of Health and Human Services (HHS). In constructing the code-specific vignettes used in determining 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.

As specified in section 1848(c)(1)(A) of the Act, the work component of physicians' services means the portion of the resources used in furnishing the service that reflects physician time and intensity. We establish work RVUs for new, revised and potentially misvalued codes based on our review of information that generally includes, but is not limited to, recommendations received from the American Medical Association/Specialty Society Relative Value Update Committee (RUC), the Health Care Professionals Advisory Committee (HCPAC), the Medicare Payment Advisory Commission (MedPAC), and other public commenters; medical literature and comparative databases; as well as a comparison of the work for other codes within the Medicare PFS, and consultation with other physicians and health care professionals within CMS and the federal government. We also assess the methodology and data used to develop the recommendations submitted to us by the RUC and other public commenters, and the rationale for their recommendations.

b. Practice Expense RVUs

Initially, only the work RVUs were resource-based, and the PE and MP RVUs were based on average allowable charges. 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 required to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs. The PE RVUs continue to represent the portion of these resources involved in furnishing PFS services.

Originally, the resource-based method was to be used beginning in 1998, but section 4505(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33, enacted on August 5, 1997) (BBA) delayed 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 the charge-based PE RVUs to the resource-based PE RVUs.

We established the resource-based PE RVUs for each physicians' service in a final rule, published on November 2, 1998 (63 FR 58814), effective for services furnished in CY 1999. Based on the requirement to transition to a resource-based system for PE over a 4-year period, payment rates were not fully based upon resource-based PE RVUs until CY 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. (These data sources are described in greater detail in the CY 2012 final rule with comment period (76 FR 73033).)

Separate PE RVUs are established for services furnished in facility settings, such as a hospital outpatient department (HOPD) or an ambulatory surgical center (ASC), and in nonfacility settings, such as a physician's office. The nonfacility RVUs reflect all of the direct and indirect PEs involved in furnishing a service described by a particular HCPCS code. The difference, if any, in these PE RVUs generally results in a higher payment in the nonfacility setting because in the facility settings some costs are borne by the facility. Medicare's payment to the facility (such as the outpatient prospective payment system (OPPS) payment to the HOPD) would reflect costs typically incurred by the facility. Thus, payment associated with those facility resources is not made under the PFS.

Section 212 of the Balanced Budget Refinement Act of 1999 (Pub. L. 106-113, enacted on November 29, 1999) (BBRA) 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 for CY 2010. 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). In CY 2010, we began a 4-year transition to the new PE RVUs using the updated PE/HR data, which was completed for CY 2013.

c. Malpractice RVUs

Section 4505(f) of the BBA amended section 1848(c) of the Act to require 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 are based on commercial and physician-owned insurers' malpractice insurance premium data from all the states, the District of Columbia, and Puerto Rico. For more information on MP RVUs, see section II.C. of this proposed rule.

d. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review RVUs no less often than every 5 years. Prior to CY 2013, we conducted periodic reviews of work RVUs and PE RVUs independently. We completed five-year reviews of work RVUs that were effective for calendar years 1997, 2002, 2007, and 2012.

Although refinements to the direct PE inputs initially relied heavily on input from the RUC Practice Expense Advisory Committee (PEAC), the shifts to the bottom-up PE methodology in CY 2007 and to the use of the updated PE/HR data in CY 2010 have resulted in significant refinements to the PE RVUs in recent years.

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 addition to the five-year reviews, beginning for CY 2009, CMS, and the 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.

e. Application of Budget Neutrality to Adjustments of RVUs

As described in section VI.C. of this proposed rule, in accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions to the RVUs caused expenditures for the year to change by more than $20 million, we make adjustments to ensure that expenditures did not increase or decrease by more than $20 million.

2. Calculation of Payments Based on RVUs

To calculate the payment for each service, the components of the fee schedule (work, PE, and MP RVUs) are adjusted by geographic practice cost indices (GPCIs) to reflect the variations in the costs of furnishing the services. The GPCIs reflect the relative costs of work, PE, and MP in an area compared to the national average costs for each component. (See section II.D. of this proposed rule for more information about GPCIs.)

RVUs are converted to dollar amounts through the application of a CF, which is calculated based on a statutory formula by CMS's Office of the Actuary (OACT). The formula for calculating the Medicare fee schedule payment amount for a given service and fee schedule area can be expressed as:

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

3. Separate Fee Schedule Methodology for Anesthesia Services

Section 1848(b)(2)(B) of the Act specifies that the fee schedule amounts for anesthesia services are to be based on a uniform relative value guide, with appropriate adjustment of an anesthesia conversion factor, in a manner to assure that fee schedule amounts for anesthesia services are consistent with those for other services of comparable value. Therefore, there is a separate fee schedule methodology for anesthesia services. Specifically, we establish a separate conversion factor for anesthesia services and we utilize the uniform relative value guide, or base units, as well as time units, to calculate the fee schedule amounts for anesthesia services. Since anesthesia services are not valued using RVUs, a separate methodology for locality adjustments is also necessary. This involves an adjustment to the national anesthesia CF for each payment locality.

4. Most Recent Changes to the Fee Schedule

Section 220(d) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93, enacted on April 1, 2014) added a new subparagraph (O) to section 1848(c)(2) of the Act to establish an annual target for reductions in PFS expenditures resulting from adjustments to relative values of misvalued codes. If the estimated net reduction in expenditures for a year is equal to or greater than the target for that year, the provision specifies that reduced expenditures attributable to such adjustments shall be redistributed in a budget-neutral manner within the PFS. The provision also specifies that the amount by which such reduced expenditures exceed the target for a given year shall be treated as a reduction in expenditures for the subsequent year for purposes of determining whether the target for the subsequent year has been met. The provision also specifies that an amount equal to the difference between the target and the estimated net reduction, called the target recapture amount shall not be taken into account when applying the budget neutrality requirements specified in section 1848(c)(2)(B)(ii)(II) of the Act. The PAMA originally applied the target to CYs 2017 through 2020 and set the target amount to 0.5 percent of the estimated amount of expenditures under the PFS for each of those 4 years.

More recently, section 202 of the Achieving a Better Life Experience Act of 2014 (ABLE) (Division B of Pub. L. 113-295, enacted December 19, 2014) accelerated the application of the target, amending section 1848(c)(2)(O) of the Act to specify that targets would apply for CYs 2016, 2017, and 2018 and set a 1 percent target for CY 2016 and 0.5 percent for CYs 2017 and 2018. The implementation of the target legislation is discussed in section II.F. of this proposed rule.

Section 1848(c)(7) of the Act, as added by section 220(e) of the PAMA, specifies that for services that are not new or revised codes, if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the applicable adjustments in work, PE, and MP RVUs shall be phased-in over a 2-year period. Although section 220(e) of the PAMA required the phase-in of RVU reductions of 20 percent or more to begin for 2017, section 202 of the ABLE Act now requires the phase-in to begin in CY 2016. The implementation of the phase-in legislation is discussed in section II.G. of this proposed rule.

Section 218(a) of the PAMA adds a new section 1834(p) to the statute. Section 1834(p) requires reductions in payment for the technical component (TC) (and the TC of the global fee) of the PFS service and in the hospital OPPS payment (5 percent in 2016, and 15 percent in 2017 and subsequent years) for computed tomography (CT) services (identified as of January 1, 2014 by HCPCS codes 70450-70498, 71250-71275, 72125-72133, 72191-72194, 73200-73206, 73700-73706, 74150-74178, 74261-74263, and 75571-75574, and succeeding codes) furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association (NEMA) Standard XR-29-2013, entitled “Standard Attributes on CT Equipment Related to Dose Optimization and Management.” The implementation of section 218(a) of the PAMA is discussed in section II.H. of this proposed rule.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 16, 2015) makes several changes to the statute, including but not limited to:

(1) Repealing the sustainable growth rate (SGR) update methodology for physicians' services.

(2) Revising the PFS update for 2015 and subsequent years.

(3) Establishing a Merit-based Incentive Payment System (MIPS) under which eligible professionals (initially including physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists) receive annual payment increases or decreases based on their performance in a prior period. These and other MACRA provisions are discussions in various sections of this proposed rule. Please refer to the table of contents for the location of the various MACRA provision discussions.

II. Provisions of the Proposed Rule for PFS

A. Determination of Practice Expense (PE) Relative Value Units (RVUs)

1. Overview

Practice expense (PE) is the portion of the resources used in furnishing a 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. As required by section 1848(c)(2)(C)(ii) of the Act, we use a resource-based system for determining PE RVUs for each physicians' service. We develop PE RVUs by considering the direct and indirect 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. 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 determine the direct PE for a specific service by adding the costs of the direct resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing that 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 generally based on our review of recommendations received from the RUC and those provided in response to public comment periods. For a detailed explanation of the 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). The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) paid under the PFS using a 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 health care professional groups. We believe the PPIS is the most comprehensive source of PE survey information available. We used the PPIS data to update the PE/HR data for the CY 2010 PFS for almost all of the Medicare-recognized specialties that participated in the survey.

When we began using the PPIS data 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 transitioned its use over a 4-year period from the previous PE RVUs to the PE RVUs developed using the new PPIS data. As provided in the CY 2010 PFS final rule with comment period (74 FR 61751), the transition to the PPIS data was complete for CY 2013. Therefore, PE RVUs from CY 2013 forward are developed based entirely on the PPIS data, except as noted in this section.

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.

Supplemental survey data on independent labs from the College of American Pathologists were implemented for payments beginning 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 beginning 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 these specialties were updated to CY 2006 using the MEI to put them on a comparable basis with the PPIS data.

We also 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 the PPIS data with Medicare-recognized specialty data.

Previously, we 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 used 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 work 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).

For CY 2016, we have incorporated the available utilization data for interventional cardiology, which became a recognized Medicare specialty during 2014. We are proposing to use a proxy PE/HR value for interventional cardiology, as there are no PPIS data for this specialty, by crosswalking the PE/HR for from Cardiology, since the specialties furnish similar services in the Medicare claims data. The proposed change is reflected in the “PE/HR” file available on the CMS Web site under the supporting data files for the CY 2016 PFS proposed rule at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/index.html.

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, medical supplies, and medical equipment) typically involved with furnishing each of 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 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 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. In other words, the initial indirect allocator is calculated so that the direct costs equal the average percentage of direct costs of those specialties furnishing the service. For example, if the direct portion of the PE RVUs for a given service is 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 calculated so that it equals 75 percent of the total PE RVUs. Thus, in this example, the initial indirect allocator would equal 6.00, resulting in a total PE RVUs of 8.00 (2.00 is 25 percent of 8.00 and 6.00 is 75 percent of 8.00).

• Next, we 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 4.00 (since the 4.00 work RVUs are greater than the 1.50 clinical labor portion) to the initial indirect allocator of 6.00 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.

• Next, we incorporate the specialty-specific indirect PE/HR data into the calculation. In our example, if, 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, the indirect portion of the PE RVUs of the first service would be equal to that of the second service.

(4) Facility and Nonfacility Costs

For procedures that can be furnished in a physician's office, as well as in a hospital or other 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 in calculating the PE RVUs for services furnished in a facility, we do not include resources that would generally not be provided by physicians when furnishing the service in a facility, the facility PE RVUs are generally lower than the nonfacility PE RVUs. Medicare makes a separate payment to the facility for its costs of furnishing a service.

(5) 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). The PC and TC may be furnished independently or by different providers, or they may be furnished together as a “global” service. When services have separately billable PC and TC components, the payment for the global service equals the sum of the payment for the TC and PC. To achieve this we use a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global service, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global service, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global.)

(6) 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).

(a) 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 calculated from the surveys.

(b) 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 aggregate pool of direct PE costs for the current year. Under our current methodology, we first multiply the current year's conversion factor by the product of the current year's PE RVUs and utilization for each service to arrive at the aggregate pool of total PE costs (Step 2a). We then calculate the average direct percentage of the current pool of PE RVUs (using a weighted average of the survey data for the specialties that furnish each service (Step 2b).) We then multiply the result of 2a by the result of 2b to arrive at the aggregate pool of direct PE costs for the current year. For CY 2016, we are proposing a technical improvement to step 2a of this calculation. In place of the step 2a calculation described above, we propose to set the aggregate pool of PE costs equal to the product of the ratio of the current aggregate PE RVUs to current aggregate work RVUs and the proposed aggregate work RVUs. Historically, in allowing the current PE RVUs to determine the size of the base PE pool in the PE methodology, we have assumed that the relationship of PE RVUs to work RVUs is constant from year to year. Since this is not ordinarily the case, by not considering the proposed aggregate work RVUs in determining the size of the base PE pool, we have introduced some minor instability from year to year in the relative shares of work, PE, and MP RVUs. While this proposed modification would result in greater stability in the relationship among the work and PE RVU components in the aggregate, we do not anticipate it will affect the distribution of PE RVUs across specialties. The PE RVUs in addendum B of this proposed rule with comment period reflect this proposed refinement to the PE methodology.

Step 3:

Calculate the aggregate pool of direct PE costs for use in ratesetting. This is the product of the aggregate direct costs for all services 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 to ensure that the aggregate pool of direct PE costs calculated in Step 3 does not vary from the aggregate pool of direct PE costs for the current year. Apply the scaling factor to the direct costs for each service (as calculated in Step 1).

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.

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 service.

Historically, we have used the specialties that furnish the service in the most recent full year of Medicare claims data (crosswalked to the current year set of codes) to determine which specialties furnish individual procedures. For example, for CY 2015 ratesetting, we used the mix of specialties that furnished the services in the CY 2013 claims data to determine the specialty mix assigned to each code. While we believe that there are clear advantages to using the most recent available data in making these determinations, we have also found that using a single year of data contributes to greater year-to-year instability in PE RVUs for individual codes and often creates extreme, annual fluctuations for low-volume services, as well as delayed fluctuations for some services described by new codes once claims data for those codes becomes available.

We believe that using an average of the three most recent years of available data may increase stability of PE RVUs and mitigate code-level fluctuations for both the full range of PFS codes, and for new and low-volume codes in particular. Therefore, we are proposing to refine this step of the PE methodology to use an average of the 3 most recent years of available Medicare claims data to determine the specialty mix assigned to each code. The PE RVUs in Addendum B of the CMS Web site reflect this proposed refinement to the PE methodology.

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 PE 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 PE allocator is: Indirect percentage (direct PE RVUs/direct percentage) + clinical labor 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 PE percentage (direct PE RVUs/direct percentage) + clinical labor PE RVUs.

(

Note:

For global services, the indirect PE 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 RVU, clinical labor PE RVU, 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 result of step 2a (as calculated with the proposed change) 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 work 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 service, 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 service.)

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.

(d) 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 proposed aggregate work RVUs scaled by the ratio of current aggregate PE and work RVUs, consistent with the proposed changes in Steps 2 and 9. This final BN adjustment is required 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 we note that all specialties are included for purposes of calculating the final BN adjustment. (See “Specialties excluded from ratesetting calculation” later in this section.)

(e) 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.

Medical supply company with registered pharmacist.

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.

Optician.

Physician assistant.

Hospital.

SNF.

Intermediate care nursing facility.

Nursing facility, other.

HHA.

Pharmacy.

Medical supply company with respiratory therapist.

Department store.

Pedorthic personnel.

Medical supply company with pedorthic personnel.

• Crosswalk certain low volume physician specialties: Crosswalk the utilization of certain specialties with relatively low PFS utilization to the associated specialties.

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

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

• Payment modifiers: Payment modifiers are accounted for in the creation of the file 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 work time file is used; where it is not present, the intraoperative percentage from the payment files used by 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 work 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 (MPPRs). 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 BN calculation under section 1848(c)(2)(B)(ii)(II) of the Act. These MPPRs are not included in the development of the RVUs.

For anesthesia services, we do not apply adjustments to volume since we use the average allowed charge when simulating RVUs; therefore, the RVUs as calculated already reflect the payments as adjusted by modifiers, and no volume adjustments are necessary. However, a time adjustment of 33 percent is made only for medical direction of two to four cases since that is the only situation where a single practitioner is involved with multiple beneficiaries concurrently, so that counting each service without regard to the overlap with other services would overstate the amount of time spent by the practitioner furnishing these services.

• Work RVUs: The setup file contains the work RVUs from this proposed rule with comment period.

(7) 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 = variable, see discussion below.

price = price of the particular piece of equipment.

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

maintenance = factor for maintenance; 0.05.

interest rate = variable, see discussion below.

Usage:

We currently use an equipment utilization rate assumption of 50 percent for most equipment, with the exception of expensive diagnostic imaging equipment, for which we use a 90 percent assumption as required by section 1848(b)(4)(C) of the Act. We also direct the reader to section II.5.b of this proposed rule for a discussion of our proposed change in the utilization rate assumption for the linear accelerator used in furnishing radiation treatment services.

Maintenance:

This factor for maintenance was proposed and finalized during rulemaking for CY 1998 PFS (62 FR 33164). Several stakeholders have suggested that this maintenance factor assumption should be variable, similar to other assumptions in the equipment cost per minute calculation. In CY 2015 rulemaking, we solicited comments regarding the availability of reliable data on maintenance costs that vary for particular equipment items. We received several comments about variable maintenance costs, and in reviewing the information offered in those comments, it is clear that the relationship between maintenance costs and the price of equipment is not necessarily uniform across equipment. However, based on our review of comments, we have been unable to identify a systematic way of varying the maintenance cost assumption relative to the price or useful life of equipment. Therefore, in order to accommodate a variable, as opposed to a standard, maintenance rate within the equipment cost per minute calculation, we believe we would have to gather and maintain valid data on the maintenance costs for each equipment item in the direct PE input database, much like we do for price and useful life.

Given our longstanding difficulties in acquiring accurate pricing information for equipment items, we are seeking comment on whether adding another item-specific financial variable for equipment costs will be likely to increase the accuracy of PE RVUs across the PFS. We note that most of the information for maintenance costs we have received is for capital equipment, and for the most part, this information has been limited to single invoices. Like the invoices for the equipment items themselves, we do not believe that very small numbers of voluntarily submitted invoices are likely to reflect typical costs for all of the same reasons we have discussed in previous rulemaking. We note that some commenters submitted high-level summary data from informal surveys but we currently have no means to validate that data. Therefore, we continue to seek a source of publicly available data on actual maintenance costs for medical equipment to improve the accuracy of the equipment costs used in developing PE RVUs.

Interest Rate:

In the CY 2013 final rule with comment period (77 FR 68902), we updated the interest rates used in developing an equipment cost per minute calculation. The interest rate was based on the Small Business Administration (SBA) maximum interest rates for different categories of loan size (equipment cost) and maturity (useful life). The interest rates are listed in Table 3. (See 77 FR 68902 for a thorough discussion of this issue.)

Table 3—SBA Maximum Interest Rates

Price

Useful life

Interest rate

(%)

<$25K

<7 Years

7.50

$25K to $50K

<7 Years

6.50

>$50K

<7 Years

5.50

<$25K

7+ Years

8.00

$25K to $50K

7+ Years

7.00

>$50K

7+ Years

6.00

Table 4—Calculation of PE RVUS Under Methodology for Selected Codes

Step

Source

Formula

99213 Office visit, est nonfacility

33533 CABG, arterial, single facility

71020 chest x-ray nonfacility

71020-TC chest x-ray, nonfacility

71020-26 chest x-ray, nonfacility

93000 ECG, complete, nonfacility

93005 ECG, tracing nonfacility

93010 ECG, report nonfacility

(1) Labor cost (Lab)

Step 1

AMA

13.32

77.52

5.74

5.1

(2) Supply cost (Sup)

Step 1

AMA

2.98

7.34

0.53

1.19

(3) Equipment cost (Eqp)

Step 1

AMA

0.17

0.58

7.08

0.09

(4) Direct cost (Dir)

Step 1

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

16.48

85.45

13.36

6.38

(5) Direct adjustment (Dir. Adj.)

Steps 2-4

See footnote*

0.6003

(6) Adjusted Labor

Steps 2-4

=Labor * Dir Adj

=(1)*(5)

46.53

3.45

3.06

(7) Adjusted Supplies

Steps 2-4

=Eqp * Dir Adj

=(2)*(5)

1.79

4.41

0.32

0.72

(8) Adjusted Equipment

Steps 2-4

=Sup * Dir Adj

=(3)*(5)

0.10

0.35

4.25

0.05

(9) Adjusted Direct

Steps 2-4

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

9.89

51.29

8.02

3.83

(10) Conversion Factor (CF)

Step 5

PFS

35.9335

(11) Adj. labor cost converted

Step 5

=(Lab * Dir Adj)/CF

=(6)/(10)

0.22

1.3

0.1

0.09

(12) Adj. supply cost converted

Step 5

=(Sup * Dir Adj)/CF

=(7)/(10)

0.05

0.12

0.01

0.02

(13) Adj. equipment cost converted

Step 5

=(Eqp * Dir Adj)/CF

=(8)/(10)

0.01

0.12

(14) Adj. direct cost converted

Step 5

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

0.28

1.43

0.22

0.11

(15) Work RVU

Setup File

PFS

0.97

33.75

0.22

0.17

(16) Dir_pct

Steps 6,7

Surveys

0.25

0.17

0.29

(17) Ind_pct

Steps 6,7

Surveys

0.75

0.83

0.71

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

Step 8

See Step 8

(14)/

(16)*(17)

(14)/

(16)*(17)

(14)/

(16)*(17)

(14)/

(16)*(17)

(14)/

(16)*(17)

(14)/

(16)*(17)

(14)/

(16)*(17)

(14)/

(16)*(17)

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

Step 8

See 18

0.83

6.75

0.54

0.26

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

Step 8

See Step 8

(15)

(15+11)

(11)

(15)

(15+11)

(11)

(15)

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

Step 8

See 20

0.97

33.75

0.32

0.1

0.22

0.26

0.09

0.17

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

Step 8

=(19)+(21)

1.8

40.50

0.86

0.64

0.22

0.52

0.35

0.17

(23) Indirect Adjustment (Ind. Adj.)

Steps 9-11

See Footnote**

0.3811

(24) Adjusted Indirect Allocator

Steps 9-11

=Ind Alloc * Ind Adj

0.69

15.43

0.33

0.24

0.08

0.2

0.13

0.06

(25) Ind. Practice Cost Index (IPCI)

Steps 12-16

1.07

0.76

0.98

0.9

(26) Adjusted Indirect

Step 17

= Adj.Ind Alloc * PCI

=(24)*(25)

0.73

11.68

0.32

0.24

0.08

0.18

0.12

0.06

(27) Final PE RVU

Step 18

=(Adj Dir + Adj Ind) * Other Adj

=((14)+(26)) * Other Adj)

1.01

13.15

0.54

0.46

0.08

0.28

0.23

0.06

Notes: PE RVUs above (row 27), may not match Addendum B due to rounding.

The use of any particular conversion factor (CF) in the table to illustrate the PE Calculation has no effect on the resulting RVUs.

*The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [step2]/[step3]; **The indirect adj =[current pe rvus * avg ind pct]/[sum of ind allocators]=[step9]/[step10]

c. Changes to Direct PE Inputs for Specific Services

In this section, we discuss other CY 2016 proposals related to particular PE inputs. The proposed direct PE inputs are included in the proposed CY 2016 direct PE input database, which is available on the CMS Web site under downloads for the CY 2016 PFS proposed rule with comment period at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html

(1) PE Inputs for Digital Imaging Services

Prior to CY 2015 rulemaking, the RUC provided a recommendation regarding the PE inputs for digital imaging services. Specifically, the RUC recommended that we remove supply and equipment items associated with film technology from a list of codes since these items are no longer typical resource inputs. The RUC also recommended that the Picture Archiving and Communication System (PACS) equipment be included for these imaging services since these items are now typically used in furnishing imaging services. However, since we did not receive any invoices for the PACS system, we were unable to determine the appropriate pricing to use for the inputs. For CY 2015, we proposed, and finalized our proposal, to remove the film supply and equipment items, and to create a new equipment item as a proxy for the PACS workstation as a direct expense. We used the current price associated with ED021 (computer, desktop, w-monitor) to price the new item, ED050 (PACS Workstation Proxy), pending receipt of invoices to facilitate pricing specific to the PACS workstation.

Subsequent to establishing payment rates for CY 2015, we received information from several stakeholders regarding pricing for items related to the digital acquisition and storage of images. Some of these stakeholders submitted information that included prices for items clearly categorized as indirect costs within the established PE methodology and equivalent to the storage mechanisms for film. Additionally, some of the invoices we received included other products (like training and maintenance costs) in addition to the equipment items, and there was no distinction on these invoices between the prices for the equipment items themselves and the related services. However, we did receive invoices from one stakeholder that facilitated a proposed price update for the PACS workstation. Therefore, we are proposing to update the price for the PACS workstation to $5,557 from the current price of $2,501 since the latter price was based on the proxy item and the former based on submitted invoices. The PE RVUs in Addendum B on the CMS Web site reflect the updated price.

In addition to the workstation used by the clinical staff acquiring the images and furnishing the technical component of the services, a stakeholder also submitted more detailed information regarding a workstation used by the practitioner interpreting the image in furnishing the professional component of many of these services. As we stated in the CY 2015 final rule with comment period (79 FR 67563), we generally believe that workstations used by these practitioners are more accurately considered indirect costs associated with the professional component of the service. However, we understand that the professional workstations for interpretation of digital images are similar in principle to some of the previous film inputs incorporated into the global and technical components of the codes. Given that many of these services are reported globally in the nonfacility setting, we believe it may be appropriate to include these costs as direct inputs for the associated HCPCS codes. Based on our established methodology, these costs would be incorporated into the PE RVUs of the global and technical component of the HCPCS code. We are seeking comment on whether including the professional workstation as a direct PE input for these codes would be appropriate, given that the resulting PE RVUs would be assigned to the global and technical components of the codes.

Another stakeholder expressed concern about the changes in direct PE inputs for CPT code 76377, (3D radiographic procedure with computerized image post-processing), that were proposed and finalized in CY 2015 rulemaking as part of the film to digital change. Based on a recommendation from the RUC, we removed the input called “computer workstation, 3D reconstruction CT-MR” from the direct PE input database and assigned the associated minutes to the proxy for the PACS workstation. We are seeking comment from stakeholders, including the RUC, about whether or not the PACS workstation used in in imaging codes is the same workstation that is used in the postprocessing described by CPT code 76377, or if more specific workstation should be incorporated in the direct PE input database . . .

(2) Standardization of Clinical Labor Tasks

As we noted in PFS rulemaking for CY 2015, we continue to work on revisions to the direct PE input database to provide the number of clinical labor minutes assigned for each task for every code in the database instead of only including the number of clinical labor minutes for the pre-service, service, and post-service periods for each code. In addition to increasing the transparency of the information used to set PE RVUs, this improvement would allow us to compare clinical labor times for activities associated with services across the PFS, which we believe is important to maintaining the relativity of the direct PE inputs. This information will facilitate the identification of the usual numbers of minutes for clinical labor tasks and the identification of exceptions to the usual values. It will also allow for greater transparency and consistency in the assignment of equipment minutes based on clinical labor times. Finally, we believe that the information can be useful in maintaining standard times for particular clinical labor tasks that can be applied consistently to many codes as they are valued over several years, similar in principle to the use of physician pre-service time packages. We believe such standards will provide greater consistency among codes that share the same clinical labor tasks and could improve relativity of values among codes. For example, as medical practice and technologies change over time, changes in the standards could be updated at once for all codes with the applicable clinical labor tasks, instead of waiting for individual codes to be reviewed.

While this work is not yet complete, we anticipate completing it in the near future. In the following paragraphs, we address a series of issues related to clinical labor tasks, particularly relevant to services currently being reviewed under the misvalued code initiative

(a) Clinical Labor Tasks Associated With Digital Imaging

In PFS rulemaking for CY 2015, we noted that the RUC recommendation regarding inputs for digital imaging services indicated that, as each code is reviewed under the misvalued code initiative, the clinical labor tasks associated with digital technology (instead of film) would need to be addressed. When we reviewed that recommendation, we did not have the capability of assigning standard clinical labor times for the hundreds of individual codes since the direct PE

input database did not previously allow for comprehensive adjustments for clinical labor times based on particular clinical labor tasks. Therefore, consistent with the recommendation, we proposed to remove film-based supply and equipment items but maintain clinical labor minutes that were assigned based on film technology.

As noted in the paragraphs above, we continue to improve the direct PE input database by specifying the minutes for each code associated with each clinical labor task. Once completed, this work would allow adjustments to be made to minutes assigned to particular clinical labor tasks related to digital technology, consistent with the changes that were made to individual supply and equipment items. In the meantime, we believe it would be appropriate to establish standard times for clinical labor tasks associated with all digital imaging for purposes of reviewing individual services at present, and for possible broad-based standardization once the changes to the database facilitate our ability to adjust time for existing services. Therefore, we are seeking comment on the appropriate standard minutes for the clinical labor tasks associated with services that use digital technology, which are listed in Table 5. We note that the application of any standardized times we adopt for clinical labor tasks to codes that are not being reviewed in this proposed rule would be considered for possible inclusion in future notice and comment rulemaking.

Table 5—Clinical Labor Tasks Associated With Digital Technology

Clinical labor task

Typical minutes

Availability of prior images confirmed

Patient clinical information and questionnaire reviewed by technologist, order from physician confirmed and exam protocoled by radiologist

Technologist QC's * images in PACS, checking for all images, reformats, and dose page

Review examination with interpreting MD

Exam documents scanned into PACS. Exam completed in RIS system to generate billing process and to populate images into Radiologist work queue

* This clinical labor task is listed as it appears on the “PE worksheets.” QC refers to quality control, which we understand to mean the verification of the image using the PACS workstation.

(b) Pathology Clinical Labor Tasks

As with the clinical labor tasks associated with digital imaging, many of the specialized clinical labor tasks associated with pathology services do not have consistent times across those codes. In reviewing the recommendations for pathology services, we have not identified information that suggests that the inconsistencies reflect the judgment that the same tasks take significantly more or less time depending on the individual service for which they are performed, especially given the specificity with which they are described.

We have therefore developed proposed standard times that we have used in proposing direct PE inputs. These times are based on our review and assessment of the current times included for these clinical labor tasks in the direct PE input database. We have listed these proposed standard times in Table 6. For services reviewed for CY 2016, in cases where the RUC-recommended times differed from these standards, we have refined the time for those tasks to align with the values in Table 6. We seek comment on whether these standard times accurately reflect the typical time it takes to perform these clinical labor tasks when furnishing pathology services.

Table 6—Standard Times for Clinical Labor Tasks Associated With Pathology Services

Clinical Labor Task

Standard clinical labor time

Accession specimen/prepare for examination

Assemble and deliver slides with paperwork to pathologists

0.5

Assemble other light microscopy slides, open nerve biopsy slides, and clinical history, and present to pathologist to prepare clinical pathologic interpretation

0.5

Assist pathologist with gross specimen examination

Clean room/equipment following procedure (including any equipment maintenance that must be done after the procedure)

Dispose of remaining specimens, spent chemicals/other consumables, and hazardous waste

Enter patient data, computational prep for antibody testing, generate and apply bar codes to slides, and enter data for automated slide stainer

Instrument start-up, quality control functions, calibration, centrifugation, maintaining specimen tracking, logs and labeling

Load specimen into flow cytometer, run specimen, monitor data acquisition and data modeling, and unload flow cytometer

Preparation: labeling of blocks and containers and document location and processor used

0.5

Prepare automated stainer with solutions and load microscopic slides

Prepare specimen containers/preload fixative/label containers/distribute requisition form(s) to physician

0.5

Prepare, pack and transport specimens and records for in-house storage and external storage (where applicable)

Print out histograms, assemble materials with paperwork to pathologists. Review histograms and gating with pathologist.

Receive phone call from referring laboratory/facility with scheduled procedure to arrange special delivery of specimen procurement kit, including muscle biopsy clamp as needed. Review with sender instructions for preservation of specimen integrity and return arrangements. Contact courier and arrange delivery to referring laboratory/facility

Stain air dried slides with modified Wright stain. Review slides for malignancy/high cellularity (cross contamination)

In the process of improving the level of detail in the direct PE input database by including the minutes assigned for each clinical labor task, we noticed that there are several codes with minutes assigned for the clinical labor task called “complete botox log.” We do not believe the completion of such a log is a direct resource cost of furnishing a medically reasonable and necessary physician's service for a Medicare beneficiary. Therefore, we are proposing to eliminate the minutes assigned for the task “complete botox log” from the direct PE input database. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the modified inputs displayed in the CY 2016 direct PE input database.

(3) Clinical Labor Input Inconsistencies

Subsequent to the publication of the CY 2015 PFS final rule with comment period, stakeholders alerted us to several clerical inconsistencies in the clinical labor nonfacility intraservice time for several vertebroplasty codes with interim final values for CY 2015, based on our understanding of RUC recommended values. We are proposing to correct these inconsistencies in the CY 2016 proposed direct PE input database to reflect the RUC recommended values, without refinement, as stated in the CY 2015 PFS final rule with comment period. The CY 2015 interim final direct PE inputs for these codes are displayed on the CMS Web site under downloads for the CY 2015 PFS final rule with comment period at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

For CY 2016, we are proposing the following adjustments. For CPT codes 22510 (percutaneous vertebroplasty (bone biopsy included when performed), 1 vertebral body, unilateral or bilateral injection, inclusive of all imaging guidance; cervicothoracic) and 22511 (percutaneous vertebroplasty (bone biopsy included when performed), 1 vertebral body, unilateral or bilateral injection, inclusive of all imaging guidance; lumbosacral), a value of 45 minutes for labor code L041B (“Radiologic Technologist”) were are proposing to assign for the “assist physician” task and a value of 5 minutes for labor code L037D (“RN/LPN/MTA”) for the “Check dressings & wound/home care instructions/coordinate office visits/prescriptions” task. For CPT code 22514 (percutaneous vertebral augmentation, including cavity creation (fracture reduction and bone biopsy included when performed) using mechanical device (eg, kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, inclusive of all imaging guidance; lumbar), we are proposing to adjust the nonfacility intraservice time to 50 minutes for L041B, 50 minutes for L051A (“RN”), 38 minutes for a second L041B, and 12 minutes for L037D. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the inputs displayed in the CY 2016 direct PE input database.

(4) Freezer

We identified several pathology codes for which equipment minutes are assigned to the item EP110 “Freezer.” Minutes are only allocated to particular equipment items when those items cannot be used in conjunction with furnishing services to another patient at the same time. We do not believe that minutes should be allocated to items such as freezers since the storage of any particular specimen or item in a freezer for any given period of time would be unlikely to make the freezer unavailable for storing other specimens or items. Instead, we propose to classify the freezer as an indirect cost because we believe that would be most consistent with the principles underlying the PE methodology since freezers can be used for many specimens at once. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the modified inputs displayed in the CY 2016 direct PE input database.

(5) Updates to Price for Existing Direct Inputs

In the CY 2011 PFS final rule with comment period (75 FR 73205), we finalized a process to act on public requests to update equipment and supply price and equipment useful life inputs through annual rulemaking beginning with the CY 2012 PFS proposed rule. During 2014, we received a request to update the price of supply item “antigen, mite” (SH006) from $4.10 per test to $59. In reviewing the request, it is evident that the requested price update does not apply to the SH006 item but instead represents a different item than the one currently included as an input in CPT code 86490 (skin test, coccidioidomycosis). Therefore, rather than changing the price for SH006 that is included in several codes, we are proposing to create a new supply code for Spherusol, valued at $590 per 1 ml vial and $59 per test, and to include this new item as a supply for 86490 instead of the current input, SH006. We also received a request to update the price for EQ340 (Patient Worn Telemetry System) used only in CPT code 93229 (External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of daily and emergent data reports as prescribed by a physician or other qualified health care.) The requestor noted that we had previously proposed and finalized a policy to remove wireless communication and delivery costs related to the equipment item that had previously been included in the direct PE input database as supply items. The requestor asked that we alter the price of the equipment from $21,575 to $23,537 to account for the equipment costs specific to the patient-worn telemetry system.

We have considered this request in the context of the unique nature of this particular equipment item. This equipment item is unique in several ways, including that it is used continuously 24 hours per day and 7 days per week for an individual patient over several weeks. It is also unique in that the equipment is primarily used outside of a healthcare setting. Within our current methodology, we currently account for these unique properties by calculating the per minute costs with different assumptions than those used for most other equipment by increasing the number of hours the equipment is available for use. Therefore, we also believe it would be appropriate to incorporate other unique aspects of the operating costs of this item in our calculation of the equipment cost per minute. We believe the requestor's suggestion to do so by increasing the price of the equipment is practicable and appropriate. Therefore, we are proposing to change the price for EQ340 (Patient Worn Telemetry System) to $23,537. The PE RVUs displayed in Addendum B on the CMS Web site were calculated with the modified inputs displayed in the CY 2016 direct PE input database.

For CY 2015, we received a request to update the price for supply item “kit, HER-2/neu DNA Probe” (SL196) from $105 to $144.50. Accordingly, we proposed to update the price to $144.50. In the CY 2015 final rule with comment period, we indicated that we obtained new information suggesting that further study of the price of this item was necessary before proceeding to update

the input price. We obtained pricing information readily available on the Internet that indicated a price of $94 for this item for a particular hospital. Subsequent to the CY 2015 final rule with comment period, stakeholders requested that we use the updated price of $144.50. One stakeholder suggested that the price of $94 likely reflected discounts for volume purchases not received by the typical laboratory. We are seeking comment on how to consider the higher-priced invoice, which is 53 percent higher than the price listed, relative to the price currently in the direct PE database. Specifically, we are seeking information on the price of the disposable supply in the typical case of the service furnished to a Medicare beneficiary, including, based on data, whether the typical Medicare case is furnished by an entity likely to receive a volume discount.

(6) Typical Supply and Equipment Inputs for Pathology Services

In reviewing public comments in response to the CY 2015 PFS final rule with comment period, we re-examined issues around the typical number of pathology tests furnished at once. In the CY 2013 final rule with comment period (77 FR 69074), we noted that the number of blocks assumed for a particular code significantly impacts the assumed clinical labor, supplies, and equipment for that service. We indicated that we had concerns that the assumed number of blocks was inaccurate, and that we sought corroborating, independent evidence that the number of blocks assumed in the current direct PE input recommendations is typical. We note that, given the high volume of many pathology services, these assumptions have a significant impact on the PE RVUs for all other PFS services. We refer readers to section II.I.5.d where we detail our concerns about the lack of information regarding typical batch size and typical block size for many pathology services and solicit stakeholder input on approaches to obtaining accurate information that can facilitate our establishing payment rates that best reflect the relative resources involved in furnishing the typical service, for both pathology services in particular and more broadly for services across the PFS.

d. Developing Nonfacility Rates

We note that not all PFS services are priced in the nonfacility setting, but as medical practice changes, we routinely develop nonfacility prices for particular services when they can be furnished outside of a facility 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.

(1) Request for Information on Nonfacility Cataract Surgery

Cataract surgery generally has been performed in an ambulatory surgery center (ASC) or a hospital outpatient department (HOPD). Therefore, CMS has not assigned nonfacility PE RVUs under the PFS for cataract surgery. According to Medicare claims data, there are a relatively small number of these services furnished in nonfacility settings. Except in unusual circumstances, anesthesia for cataract surgery is either local or topical/intracameral. Advancements in technology have significantly reduced operating time and improved both the safety of the procedure and patient outcomes. We believe that it is now possible for cataract surgery to be furnished in an in-office surgical suite, especially for routine cases. Cataract surgery patients require a sterile surgical suite with certain equipment and supplies that we believe could be a part of a nonfacility-based setting that is properly constructed and maintained for appropriate infection prevention and control.

We believe that there are potential advantages for all parties to furnishing appropriate cataract surgery cases in the nonfacility setting. Cataract surgery has been for many years the highest volume surgical procedure performed on Medicare beneficiaries. For beneficiaries, cataract surgery in the office setting might provide the additional convenience of receiving the preoperative, operative, and post-operative care in one location. It might also reduce delays associated with registration, processing, and discharge protocols associated with some facilities. Similarly, it might provide surgeons with greater flexibility in scheduling patients at an appropriate site of service depending on the individual patient's needs. For example, routine cases in patients with no comorbidities could be performed in the nonfacility surgical suite, while more complicated cases (for example, pseudoexfoliation) could be scheduled in the ASC or HOPD. In addition, furnishing cataract surgery in the nonfacility setting could result in lower Medicare expenditures for cataract surgery if the nonfacility payment rate were lower than the sum of the PFS facility payment rate and the payment to either the ASC or HOPD.

We are seeking comments from ophthalmologists and other stakeholders on office-based surgical suite cataract surgery. In addition, we are soliciting comments from the RUC and other stakeholders on the direct practice expense inputs involved in furnishing cataract surgery in the nonfacility setting in conjunction with our consideration of information regarding the possibility of developing nonfacility PE RVUs for cataract surgery. We understand that cataract surgery generally requires some standard equipment and supplies (for example; phacoemulsification machine, surgical pack, intraocular lenses (IOL), etc.) that would be incorporated as direct PE inputs in calculating nonfacility PE RVUs.

(2) Direct PE Inputs for Functional Endoscopic Sinus Surgery Services

A stakeholder indicated that due to changes in technology and technique, several codes that describe endoscopic sinus surgeries can now be furnished in the nonfacility setting. According to Medicare claims data, there are a relatively small number of these services furnished in nonfacility settings. These CPT codes are 31254 (Nasal/sinus endoscopy, surgical; with ethmoidectomy, partial (anterior)), 31255 (Nasal/sinus endoscopy, surgical; with ethmoidectomy, total (anterior and posterior)), 31256 (Nasal/sinus endoscopy, surgical, with maxillary antrostomy;), 31267 (Nasal/sinus endoscopy, surgical, with maxillary antrostomy; with removal of tissue from maxillary sinus), 31276 (Nasal/sinus endoscopy, surgical with frontal sinus exploration, with or without removal of tissue from frontal sinus), 31287 (Nasal/sinus endoscopy, surgical, with sphenoidotomy;), and 31288 (Nasal/sinus endoscopy, surgical, with sphenoidotomy; with removal of tissue from the sphenoid sinus). We are seeking input from stakeholders, including the RUC, about the appropriate direct PE inputs for these services.

B. Determination of Malpractice Relative Value Units (RVUs)

1. Overview

Section 1848(c) of the Act requires that each service paid under the PFS be comprised of three components: work, PE, and malpractice (MP) expense. As required by section 1848(c)(2)(C)(iii) of the Act, beginning in CY 2000, MP RVUs are resource based. Malpractice RVUs for new codes after 1991 were

extrapolated from similar existing codes or as a percentage of the corresponding work RVU. Section 1848(c)(2)(B)(i) of the Act also requires that we review, and if necessary adjust, RVUs no less often than every 5 years. In the CY 2015 PFS final rule with comment period, we implemented the third review and update of MP RVUs. For a discussion of the third review and update of MP RVUs see the CY 2015 proposed rule (79 FR 40349 through 40355) and final rule with comment period (79 FR 67591 through 67596).

As explained in the CY 2011 PFS final rule with comment period (75 FR 73208), MP RVUs for new and revised codes effective before the next five-year review of MP RVUs (for example, effective CY 2016 through CY 2019, assuming that the next review of MP RVUs occurs for CY 2020) are determined either by a direct crosswalk from a similar source code or by a modified crosswalk to account for differences in work RVUs between the new/revised code and the source code. For the modified crosswalk approach, we adjust (or “scale”) the MP RVU for the new/revised code to reflect the difference in work RVU between the source code and the new/revised work value (or, if greater, the clinical labor portion of the fully implemented PE RVU) for the new code. For example, if the proposed work RVU for a revised code is 10 percent higher than the work RVU for its source code, the MP RVU for the revised code would be increased by 10 percent over the source code MP RVU. Under this approach the same risk factor is applied for the new/revised code and source code, but the work RVU for the new/revised code is used to adjust the MP RVUs for risk.

For CY 2016, we propose to continue our current approach for determining MP RVUs for new/revised codes. For the new and revised codes for which we include proposed work values and PE inputs in the proposed rule, we will also publish the proposed MP crosswalks used to determine their MP RVUs in the proposed rule. The MP crosswalks for those new and revised codes will be subject to public comment and finalized in the CY 2016 PFS final rule. The MP crosswalks for new and revised codes with interim final values established in the CY 2016 final rule will be implemented for CY 2016 and subject to public comment. They will then be finalized in the CY 2017 PFS final rule with comment period.

2. Proposed Annual Update of MP RVUs

In the CY 2012 PFS final rule with comment period (76 FR 73057), we finalized a process to consolidate the five-year reviews of physician work and PE RVUs with our annual review of potentially misvalued codes. We discussed the exclusion of MP RVUs from this process at the time, and we stated that, since it is not feasible to obtain updated specialty level MP insurance premium data on an annual basis, we believe the comprehensive review of MP RVUs should continue to occur at 5-year intervals. In the CY 2015 PFS proposed rule (79 FR 40349 through 40355), we stated that there are two main aspects to the update of MP RVUs: (1) Recalculation of specialty risk factors based upon updated premium data; and (2) recalculation of service level RVUs based upon the mix of practitioners providing the service. In the CY 2015 PFS final rule with comment period (79 FR 67596), in response to several stakeholders' comments, we stated that we would address potential changes regarding the frequency of MP RVU updates in a future proposed rule. For CY 2016, we are proposing to begin conducting annual MP RVU updates to reflect changes in the mix of practitioners providing services, and to adjust MP RVUs for risk. Under this approach, the specialty-specific risk factors would continue to be updated every five years using updated premium data, but would remain unchanged between the 5-year reviews. However, in an effort to ensure that MP RVUs are as current as possible, our proposal would involve recalibrating all MP RVUs on an annual basis to reflect the specialty mix based on updated Medicare claims data. Since under this proposal, we would be recalculating the MP RVUs annually, we are also proposing to maintain the relative pool of MP RVUs from year to year; this will preserve the relative weight of MP RVUs to work and PE RVUs. We are proposing to calculate the current pool of MP RVUs by using a process parallel to the one we use in calculating the pool of PE RVUs. (We direct the reader to section II.2.b.(6) for detailed description of that process, including a proposed technical revision for 2016.) To determine the specialty mix assigned to each code, we are also proposing to use the same process used in the PE methodology, described in section II.2.b.(6) of this proposed rule. We note that for CY 2016, we are proposing to modify the specialty mix assignment methodology to use an average of the 3 most recent years of available data instead of a single year of data as is our current policy. We anticipate that this change will increase the stability of PE and MP RVUs and mitigate code-level fluctuations for all services paid under the PFS, and for new and low-volume codes in particular. We are also proposing to no longer apply the dominant specialty for low volume services, because the primary rationale for the policy has been mitigated by this proposed change in methodology. However, we are not proposing to adjust the code-specific overrides established in prior rulemaking for codes where the claims data are inconsistent with a specialty that could be reasonably expected to furnish the service. We believe that these proposed changes will serve to balance the advantages of using annually updated information with the need for year-to-year stability in values. We seek comment on both aspects of the proposal: updating the specialty mix for MP RVUs annually (while continuing to update specialty-specific risk factors every 5 years using updated premium data); and using the same process to determine the specialty mix assigned to each code as is used in the PE methodology, including the proposed modification to use the most recent 3 years of claims data. We also seek comment on whether this approach will be helpful in addressing some of the concerns regarding the calculation of MP RVUs for services with low volume in the Medicare population, including the possibility of limiting our use of code-specific overrides of the claims data.

We are also proposing an additional refinement in our process for assigning MP RVUs to individual codes. Historically, we have used a floor of 0.01 MP RVUs for all nationally-priced PFS codes. This means that even when the code-level calculation for the MP RVU falls below 0.005, we have rounded to 0.01. In general, we believe this approach accounts for the minimum MP costs associated with each service furnished to a Medicare beneficiary. However, in examining the calculation of MP RVUs, we do not believe that this floor should apply to add-on codes. Since add-on codes must be reported with another code, there is already an MP floor of 0.01 that applies to the base code, and therefore, to each individual service. By applying the floor to add-on codes, the current methodology practically creates a 0.02 floor for any service reported with one add-on code, and 0.03 for those with 2 add-on codes, etc. Therefore, we are proposing to maintain the 0.01 MP RVU floor for all nationally-priced PFS services that are described by base codes, but not for add-on codes. We will continue to calculate, display, and make payments that include MP RVUs for

add-on codes that are calculated to 0.01 or greater, including those that round to 0.01. We are only proposing to allow the MP RVUs for add-on codes to round to 0.00 where the calculated MP RVU is less than 0.005.

We will continue to study the appropriate frequency for collecting and updating premium data and will address any further proposed changes in future rulemaking.

3. MP RVU Update for Anesthesia Services

In the CY 2015 PFS proposed rule (79 FR 40354 through 40355), we did not include an adjustment under the anesthesia fee schedule to reflect updated MP premium information, and stated that we intended to propose an anesthesia adjustment for MP in the CY 2016 PFS proposed rule. We also solicited comments regarding how to best reflect updated MP premium amounts under the anesthesiology fee schedule.

As we previously explained, anesthesia services under the PFS are paid based upon a separate fee schedule, so routine updates must be calculated in a different way than those for services for which payment is calculated based upon work, PE, and MP RVUs. To apply budget neutrality and relativity updates to the anesthesiology fee schedule, we typically develop proxy RVUs for individual anesthesia services that are derived from the total portion of PFS payments made through the anesthesia fee schedule. We then update the proxy RVUs as we would the RVUs for other PFS services and adjust the anesthesia fee schedule conversion factor based on the differences between the original proxy RVUs and those adjusted for relativity and budget neutrality.

We believe that taking the same approach to update the anesthesia fee schedule based on new MP premium data is appropriate. However, because work RVUs are integral to the MP RVU methodology and anesthesia services do not have work RVUs, we decided to seek potential alternatives prior to implementing our approach in conjunction with the proposed CY 2015 MP RVUs based on updated premium data. One commenter supported the delay in proposing to update the MP for anesthesia at the same time as updating the rest of the PFS, and another commenter suggested using mean anesthesia MP premiums per provider over a 4 or 5 year period prorated by Medicare utilization to yield the MP expense for anesthesia services; no commenters offered alternatives to calculating updated MP for anesthesia services. The latter suggestion might apply more broadly to the MP methodology for the PFS and does not address the methodology as much as the data source.

We continue to believe that payment rates for anesthesia should reflect MP resource costs relative to the rest of the PFS, including updates to reflect changes over time. Therefore, for CY 2016, in order to appropriately update the MP resource costs for anesthesia, we are proposing to make adjustments to the anesthesia conversion factor to reflect the updated premium information collected for the five year review. To determine the appropriate adjustment, we calculated imputed work RVUs and MP RVUs for the anesthesiology fee schedule services using the work, PE, and MP shares of the anesthesia fee schedule. Again, this is consistent with our longstanding approach to making annual adjustments to the PE and work RVU portions of the anesthesiology fee schedule. To reflect differences in the complexity and risk among the anesthesia fee schedule services, we multiplied the service-specific risk factor for each anesthesia fee schedule service by the CY 2016 imputed proxy work RVUs and used the product as the updated raw proxy MP RVUs for each anesthesia service for CY 2016. We then applied the same scaling adjustments to these raw proxy MP RVUs that we apply to the remainder of the PFS MP RVUs. Finally, we calculated the aggregate difference between the 2015 proxy MP RVUs and the proxy MP RVUs calculated for CY 2016. We then adjusted the portion of the anesthesia conversion factor attributable to MP proportionately; we refer the reader to section VI.C. of this proposed rule for the Anesthesia Fee Schedule Conversion Factors for CY 2016. We are inviting public comments regarding this proposal.

4. MP RVU Methodology Refinements

In the CY 2015 PFS final rule with comment period (79 FR 67591 through 67596), we finalized updated MP RVUs that were calculated based on updated MP premium data obtained from state insurance rate filings. The methodology used in calculating the finalized CY 2015 review and update of resource-based MP RVUs largely paralleled the process used in the CY 2010 update. We posted our contractor's report, “Final Report on the CY 2015 Update of Malpractice RVUs” on the CMS Web site. It is also located under the supporting documents section of the CY 2015 PFS final rule with comment period located at

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

. A more detailed explanation of the 2015 MP RVU update can be found in the CY 2015 PFS proposed rule (79 FR 40349 through 40355).

In the CY 2015 PFS proposed rule, we outlined the steps for calculating MP RVUs. In the process of calculating MP RVUs for purposes of this proposed rule, we have identified a necessary refinement to way we have calculated Step 1, which involves computing a preliminary national average premium for each specialty, to align the calculations within the methodology to the calculations described within the aforementioned contractor's report. Specifically, in the calculation of the national premium for each specialty (refer to equations 2.3, 2.4, 2.5 in the aforementioned contractor's report), we calculate a weighted sum of premiums across areas and divide it by a weighted sum of MP GPCIs across areas. The calculation currently takes the ratio of sums, rather than the weighted average of the local premiums to the MP GPCI in that area. Instead, we are proposing to update the calculation to use a price-adjusted premium (that is, the premium divided by the GPCI) in each area, and then taking a weighted average of those adjusted premiums. The CY 2016 PFS proposed rule MP RVUs were calculated in this manner.

Additionally, in the calculation of the national average premium for each specialty as discussed above, our current methodology used the total RVUs in each area as the weight in the numerator (that is, for premiums), and total MP RVUs as the weights in the denominator (that is, for the MP GPCIs). After further consideration, we believe that the use of these RVU weights is problematic. Use of weights that are central to the process at hand presents potential circularity since both weights incorporate MP RVUs as part of the computation to calculate MP RVUs. The use of different weights for the numerator and denominator introduces potential inconsistency. Instead, we believe that it would be better to use a different measure that is independent of MP RVUs and better represents the reason for weighting. Specifically, we are proposing to use area population as a share of total U.S. population as the weight. The premium data are for all MP premium costs, not just those associated with Medicare patients, so we believe that the distribution of the population does a better job of capturing the role of each area's premium in the “national” premium for each specialty than our previous Medicare-specific measure. Use of population weights also avoids the potential problems of circularity and inconsistency.

The CY 2016 PFS proposed MP RVUs, as displayed in Addendum B of this proposed rule, reflect MP RVUs calculated following our established methodology, with the inclusion of the proposals and refinements described above.

C. Potentially Misvalued Services Under the Physician Fee Schedule

1. Background

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. Section 1848(c)(2)(K) of the Act 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 1848(c)(2)(L) to the Act also requires the Secretary to develop a process to validate the RVUs of certain potentially misvalued codes under the PFS, using the same criteria used to identify potentially misvalued codes, and to make appropriate adjustments.

As discussed in section I.B. of this proposed rule, each year we develop appropriate adjustments to the RVUs taking into account recommendations provided by the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC), the Medicare Payment Advisory Commission (MedPAC), and others. For many years, the 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 other data, such as claims data, to inform the decision-making process to establish relative values for these codes. We may also consider analyses of work time, work RVUs, or direct practice expense (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 System (PQRS) 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 RUC. We also consider information provided by other stakeholders. We conduct a 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 requiring us to take into account the results of consultations with organizations representing physicians who furnish the services. In accordance with section 1848(c) of the Act, we determine and make appropriate adjustments to the RVUs. We discuss these methodologies as applied to particular codes in section I.B. of this proposed rule.

Section 1848(c)(2)(K)(ii) of the Act augments our efforts by directing the Secretary to specifically examine, as determined appropriate, potentially misvalued services in the following categories:

• Codes that have experienced the fastest growth.

• Codes that have experienced substantial changes in practice expenses.

• Codes that describe new technologies or services within an appropriate time period (such as 3 years) after the relative values are initially established for such codes.

• Codes which are 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 that have not been subject to review since implementation of the fee schedule.

• Codes that account for the majority of spending under the PFS.

• Codes for services that have experienced a substantial change in the hospital length of stay or procedure time.

• Codes for which there may be a change in the typical site of service since the code was last valued.

• Codes for which there is a significant difference in payment for the same service between different sites of service.

• Codes for which there may be anomalies in relative values within a family of codes.

• Codes for services where there may be efficiencies when a service is furnished at the same time as other services.

• Codes with high intra-service work per unit of time.

• Codes with high practice expense relative value units.

• Codes with high cost supplies.

• Codes as determined 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. 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) that may include consolidation of individual services into bundled codes for payment under the PFS.

2. Progress in Identifying and Reviewing Potentially Misvalued Codes

To fulfill our statutory mandate, we have identified and reviewed numerous potentially misvalued codes as 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. As part of our current process, we identify potentially misvalued codes for review, and request recommendations from the RUC and other public commenters on revised work RVUs and direct PE inputs for those codes. The RUC, through its own processes, also identifies potentially misvalued codes for review. Through our public nomination process for potentially misvalued codes established in the CY 2012 PFS final rule with comment period, 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 1,560 potentially misvalued codes to refine work RVUs and direct PE inputs. We have assigned appropriate work RVUs and direct PE inputs for these services as a result of these reviews. 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 the CY 2012 final rule with comment period, we finalized our 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.

In the CY 2013 final rule with comment period, we built upon the work we began in CY 2009 to review potentially misvalued codes that have not been reviewed since the implementation of the PFS (so-called “Harvard-valued codes”). In CY 2009, we requested recommendations from the RUC to aid in our review of Harvard-valued codes that had not yet been reviewed, focusing first on high-volume, low intensity codes (73 FR 38589). In the Fourth Five-Year Review, we requested recommendations from the RUC to aid in our review of Harvard-valued codes with annual utilization of greater than 30,000 (76 FR 32410). In the CY 2013 final rule with comment period, we identified as potentially misvalued Harvard-valued services with annual allowed charges that total at least $10,000,000. In addition to the Harvard-valued codes, in the CY 2013 final rule with comment period we finalized for review a list of potentially misvalued codes that have stand-alone PE (codes with physician work and no listed work time, and codes with no physician work and listed work time).

In the CY 2014 final rule with comment period, we finalized for review a list of potentially misvalued services. We included on the list for review ultrasound guidance codes that had longer procedure times than the typical procedure with which the code is billed to Medicare. We also finalized our proposal to replace missing post-operative hospital E/M visit information and work time for approximately 100 global surgery codes. In CY 2014, we also considered a proposal to limit Medicare PFS payments for services furnished in a non-facility setting when the PFS payment would exceed the combined Medicare payment made to the practitioner under the PFS and facility payment made to either the ASC or hospital outpatient. Based upon extensive public comment we did not finalize this proposal.

In the CY 2015 final rule with comment period, we finalized a list of potentially misvalued services. The potentially misvalued codes list included the publicly nominated CPT code 41530; two neurostimulator implantation codes, CPT 64553 and 64555; four epidural injection codes, CPT 62310, 62311, 62318 and 62319; three breast mammography codes, CPT 77055, 77056 and 77057; an abdominal aortic aneurysm ultrasound screening code, HCPCS G0389; a prostate biopsy code, G0416; and an obesity behavioral group counseling code, HCPCS G0473. We also finalized our “high expenditure services across specialty” screen as a tool to identify potentially misvalued codes though we did not finalize the particular list of codes identified in that rule as potentially misvalued. In CY 2015, we also considered and finalized a proposal addressing the valuation and coding of global surgical packages, which would revalue and transition 10 and 90-day global codes to 0-day codes. We also sought comment on approaches to revalue services that included moderate sedation as an inherent part of furnishing the procedure.

3. Validating RVUs of Potentially Misvalued Codes

Section 1848(c)(2)(L) of the Act requires the Secretary to establish a formal process to validate RVUs under the PFS. The Act specifies that 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 16 categories of potentially misvalued codes specified in 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 is 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).

We contracted with two outside entities to develop validation models for RVUs. Given the central role of time in establishing work RVUs and the concerns that have been raised about the current time values used in rate setting, we contracted with the Urban Institute to collect time data from several practices for services selected by the contractor in consultation with CMS. Urban Institute has used a variety of approaches to develop objective time estimates, depending on the type of service. Objective time estimates will be compared to the current time values used in the fee schedule. The project team will then convene groups of physicians from a range of specialties to review the new time data and the potential implications for work and the ratio of work to time. Urban Institute has prepared an interim report, “Development of a Model for the Valuation of Work Relative Value Units,” which discusses the challenges encountered in collecting objective time data and offers some thoughts on how these can be overcome. This interim report is posted on the CMS Web site at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Downloads/RVUs-Validation-UrbanInterimReport.pdf.

A final report will be available once the project is complete.

The second contract is with the RAND Corporation, which is using available data to build a validation model to predict work RVUs and the individual components of work RVUs, time and intensity. The model design was informed by the statistical methodologies and approach used to develop the initial work RVUs and to identify potentially misvalued procedures under current CMS and RUC processes. RAND consulted with a technical expert panel on model design issues and the test results. The RAND report is available on the CMS Web site under downloads for the CY 2015 PFS Final Rule with Comment Period at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices-Items/CMS-1612-FC.html.

4. CY 2016 Identification of Potentially Misvalued Services for Review

a. Public Nomination of Potentially Misvalued Codes

In the CY 2012 PFS final rule with comment period, we finalized a process for the public to nominate potentially misvalued codes (76 FR 73058). The public and 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, but are not limited to, 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 work 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 work 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) National Database, and the Physician Quality Reporting System (PQRS) databases).

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

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 evaluate the supporting documentation and assess whether the nominated codes appear to be potentially misvalued codes appropriate for review under the annual process. In the following year's PFS proposed rule, we publish the list of nominated codes and indicate whether we are proposing each nominated code as a potentially misvalued code.

During the comment period on the CY 2015 proposed rule and final rule with comment period, we received nominations and supporting documentation for three codes to be considered as potentially misvalued codes. We evaluated the supporting documentation for each nominated code to ascertain whether the submitted information demonstrated that the code should be proposed as potentially misvalued.

CPT Code 36516 (Therapeutic apheresis; with extracorporeal selective adsorption or selective filtration and plasma reinfusion) was nominated for review as potentially misvalued. The nominator stated that CPT code 36516 is misvalued because of incorrect direct and indirect PE inputs and an incorrect work RVU. Specifically, the nominator stated that the direct supply costs failed to include an $18 disposable bag and the $37 cost for biohazard waste disposal of the post-treatment bag, and the labor costs associated with nursing being inaccurate. The nominator also stated that the overhead expenses associated with this service were unrealistic and that the current work RVU undervalues a physician's time and expertise. We are proposing this code as a potentially misvalued code. We note that we established a policy in CY 2011 to consider biohazard bags as an indirect expense, and not as a direct PE input (75 FR 73192).

CPT Codes 52441 (Cystourethroscopy with insertion of permanent adjustable transprostatic implant; single implant) and 52442 (Cystourethroscopy with insertion of permanent adjustable transprostatic implant; each additional permanent adjustable transprostatic implant) were nominated for review as potentially misvalued. The nominator stated that the costs of the direct practice expense inputs were inaccurate, including the cost of the implant. We are proposing these codes as potentially misvalued codes.

b. Electronic Analysis of Implanted Neurostimulator (CPT Codes 95970-95982)

All of the inputs for CPT codes 95971 (Electronic analysis of implanted neurostimulator pulse generator system (eg, rate, pulse amplitude, pulse duration, configuration of wave form, battery status, electrode selectability, output modulation, cycling, impedance and patient compliance measurements); simple spinal cord, or peripheral (ie, peripheral nerve, sacral nerve, neuromuscular) neurostimulator pulse generator/transmitter, with intraoperative or subsequent programming), 95972 (Electronic analysis of implanted neurostimulator pulse generator system (eg, rate, pulse amplitude, pulse duration, configuration of wave form, battery status, electrode selectability, output modulation, cycling, impedance and patient compliance measurements); complex spinal cord, or peripheral (ie, peripheral nerve, sacral nerve, neuromuscular) (except cranial nerve) neurostimulator pulse generator/transmitter, with intraoperative or subsequent programming, up to one hour) and 95973 (Electronic analysis of implanted neurostimulator pulse generator system (eg, rate, pulse amplitude, pulse duration, configuration of wave form, battery status, electrode selectability, output modulation, cycling, impedance and patient compliance measurements); complex spinal cord, or peripheral (ie, peripheral nerve, sacral nerve, neuromuscular) (except cranial nerve) neurostimulator pulse generator/transmitter, with intraoperative or subsequent programming, each additional 30 minutes after first hour (List separately in addition to code for primary procedure)) were reviewed and valued in the CY 2015 final rule with comment period (79 FR 67670). Due to significant time changes in the base codes, we believe the entire family detailed in Table 7 should be considered as potentially misvalued and reviewed in a manner consistent with our review of CPT codes 95971, 95972 and 95973.

Table 7—Proposed Potentially Misvalued Codes Identified in the Electronic Analysis of Implanted Neurostimulator Family

HCPCS

Short descriptor

95970

Analyze neurostim no prog.

95974

Cranial neurostim complex.

95975

Cranial neurostim complex.

95978

Analyze neurostim brain/1h.

95979

Analyz neurostim brain addon.

95980

Io anal gast n-stim init.

95981

Io anal gast n-stim subsq.

95982

Io ga n-stim subsq w/reprog.

c. Review of High Expenditure Services across Specialties with Medicare Allowed Charges of $10,000,000 or More

In the CY 2015 PFS rule, we proposed and finalized the high expenditure screen as a tool to identify potentially misvalued codes in the statutory category of “codes that account for the majority of spending under the PFS.” We also identified codes through this screen and proposed them as potentially misvalued in the CY 2015 PFS proposed rule (79 FR 40337-40338). However, given the resources required for the revaluation of codes with 10- and 90-day global periods, we did not finalize those codes as potentially misvalued codes in the CY 2015 PFS final rule with comment period. We stated that we would re-run the high expenditure screen at a future date, and subsequently propose the specific set of

codes that meet the high expenditure criteria as potentially misvalued codes (79 FR 67578).

We believe that our current resources will not necessitate further delay in proceeding with the high expenditure screen for CY 2016. We have re-run the screen with the same criteria finalized in last year's rule. However, in developing this year's proposed list, we excluded all codes with 10- and 90-day global periods since we believe these codes should be reviewed as part of the global surgery revaluation. We are proposing the 118 codes listed in Table 8 as potentially misvalued codes, identified using the high expenditure screen under the statutory category, “codes that account for the majority of spending under the PFS.”

To develop this list, we followed the same approach taken last year except we excluded 10 and 90- day global periods. Specifically, we identified the top 20 codes by specialty (using the specialties used in Table 45) in terms of allowed charges. As we did last year, we excluded codes that we have reviewed since CY 2010, those with fewer than $10 million in allowed charges, and those that describe anesthesia or E/M services. We excluded E/M services from the list of proposed potentially misvalued codes for the same reasons that we excluded them in a similar review in CY 2012. These reasons were explained in the CY 2012 final rule with comment period (76 FR 73062 through 73065).

Table 8—Proposed Potentially Misvalued Codes Identified Through High Expenditure by Specialty Screen

HCPCS

Short descriptor

10022

Fna w/image

11100

Biopsy skin lesion

11101

Biopsy skin add-on

11730

Removal of nail plate

20550

Inj tendon sheath/ligament

20552

Inj trigger point 1/2 muscl

20553

Inject trigger points 3/>

22614

Spine fusion extra segment

22840

Insert spine fixation device

22842

Insert spine fixation device

22845

Insert spine fixation device

27370

Injection for knee x-ray

29580

Application of paste boot

31500

Insert emergency airway

31575

Diagnostic laryngoscopy

31579

Diagnostic laryngoscopy

31600

Incision of windpipe

33518

Cabg artery-vein two

36215

Place catheter in artery

36556

Insert non-tunnel cv cath

36569

Insert picc cath

36620

Insertion catheter artery

38221

Bone marrow biopsy

51700

Irrigation of bladder

51702

Insert temp bladder cath

51720

Treatment of bladder lesion

51728

Cystometrogram w/vp

51729

Cystometrogram w/vp&up

51784

Anal/urinary muscle study

51797

Intraabdominal pressure test

51798

Us urine capacity measure

52000

Cystoscopy

55700

Biopsy of prostate

58558

Hysteroscopy biopsy

67820

Revise eyelashes

70491

Ct soft tissue neck w/dye

70543

Mri orbt/fac/nck w/o &w/dye

70544

Mr angiography head w/o dye

70549

Mr angiograph neck w/o&w/dye

71010

Chest x-ray 1 view frontal

71020

Chest x-ray 2vw frontal&latl

71260

Ct thorax w/dye

71270

Ct thorax w/o & w/dye

72195

Mri pelvis w/o dye

72197

Mri pelvis w/o & w/dye

73110

X-ray exam of wrist

73130

X-ray exam of hand

73718

Mri lower extremity w/o dye

73720

Mri lwr extremity w/o&w/dye

74000

X-ray exam of abdomen

74022

X-ray exam series abdomen

74181

Mri abdomen w/o dye

74183

Mri abdomen w/o & w/dye

75635

Ct angio abdominal arteries

75710

Artery x-rays arm/leg

75978

Repair venous blockage

76512

Ophth us b w/non-quant a

76519

Echo exam of eye

76536

Us exam of head and neck

77059

Mri both breasts

77263

Radiation therapy planning

77334

Radiation treatment aid(s)

77470

Special radiation treatment

78306

Bone imaging whole body

78452

Ht muscle image spect mult

88185

Flowcytometry/tc add-on

88189

Flowcytometry/read 16 & >

88321

Microslide consultation

88360

Tumor immunohistochem/manual

88361

Tumor immunohistochem/comput

91110

Gi tract capsule endoscopy

92002

Eye exam new patient

92136

Ophthalmic biometry

92240

Icg angiography

92250

Eye exam with photos

92275

Electroretinography

92557

Comprehensive hearing test

92567

Tympanometry

93280

Pm device progr eval dual

93288

Pm device eval in person

93293

Pm phone r-strip device eval

93294

Pm device interrogate remote

93295

Dev interrog remote 1/2/mlt

93296

Pm/icd remote tech serv

93306

Tte w/doppler complete

93350

Stress tte only

93351

Stress tte complete

93503

Insert/place heart catheter

93613

Electrophys map 3d add-on

93965

Extremity study

94010

Breathing capacity test

94620

Pulmonary stress test/simple

95004

Percut allergy skin tests

95165

Antigen therapy services

95957

Eeg digital analysis

96101

Psycho testing by psych/phys

96116

Neurobehavioral status exam

96118

Neuropsych tst by psych/phys

96360

Hydration iv infusion init

96372

Ther/proph/diag inj sc/im

96374

Ther/proph/diag inj iv push

96375

Tx/pro/dx inj new drug addon

96401

Chemo anti-neopl sq/im

96402

Chemo hormon antineopl sq/im

96409

Chemo iv push sngl drug

96411

Chemo iv push addl drug

96567

Photodynamic tx skin

96910

Photochemotherapy with uv-b

97032

Electrical stimulation

97035

Ultrasound therapy

97110

Therapeutic exercises

97112

Neuromuscular reeducation

97113

Aquatic therapy/exercises

97116

Gait training therapy

97140

Manual therapy 1/regions

97530

Therapeutic activities

97535

Self care mngment training

G0283

Elec stim other than wound

5. Valuing Services That Include Moderate Sedation as an Inherent Part of Furnishing the Procedure

The CPT manual includes more than 400 diagnostic and therapeutic procedures, listed in Appendix G, for which CPT has determined that moderate sedation is an inherent part of furnishing the procedure. Therefore, only the procedure code is reported when furnishing the service, and in developing RVUs for these services, we include the resource costs associated with moderate sedation in the valuation of these diagnostic and therapeutic procedures. To the extent that moderate sedation is inherent in the diagnostic or therapeutic service, we believe that the inclusion of moderate sedation in the valuation of the procedure is accurate. In the CY 2015 PFS proposed rule (79 FR 40349), we noted that it appeared that practice patterns for endoscopic procedures were changing, with anesthesia increasingly being separately reported for these procedures. Due to the changing nature of medical practice, we noted that we were considering establishing a uniform approach to valuation for all Appendix G services. We continue to seek an approach that is based on using the best available objective information about the provision of moderate sedation broadly, rather than merely addressing this issue on a code-by-code basis using RUC survey data when individual procedures

are revalued. We sought public comment on approaches to address the appropriate valuation of these services given that moderate sedation is no longer inherent for many of these services. To the extent that Appendix G procedure values are adjusted to no longer include moderate sedation, we requested suggestions as to how moderate sedation should be reported and valued, and how to remove from existing valuations the RVUs and inputs related to moderate sedation.

To establish an approach to valuation for all Appendix G services based on the best data about the provision of moderate sedation, we need to determine the extent of the misvaluation for each code. We know that there are standard packages for the direct PE inputs associated with moderate sedation, and we began to develop approaches to estimate how much of the work is attributable to moderate sedation. However, we believe that we should seek input from the medical community prior to proposing changes in values for these services, given the different methodologies used to develop work RVUs for the hundreds of services in Appendix G. Therefore, we are seeking recommendations from the RUC and other interested stakeholders for appropriate valuation of the work associated with moderate sedation before formally proposing an approach that allows Medicare to adjust payments based on the resource costs associated with the moderate sedation or anesthesia services that are being furnished.

The anesthesia procedure codes 00740 (Anesthesia for procedure on gastrointestinal tract using an endoscope) and 00810 (Anesthesia for procedure on lower intestine using an endoscope) are used for anesthesia furnished in conjunction with lower GI procedures. In reviewing Medicare claims data, we noted that a separate anesthesia service is now reported more than 50 percent of the time that several types of colonoscopy procedures are reported. Given the significant change in the relative frequency with which anesthesia codes are reported with colonoscopy services, we believe the relative values of the anesthesia services should be re-examined. Therefore, we are proposing to identify CPT codes 00740 and 00810 as potentially misvalued. We welcome comments on both of these issues.

6. Improving the Valuation and Coding of the Global Package

a. Proposed Transition of 10-Day and 90-Day Global Packages Into 0-Day Global Packages

In the CY 2015 PFS final rule (79 FR 67582 through 67591) we finalized a policy to transition all 10-day and 90-day global codes to 0-day global codes to improve the accuracy of valuation and payment for the various components of global surgical packages, including pre- and post-operative visits and performance of the surgical procedure. Although we have marginally addressed some of the concerns noted with global packages in previous rulemaking, we believe there is still an unmet need to address some of the fundamental issues with the 10- and 90-day post-operative global packages. We believe it is critical that the RVUs used to develop PFS payment rates reflect the most accurate resource costs associated with PFS services. We believe that valuing global codes that package services together without objective, auditable data on the resource costs associated with the components of the services contained in the packages may significantly skew relativity and create unwarranted payment disparities within PFS fee-for-service payment. We also believe that the resource based valuation of individual physicians' services will continue to serve as a critical foundation for Medicare payment to physicians. Therefore, we believe it is critical that the RVUs under the PFS be based as closely and accurately as possible on the actual resources involved in furnishing the typical occurrence of specific services.

We stated our belief that transforming all 10- and 90-day global codes to 0-day global codes would:

• Increase the accuracy of PFS payment by setting payment rates for individual services based more closely upon the typical resources used in furnishing the procedures;

• Avoid potentially duplicative or unwarranted payments when a beneficiary receives post-operative care from a different practitioner during the global period;

• Eliminate disparities between the payment for E/M services in global periods and those furnished individually;

• Maintain the same-day packaging of pre- and post-operative physicians' services in the 0-day global; and

• Facilitate availability of more accurate data for new payment models and quality research.

b. Impact of the Medicare Access and CHIP Reauthorization Act of 2015

The Medicare Access and CHIP Reauthorization Act (MACRA) was enacted into law on April 16, 2015. Section 523 of the MACRA addresses payment for global surgical packages. Section 523(a) adds a new paragraph at section 1848(c)(8) of the Act. Section 1848(c)(8)(A)(i) of the Act prohibits the Secretary from implementing the policy established in the CY 2015 PFS final rule with comment period that would have transitioned all 10-day and 90-day global surgery packages to 0-day global periods. Section 1848(c)(8)(A)(ii) of the Act provides that nothing in the previous clause shall be construed to prevent the Secretary from revaluing misvalued codes for specific surgical services or assigning values to new or revised codes for surgical services.

Section 1848(c)(8)(B)(i) of the Act requires CMS to develop through rulemaking a process to gather information needed to value surgical services from a representative sample of physicians, and requires that the data collection shall begin no later than January 1, 2017. The collected information must include the number and level of medical visits furnished during the global period and other items and services related to the surgery, as appropriate. This information must be reported on claims at the end of the global period or in another manner specified by the Secretary. Section 1848(c)(8)(B)(ii) of the Act requires that, every 4 years, we must reassess the value of this collected information, and allows us to discontinue the collection if the Secretary determines that we have adequate information from other sources in order to accurately value global surgical services. Section 1848(c)(8)(B)(iii) of the Act specifies that the Inspector General will audit a sample of the collected information to verify its accuracy. Section 1848(c)(8)(C) of the Act requires that, beginning in CY 2019, we must use the information collected as appropriate, along with other available data, to improve the accuracy of valuation of surgical services under the PFS. Section 523(b) of the MACRA adds a new paragraph at section 1848(c)(9) of the Act which authorizes the Secretary, through rulemaking, to delay up to 5 percent of the PFS payment for services for which a physician is required to report information under section 1848(c)(8)(B)(i) of the Act until the required information is reported.

Since section 1848(c)(8)(B)(i) of the Act, as added by section 523(a) of the MACRA, requires us to use rulemaking

to develop and implement the process to gather information needed to value surgical services no later than January 1, 2017, we are seeking input from stakeholders on various aspects of this task. We are soliciting comments from the public regarding the kinds of auditable, objective data (including the number and type of visits and other services furnished by the practitioner reporting the procedure code during the current post-operative periods) needed to increase the accuracy of the values for surgical services. We are also seeking comment on the most efficient means of acquiring these data as accurately and efficiently as possible. For example, we seek information on the extent to which individual practitioners or practices may currently maintain their own data on services, including those furnished during the post-operative period, and how we might collect and objectively evaluate those data for use in increasing the accuracy of the values beginning in CY 2019. We will use the information from the public comments to help develop a proposed approach for the collection of this information in future rulemaking.

Section 1848(c)(8)(C) of the Act mandates that we use the collected data to improve the accuracy of valuation of surgery services beginning in 2019. We described in previous rulemaking (79 FR 67582 through 67591) the limitations and difficulties involved in the appropriate valuation of the global packages, especially when the values of the component services are not clear. We are seeking public comment on potential methods of valuing the individual components of the global surgical package, including the procedure itself, and the pre- and post-operative care, including the follow-up care during post-operative days. We are particularly interested in stakeholder input regarding the overall accuracy of the values and descriptions of the component services within the global packages. For example, we seek information from stakeholders on whether (both qualitatively and quantitatively) postoperative visits differ from other E/M services. We are also interested in stakeholder input on what other items and services related to the surgery, aside from postoperative visits, are furnished to beneficiaries during post-operative care. We believe that stakeholder input regarding these questions will help determine what data should be collected, as well as how to improve the accuracy of the valuations. We welcome the full range of public feedback from stakeholders to assist us in this process.

We intend to provide further opportunities for public feedback prior to developing a proposal for CY 2017 to collect this required data. We also seek comments regarding stakeholder interest in the potential for an open door forum, town hall meetings with the public, or other avenues for direct communication regarding implementation of these provisions of the Act.

D. Refinement Panel

1. Background

As discussed in the CY 1993 PFS final rule with comment period (57 FR 55938), we adopted a refinement panel process to assist us in reviewing the public comments on CPT codes with interim final work RVUs for a year and in developing final work values for the subsequent year. We decided the panel would be composed of a multispecialty group of physicians who would review and discuss the work involved in each procedure under review, and then each panel member would individually rate the work of the procedure. We believed establishing the panel with a multispecialty group would balance the interests of the specialty societies who commented on the work RVUs with the budgetary and redistributive effects that could occur if we accepted extensive increases in work RVUs across a broad range of services.

Following enactment of section 1848(c)(2)(K) of the Act, which required the Secretary periodically to identify and review potentially misvalued codes and make appropriate adjustments to the RVUs, we reassessed the refinement panel process. As detailed in the CY 2011 PFS final rule with comment period (75 FR 73306), we continued using the established refinement panel process with some modifications.

For CY 2015, in light of the changes we made to the process for valuing new, revised and potentially misvalued codes (79 FR 67606), we reassessed the role that the refinement panel process plays in the code valuation process. We noted that the current refinement panel process is tied to the review of interim final values. It provides an opportunity for stakeholders to provide new clinical information that was not available at the time of the RUC valuation that might affect work RVU values that are adopted in the interim final value process. For CY 2015 interim final rates, we stated in the CY 2015 PFS final rule with comment period that we will use the refinement panel process as usual for these codes (79 FR 67609).

2. CY 2016 Refinement Panel Proposal

Beginning in CY 2016, we are proposing to permanently eliminate the refinement panel and instead publish the proposed rates for all interim final codes in the PFS proposed rule for the subsequent year. For example, we will publish the proposed rates for all CY 2016 interim final codes in the CY 2017 PFS proposed rule. With the change in the process for valuing codes adopted in the CY 2015 final rule with comment period (79 FR 67606), proposed values for most codes that are being valued for CY 2016 will be published in the CY 2016 PFS proposed rule. As explained in the CY 2015 final rule with comment period, only a small number of codes being valued for CY 2016 will be published as interim final in the 2016 PFS final rule with comment period and be subject to comment. We will evaluate the comments we receive on these code values, and both respond to these comments and propose values for these codes for CY 2017 in the CY 2017 PFS proposed rule. Therefore, stakeholders will have two opportunities to comment and to provide any new clinical information that was not available at the time of the RUC valuation that might affect work RVU values that are adopted on an interim final basis. We believe that this proposed process, which includes two opportunities for public notice and comment, offers stakeholders a better mechanism and ample opportunity for providing any additional data for our consideration, and discussing any concerns with our interim final values, than the current refinement process. It also provides greater transparency because comments on our rules are made available to the public at

www.regulations.gov

. We welcome comments on this proposed change to eliminate the use of refinement panels in our process for establishing final values for interim final codes.

E. Improving Payment Accuracy for Primary Care and Care Management Services

We are committed to supporting primary care, and we have increasingly recognized care management as one of the critical components of primary care that contributes to better health for individuals and reduced expenditure growth (77 FR 68978). Accordingly, we have prioritized the development and implementation of a series of initiatives designed to improve the accuracy of payment for, and encourage long-term investment in, care management services.

In addition to the Medicare Shared Savings Program, various demonstration initiatives including the Pioneer Accountable Care Organization (ACO), the patient-centered medical home model in the Multi-payer Advanced Primary Care Practice (MAPCP), the Federally Qualified Health Center (FQHC) Advanced Primary Care Practice demonstration, the Comprehensive Primary Care (CPC) initiative, among others (see the CY 2015 PFS final rule (79 FR 67715) for a discussion of these), we also have continued to explore potential refinements to the PFS that would appropriately value care management within Medicare's statutory structure for fee-for-service physician payment and quality reporting. The payment for some non-face-to-face care management services is bundled into the payment for face-to-face evaluation and management (E/M) visits. However, because the current E/M office/outpatient visit CPT codes were designed with an overall orientation toward episodic treatment, we have recognized that these E/M codes may not reflect all the services and resources involved with furnishing certain kinds of care, particularly comprehensive, coordinated care management for certain categories of beneficiaries.

Over several years, we have developed proposals and sought stakeholder input regarding potential PFS refinements to improve the accuracy of payment for care management services. For example, in the CY 2013 PFS final rule with comment period, we adopted a policy to pay separately for transitional care management (TCM) involving the transition of a beneficiary from care furnished by a treating physician during an inpatient stay to care furnished by the beneficiary's primary physician in the community (77 FR 68978 through 68993). In the CY 2014 PFS final rule with comment period, we finalized a policy, beginning in CY 2015 (78 FR 74414), to pay separately for chronic care management (CCM) services furnished to Medicare beneficiaries with two or more chronic conditions. We believe that these new separately billable codes more accurately describe, recognize, and make payment for non-face-to-face care management services furnished by practitioners and clinical staff to particular patient populations.

We view ongoing refinements to payment for care management services as part of a broader strategy to incorporate input and information gathered from research, initiatives, and demonstrations conducted by CMS and other public and private stakeholders, the work of all parties involved in the potentially misvalued code initiative, and, more generally, from the public at large. Based on input and information gathered from these sources, we are considering several potential refinements that would continue our efforts to improve the accuracy of PFS payments. In this section, we discuss these potential refinements.

1. Improved Payment for the Professional Work of Care Management Services

Although both the TCM and CCM services describe certain aspects of professional work, some stakeholders have suggested that neither of these new sets of codes nor the inputs used in their valuations explicitly account for all of the services and resources associated with the more extensive cognitive work that primary care physicians and other practitioners perform in planning and thinking critically about the individual chronic care needs of particular subsets of Medicare beneficiaries. Stakeholders assert that the time and intensity of the cognitive efforts are in addition to the work typically required to supervise and manage the clinical staff associated with the current TCM and CCM codes. Similarly, we continue to receive requests from a few stakeholders for CMS to lead efforts to revise the current CPT E/M codes or construct a new set of E/M codes. The goal of such ef

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