# Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2015-28005 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** November 16, 2015 - **Citation:** 80 FR 70886 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 405, 410, 411, 414, 425, and 495 [CMS-1631-FC] 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: Final rule with comment period. SUMMARY: This major final rule with comment period addresses changes to the physician fee schedule, and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute. DATES: Effective date: The provisions of this final rule with comment period are effective on January 1, 2016, except the definition of “ownership or investment interest” in § 411.362(a), which has an effective date of January 1, 2017. Comment date: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on December 29, 2015. (See the SUPPLEMENTARY INFORMATION section of this final rule with comment period for a list of provisions open for comment.) ADDRESSES: In commenting, please refer to file code CMS-1631-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to www.regulations.gov . Follow the instructions for “submitting a comment.” 2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1631-FC, P.O. Box 8013, Baltimore, MD 21244-8013. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1631-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 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 issues related to pathology and ophthalmology services or any physician payment issues not identified below. Abdihakin Abdi, (410) 786-4735, for issues related to portable X-ray transportation fees. Gail Addis, (410) 786-4522, for issues related to the refinement panel. Lindsey Baldwin, (410) 786-1694, for issues related to valuation of moderate sedation and colonoscopy services. Jessica Bruton, (410) 786-5991, for issues related to potentially misvalued code lists. Roberta Epps, (410) 786-4503, for issues related to PAMA section 218(a) policy. 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. Geri Mondowney, (410) 786-4584, for issues related to geographic practice cost indices, malpractice RVUs, target, and phase-in provisions. Chava Sheffield, (410) 786-2298, for issues related to the practice expense methodology, impacts, and conversion factor. Michael Soracoe, (410) 786-6312, for issues related to the practice expense methodology and the valuation and coding of the global surgical packages. Regina Walker-Wren, (410) 786-9160, for issues related to the “incident to” proposals. Pamela West, (410) 786-2302, for issues related to therapy caps. 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. Deborah Krauss, (410) 786-5264 and Alexandra Mugge, (410) 786-4457, 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, (410786-5663 for issues related to EHR Incentive Program-Comprehensive Primary Care (CPC) initiative and Medicare EHR Incentive Program aligned reporting. Rabia Khan or Terri Postma, (410) 786-8084 or ACO@cms.hhs.gov , 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, or Matthew Edgar (410) 786-0698, for issues related to physician self-referral updates. Christiane LaBonte, (410) 786-7234, for issues related to Comprehensive Primary Care (CPC) initiative. JoAnna Baldwin (410) 786-7205, or Sarah Fulton (410) 786-2749, for issues related to appropriate use criteria for advanced diagnostic imaging services. 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. Provisions open for comment: We will consider comments that are submitted as indicated above in the DATES and ADDRESSES sections on the following subject areas discussed in this final rule with comment period: Interim final work, practice expense (PE), and malpractice (MP) RVUs (including applicable work time, direct PE inputs, and MP crosswalks) for CY 2016; interim final new, revised, potentially misvalued HCPCS codes as indicated in the Preamble text and listed in Addendum C to this final rule with comment period; and the additions and deletions to the physician self-referral list of HCPCS/CPT codes found on tables 50 and 51. Table of Contents I. Executive Summary and Background A. Executive Summary B. Background II. Provisions of the Final Rule With Comment Period for PFS A. Determination of Practice Expense (PE) Relative Value Units (RVUs) B. Determination of Malpractice Relative Value Units (RVUs) 1. Overview 2. Proposed Annual Update of MP RVUs 3. MP RVU Update for Anesthesia Services 4. MP RVU Methodology Refinements 5. CY 2016 Identification of Potentially Misvalued Services for Review 6. Valuing Services That Include Moderate Sedation as an Inherent Part of Furnishing the Procedure 7. Improving the Valuation and Coding of the Global Package C. Elimination of the Refinement Panel D. Improving Payment Accuracy for Primary Care and Care Management Services E. Target for Relative Value Adjustments for Misvalued Services F. Phase-In of Significant RVU Reductions G. Changes for Computed Tomography (CT) Under the Protecting Access to Medicare Act of 2014 (PAMA) H. Valuation of Specific Codes 1. Background 2. Process for Valuing New, Revised, and Potentially Misvalued Codes 3. Methodology for Establishing Work RVUs 4. Methodology for Establishing the Direct PE Inputs Used To Develop PE RVUs 5. Methodology for Establishing Malpractice RVUs 6. CY 2016 Valuation of Specific Codes a. Lower GI Endoscopy Services b. Radiation Treatment and Related Image Guidance Services c. Advance Care Planning Services d. Valuation of Other Codes for CY 2016 7. Direct PE Input-Only Recommendations 8. CY 2015 Interim Final Codes 9. CY 2016 Interim Final Codes I. Medicare Telehealth Services J. Incident to Proposals: Billing Physician as the Supervising Physician and Ancillary Personnel Requirements K. Portable X-Ray: Billing of the Transportation Fee L. Technical Correction: Waiver of Deductible for Anesthesia Services Furnished on the Same Date as a Planned Screening Colorectal Cancer Test M. Therapy Caps III. Other Provisions of the Final Rule With Comment Period A. 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. Discussion and Acknowledgement of Public Comments Received on the 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 P. Physician Self-Referral Prohibition: Annual Update to the List of CPT/HCPCS Codes IV. Collection of Information Requirements V. Response to Comments VI. Waiver of Proposed Rulemaking and Waiver of Delay in Effective Date VII. Regulatory Impact Analysis Acronyms In addition, because of the many organizations and terms to which we refer by acronym in this final rule with comment period, we are listing these acronyms and their corresponding terms in alphabetical order below: AAA Abdominal aortic 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) AWV Annual wellness visit BBA Balanced Budget Act of 1997 (Pub. L. 105-33) BBRA [Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) 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 ( CPT codes, descriptions and other data only are copyright 2014 American Medical Association. All rights reserved .) 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 IPPE Initial preventive physical exam IPPS Inpatient Prospective Payment System IQR Inpatient Quality Reporting ISO Insurance service office IT Information technology 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 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 final rule with comment period 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 Final Rule with Comment Period, refer to item CMS-1631-FC. 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 final rule with comment period, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 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 final rule with comment period revises payment polices under the Medicare Physician Fee Schedule (PFS) and makes other policy changes related to Medicare Part B payment. These changes are 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 final rule with comment period, 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 final rule with comment period includes discussions and proposals regarding: • Potentially Misvalued PFS Codes. • Telehealth Services. • Advance Care Planning. • 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 changes in this final rule with comment period will 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 is larger for a few specialties. We have determined that this major final rule with comment period is economically significant. For a detailed discussion of the economic impacts, see section VII. of this final rule with comment period. 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 final rule with comment period, 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.B.2. of this final rule with comment period. 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 final rule with comment period, in accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions to the RVUs cause 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. We received several comments regarding GPCIs that are not within the scope of proposals in the CY 2016 PFS proposed rule. Many of these commenters requested adjustments to GPCI values for the Puerto Rico payment locality. These commenters contend that the data used to calculate GPCIs do not accurately reflect the cost of medical practice in Puerto Rico. We have addressed some of these issues in response to specific comments in prior rulemaking, such as the CY 2014 PFS final rule with comment period (78 FR 74380 through 74391), and will further take comments into account when we next propose to update GPCIs. However, we also note that we anticipate proposing updated GPCIs during CY 2017 rulemaking, and in the context of that update, we will consider the concerns expressed by commenters and others regarding the GPCIs for the Puerto Rico locality. 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 × GPCI work) + (RVU PE × GPCI PE) + (RVU MP × GPCI MP)] × 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 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 in expenditures, 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 amendments originally made the target provisions applicable for CYs 2017 through 2020 and set the target for reduced expenditures at 0.5 percent of estimated expenditures under the PFS for each of those 4 years. Subsequently, 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 target provisions apply for CYs 2016, 2017, and 2018; and setting a 1 percent target for reduced expenditures for CY 2016 and a 0.5 percent target for CYs 2017 and 2018. The implementation of the target legislation is discussed in section II.E. of this final rule with comment period. Section 1848(c)(7) of the Act, as added by section 220(e) of the PAMA, specified 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. Section 220(e) of the PAMA required the phase-in of RVU reductions of 20 percent or more to begin for 2017. Section 1848(c)(7) of the Act was later amended by section 202 of the ABLE Act to require instead that the phase-in must begin in CY 2016. The implementation of the phase-in legislation is discussed in section II.F. of this final rule with comment period. Section 218(a) of the PAMA added a new section 1834(p) of the Act. Section 1834(p) of the Act requires for certain computed tomography (CT) services 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). The CT services that are subject to the payment reduction are 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, that are 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 the amendments made by section 218(a) of the PAMA is discussed in section II.G. of this final rule with comment period. 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) Requiring that we establish a Merit-based Incentive Payment System (MIPS) under which MIPS eligible professionals (initially including physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse anesthetists) receive annual payment adjustments (increases or decreases) based on their performance in a prior period. These and other MACRA provisions are discussions in various sections of this final rule with comment period. Please refer to the table of contents for the location of the various MACRA provision discussions. II. Provisions of the Final Rule with Comment Period 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). Comment: Several commenters requested that CMS include pharmacists as active qualified health care providers for purposes of calculating physician PE direct costs. The commenters stated that there are a number of ongoing Center for Medicare and Medicaid Innovation (CMMI) initiatives in which pharmacists are making substantial contributions to redesigning healthcare delivery and financing. The commenters insisted that pharmacists need to be included in the calculation of direct PE expenses as an element of the clinical labor variable relating to physician services, to ensure optimal medication therapy outcomes for beneficiaries, and the absence of these pharmacists negatively impacts the health care system. Response: The direct PE input database contains the service-level costs in clinical labor based on the typical service furnished to Medicare beneficiaries. Commenters did not suggest that the labor costs of pharmacists are a typical resource cost in furnishing any particular physicians' service. When such costs are typically incurred in furnishing such services, we do not have any standing policies that would prohibit the inclusion of the costs in the direct PE input database used to develop PE RVUs for individual services, to the extent that inclusion of such costs would not lead to duplicative payments. Therefore, we welcome more detailed information regarding the typical clinical labor costs involving pharmacists for particular PFS services. We note, however, that in many of the CMMI initiatives, payment is provided for care management and care coordination services, including services provided by pharmacists. As such, we encourage commenters to provide information about the inclusion of additional clinical labor costs for specific services described by HCPCS codes for which payment is made under the PFS, as opposed to clinical labor costs that may be typical only under certain initiatives. 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 proposed to use a proxy PE/HR value for interventional cardiology, as there are no PPIS data for this specialty, by crosswalking the PE/HR from Cardiology, since the specialties furnish similar services in the Medicare claims data. The 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. Comment: One commenter expressed support for the new proposal to use a proxy PE per hour for interventional cardiology by crosswalking to the PE/HR for cardiology. Response: We appreciate the commenter's support and are finalizing the crosswalk as proposed. 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 final rule with comment period 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 used 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. That is, 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 added 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 incorporated 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 proposed a technical improvement to step 2a of this calculation. In place of the step 2a calculation described above, we proposed 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. Although this 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 final rule with comment period reflect this refinement to the PE methodology. We did not receive any comments on this proposed refinement of the methodology. Therefore, we are finalizing this refinement as proposed. 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. (c) Create the Indirect Cost PE RVUs Create indirect allocators. Step 6: Based on the survey data, calculate direct and indirect PE percentages for each physician specialty. Step 7: Calculate direct and indirect PE percentages at the service level by taking a weighted average of the results of Step 6 for the specialties that furnish the service. Note that for services with TCs and PCs, the direct and indirect percentages for a given service do not vary by the PC, TC, and global 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. Although 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 proposed 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 refinement to the PE methodology. Comment: We received several comments supporting this proposed refinement of the methodology. Several commenters also urged us to override the utilization data for low-volume codes using a recommended list of expected specialty or dominant specialty, consistent with our previous approach. Response: We appreciate the support for the use of the 3-year average of claims utilization for purposes of determining the specialty mix for individual service. As we stated in our proposal, we believe that the 3-year average will mitigate the need to use dominant or expected specialty instead of the claims data. However, we also understand that the hypothesis will be tested as soon as a new year of claims data is incorporated into the PFS ratesetting methodology. Because we anticipate incorporating CY 2015 claims data for use in CY 2017 ratesetting, we believe that the proposed PE RVUs associated with the CY 2017 PFS proposed rule will provide the best opportunity to determine whether service-level overrides of claims data are necessary. Therefore, we are finalizing the policy as proposed for CY 2016 but will seek comment on the proposed CY 2017 PFS rates and whether or not the incorporation a new year of utilization data mitigates the need for service-level overrides. At that time, we would reconsider whether or not to use a claims-based approach (dominant specialty) or stakeholder-recommended approach (expected specialty) in the development of PE RVUs for low-volume codes. 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 labor 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 49 Ambulatory surgical center. 50 Nurse practitioner. 51 Medical supply company with certified orthotist. 52 Medical supply company with certified prosthetist. 53 Medical supply company with certified prosthetist-orthotist. 54 Medical supply company not included in 51, 52, or 53. 55 Individual certified orthotist. 56 Individual certified prosthetist. 57 Individual certified prosthetist-orthotist. 58 Medical supply company with registered pharmacist. 59 Ambulance service supplier, e.g., private ambulance companies, funeral homes, etc. 60 Public health or welfare agencies. 61 Voluntary health or charitable agencies. 73 Mass immunization roster biller. 74 Radiation therapy centers. 87 All other suppliers (e.g., drug and department stores). 88 Unknown supplier/provider specialty. 89 Certified clinical nurse specialist. 96 Optician. 97 Physician assistant. A0 Hospital. A1 SNF. A2 Intermediate care nursing facility. A3 Nursing facility, other. A4 HHA. A5 Pharmacy. A6 Medical supply company with respiratory therapist. A7 Department store. B2 Pedorthic personnel. B3 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. AS Assistant at Surgery—Physician Assistant 14% (85% * 16%) Intraoperative portion. 50 or LT and RT Bilateral Surgery 150% 150% of work time. 51 Multiple Procedure 50% Intraoperative portion. 52 Reduced Services 50% 50%. 53 Discontinued Procedure 50% 50%. 54 Intraoperative Care only Preoperative + Intraoperative Percentages on the payment files used by Medicare contractors to process Medicare claims Preoperative + Intraoperative portion. 55 Postoperative Care only Postoperative Percentage on the payment files used by Medicare contractors to process Medicare claims Postoperative portion. 62 Co-surgeons 62.5% 50%. 66 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 final rule with comment period. The following is a summary of the comments we received regarding PE RVU methodology. Comment: We received several comments in response to our proposal to use the 3 most recent years of Medicare claims data to determine the specialty mix assigned to each code. All commenters broadly supported the proposal to use a 3-year average to increase stability of PE RVUs and mitigate code-level fluctuations. Some commenters, including the RUC, also stated that for codes which are very low volume in the Medicare population, the dominant specialty(ies) should be assigned. These commenters stressed that CMS should continue to utilize the expertise of the RUC when making these assignments. Response: For services that are newly created or very low volume, we will continue to explore different methods to ensure the utilization of the most accurate specialty mix. (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.H.6.b of this final rule with comment period for a discussion of our 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. After reviewing the comments received, 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, 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 solicited comments 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 noted 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 noted 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. Comment: Many commenters stated that the current 5 percent equipment maintenance factor does not account for expensive maintenance contracts on pieces of highly technical equipment. Most commenters were supportive of the idea of adding an item-specific maintenance variable for equipment costs, which they stated would likely increase the accuracy of the PE RVUs across the PFS. These commenters stated that specialty societies and other stakeholders should be allowed to provide documentation to CMS, as they currently do for pricing new supplies and equipment, to apply for an increase in maintenance costs. Other commenters requested that if a fixed maintenance factor remains in place, it should be increased from 5 percent to 10 percent. One commenter expressed concern that CMS would entertain making a change in this aspect of the equipment cost per minute formula based on a few invoices when a change would impact every service in the fee schedule. The commenter expressed concerns with the possibility that CMS might adopt a variable maintenance factor based on the submission of individual invoices. Another commenter stated that without a systematic data collection methodology for determining maintenance factors, they had concerns that any invoices CMS received might not accurately capture the true costs of equipment maintenance. Although most commenters were supportive of adopting a variable maintenance factor for equipment items, commenters also stated that they were unaware of any publicly available data source containing this information. One commenter agreed that there is no comprehensive data source for the maintenance information and therefore it would be difficult to implement a variable maintenance formula. Multiple other commenters concurred that they were unaware of any such public dataset. Several commenters encouraged CMS to work with stakeholders to define service contracts/maintenance contracts, collect data on their associated costs and update the equipment maintenance adjustment factor as necessary. Response: We appreciate the submission of extensive comments regarding the subject of equipment maintenance factor. We agree with commenters that we do not believe the annual maintenance factor for all equipment is exactly 5 percent, and we concur that the current rate likely understates the true cost of maintaining some equipment. We also believe it likely overstates the maintenance costs for other equipment. However, in the absence of publicly available datasets regarding equipment maintenance costs or another systematic data collection methodology for determining maintenance factor, we do not believe that we have sufficient information at present to adopt a variable maintenance factor for equipment cost per minute pricing. While we believe that these costs ideally should be incorporated into the PE methodology, we also have serious concerns about the problems that result from incorporating anecdotal data based solely on voluntarily submitted pricing information. In establishing prices for equipment and supplies, in many cases we have found that the submitted invoices often overstate the costs for individual items relative to publically available prices. We believe that the incentives related to voluntarily submitted limited invoices for maintenance costs would likely produce information subject to similar limitations. However, in contrast to prices, where we have identified no feasible alternative, our alternative for determining maintenance rates is a long-established default maintenance rate. We also note that the amount of costs for maintenance under the current methodology is directly proportional to the equipment prices, largely determined by the voluntarily submitted invoices for particular equipment items. Therefore, we believe that absent an auditable, robust data source, using anecdotal data for maintenance costs is likely to compound the current problems of pricing equipment costs accurately, not increase accuracy. We will continue to investigate potential avenues for determining equipment maintenance costs across a broad range of equipment items. 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.) We did not propose any changes to these interest rates for CY 2016. Table 3A—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 5.74 0 5.1 5.1 0 (2) Supply cost (Sup) Step 1 AMA 2.98 7.34 0.53 0.53 0 1.19 1.19 0 (3) Equipment cost (Eqp) Step 1 AMA 0.17 0.58 7.08 7.08 0 0.09 0.09 0 (4) Direct cost (Dir) Step 1 =(1)+(2)+(3) 16.48 85.45 13.36 13.36 0 6.38 6.38 0 (5) Direct adjustment (Dir. Adj.) Steps 2-4 See Footnote* 0.5957 0.5957 0.5957 0.5957 0.5957 0.5957 0.5957 0.5957 (6) Adjusted Labor Steps 2-4 =(1)*(5) 7.93 46.18 3.42 3.42 0 3.04 3.04 0 (7) Adjusted Supplies Steps 2-4 =Eqp * Dir Adj =(2)*(5) 1.78 4.37 0.32 0.32 0 0.71 0.71 0 (8) Adjusted Equipment Steps 2-4 =Sup * Dir Adj =(3)*(5) 0.1 0.35 4.22 4.22 0 0.05 0.05 0 (9) Adjusted Direct Steps 2-4 =(6)+(7)+(8) 9.82 50.9 7.96 7.96 0 3.8 3.8 0 (10) Conversion Factor (CF) Step 5 PFS 35.9335 35.9335 35.9335 35.9335 35.9335 35.9335 35.9335 35.9335 (11) Adj. labor cost converted Step 5 =(Lab * Dir Adj)/CF =(6)/(10) 0.22 1.29 0.1 0.1 0 0.08 0.08 0 (12) Adj. supply cost converted Step 5 =(Sup * Dir Adj)/CF =(7)/(10) 0.05 0.12 0.01 0.01 0 0.02 0.02 0 (13) Adj. equipment cost converted Step 5 =(Eqp * Dir Adj)/CF =(8)/(10) 0 0.01 0.12 0.12 0 0 0 0 (14) Adj. direct cost converted Step 5 =(11)+(12)+(13) 0.27 1.42 0.22 0.22 0 0.11 0.11 0 (15) Work RVU Setup File PFS 0.97 33.75 0.22 0 0.22 0.17 0 0.17 (16) Dir_pct Steps 6,7 Surveys 0.25 0.17 0.29 0.29 0.29 0.29 0.29 0.29 (17) Ind_pct Steps 6,7 Surveys 0.75 0.83 0.71 0.71 0.71 0.71 0.71 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 6.7 0.54 0.54 0 0.26 0.26 0 (20) Ind. Alloc. Formula (2nd pt) Step 8 See Step 8 (15) (15) (15+11) (11) (15) (15+11) (11) (15) (21) Ind. Alloc.(2nd part) Step 8 See 20 0.97 33.75 0.32 0.1 0.22 0.25 0.08 0.17 (22) Indirect Allocator (1st + 2nd) Step 8 =(19)+(21) 1.8 40.45 0.85 0.63 0.22 0.52 0.35 0.17 (23) Indirect Adjustment (Ind Adj) Steps 9-11 See Footnote** 0.3816 0.3816 0.3816 0.3816 0.3816 0.3816 0.3816 0.3816 (24) Adjusted Indirect Allocator Steps 9-11 =Ind Alloc * Ind Adj 0.69 15.44 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 0.98 0.98 0.9 0.9 0.9 (26) Adjusted Indirect Step 17 = Adj.Ind Alloc * PCI =(24)*(25) 0.73 11.71 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 13.16 0.54 0.46 0.08 0.28 0.23 0.06 CPT codes and descriptions are copyright 2015 American Medical Association. All Rights Reserved. Applicable FARS/DFARS apply. 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 This section focusses on specific PE inputs that we addressed in the proposed rule. The direct PE inputs are included in the CY 2016 direct PE input database, which is available on the CMS Web site under downloads for the CY 2016 PFS final 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 proposed 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 TC of the services, a stakeholder also submitted more detailed information regarding a workstation used by the practitioner interpreting the image in furnishing the PC 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 PC 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 solicited comments 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. Comment: Many commenters supported the equipment price increase to $5,557 for the PACS workstation. Commenters stated that this is a more accurate amount than the current price of $2,501. However, many commenters, including the RUC, stated that this price did not capture the appropriate pricing for the PC of the PACS workstation. One commenter expressed concerns with the method that CMS employed to establish the proposed price for the PACS workstation, disregarded the invoices and accompanying explanations submitted by several stakeholders and instead relying on the information submitted by a single group. Response: We acknowledge and appreciate that several stakeholders provided information intended to facilitate our pricing of the equipment related to PACS. However, much of that submitted information included costs that are considered indirect PE under the established methodology. We considered all of the submitted information and used the submitted prices that were consistent with the principles established under the PE methodology. Comment: Many commenters, including the RUC, stated that the proposed price did not capture the appropriate pricing for the PC of the PACS workstation. Several commenters indicated that the professional workstation was a direct PE item due to the fact that it is used for individual studies (one at a time) in the non-facility setting, and its use involves a bi-directional exchange between a technologist and a radiologist while the TC is being provided. These commenters also suggested that the professional PACS workstation was a direct proxy for the film alternators, film processors, and view-boxes previously considered direct PE inputs for many of these services prior to the film to digital conversion. Several commenters suggested that the true cost of the PACS workstation was significantly higher than the proposed $5,557 due to these professional expenses. Response: We appreciate the extensive feedback regarding the potential addition of a PC to the PACS workstation. We agree that the costs of the professional workstation may be analogous to costs previously incorporated as direct PE inputs for these services. Therefore, we are seeking comments and recommendations from stakeholders, including the RUC, regarding which codes would require the professional PACS workstation and for how many minutes the professional equipment workstation would be used relative to the work time or clinical labor tasks associated with individual codes. We would address any such recommendations in future rulemaking. Comment: One commenter stated that the CMS' attempt to analogize elements of a PACS workstation to the historic inputs associated with film technology was inherently flawed. This commenter stated that CMS should not characterize critical elements of the PACS workstation as indirect costs because film technology is fundamentally distinct from digital technology. The commenter indicated that the PACS workstation requires specific software to function, and the costs associated with training, maintenance, and warranties for the PACS workstation have not been factored into the cost of the equipment. The commenter suggested that not including these as direct costs reflects a mistaken assumption that a PACS workstation has functionality for non-imaging services, such as patient scheduling, billing, or electronic medical records capability. Response: We believe that maintaining consistent treatment of PE costs is of central importance in the resource-based relative value system. Since the PE RVUs for individual services are relative to all other PFS services, we believe that we must categorize typical costs for individual services into the direct and indirect categories using the same definitions that apply to all PFS services. We believe it would be inconsistent with cost-based relative value principles to change the definition of those categories for particular procedures or tests, even when technology changes. Centralized record keeping systems, containing clinical or billing information are considered indirect expenses across the PFS. Due to technological changes, some of these systems are well-integrated into equipment items with clinical functionality, while others remain completely distinct. In pricing and categorizing these costs, we have aimed to separate these costs where possible and believe we have maintained relativity among PFS services to the greatest extent possible. We remind commenters that indirect PE RVUs are included for every nationally priced PFS service and that these RVUs contribute to payment for each and every service. We also note that over time, indirect costs change as direct costs change. For example, changes in technology might result in particular items using more or less office space, or using more or less electricity. We do not believe it would be appropriate to redefine indirect costs as direct costs whenever we have reason to believe that indirect costs have changed due to changes in technology. Instead, we acknowledge that indirect costs change over time for all those who are paid through the Medicare PFS, making it even more important to follow the established principles of relativity in establishing direct PE inputs. After consideration of comments received, we are finalizing our proposal to update the price for the PACS workstation to $5,557 from the current price of $2,501. As we noted in the proposed rule, one commenter 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. Therefore, we sought comment from stakeholders, including the RUC, about whether or not the PACS workstation used in imaging codes is the same workstation that is used in the post-processing described by CPT code 76377, or if a more specific workstation should be incorporated in the direct PE input database. Comment: Multiple commenters indicated that CPT code 76377 requires image post-processing on an independent workstation. Commenters stated that the “computer workstation, 3D reconstruction CT-MR” equipment (ED014), which was removed by the RUC from the equipment list for this procedure, is separate from the PACS workstation and performs a different function. The commenters requested that ED014 be restored to the equipment inputs for CPT code 76377 and assigned 38 minutes of equipment time. The commenters also suggested that the PACS workstation should remain as a separate direct PE expense as well, since there are additional PACS related activities specific to the 3-D images after they have been created on the computer workstation. Response: We appreciate the additional information regarding the use of the 3D reconstruction computer workstation for CPT code 76377. After consideration of comments received, we agree that the “computer workstation, 3D reconstruction CT-MR” equipment (ED014) should be restored to the equipment list and assigned to CPT code 76377 with an equipment time of 38 minutes. However, we do not believe that the typical service for CPT code 76377 would also use the PACS workstation. Therefore, we substituted ED014 in place of the PACS workstation. (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. Although 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 solicited comments 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 final 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 2 Patient clinical information and questionnaire reviewed by technologist, order from physician confirmed and exam protocoled by radiologist. 2 Technologist QC's* images in PACS, checking for all images, reformats, and dose page. 2 Review examination with interpreting MD 2 Exam documents scanned into PACS. Exam completed in RIS system to generate billing process and to populate images into Radiologist work queue. 1 * 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. The following is a summary of the comments we received regarding whether these standard times accurately reflect the typical time it takes to perform these clinical labor tasks associated with digital imaging. Comment: Many commenters supported CMS' efforts to recognize the advances in digital technology and take them into account through updated RVUs. Several commenters agreed that the clinical labor tasks outlined in Table 5 reflected the PE Subcommittee's film to digital workgroup recommendations. The commenters suggested that the staff types in the tasks should be made more generalized and less specific (such as technologist to clinical staff or radiologist to physician), and stated that specialty societies should be afforded the opportunity to request deviations (that is, increases) from the standard times. Response: We believe that providing specific guidelines for the staff types associated with these tasks will aid in determining the most accurate value for each service. We also agree that specialties should be afforded the opportunity to request deviations from the standard times for unusual situations, when supported with the presentation of additional justification for the added time. Comment: The RUC commented that it had not supported standard times for clinical staff activities related to digital imaging in the past, as the RUC had recommended that the specialties should have an opportunity to determine the appropriate inputs at the individual distinct service level and there was too much variability across imaging modalities to propose standards. While the RUC continued to hold to its previous position on this subject, it also agreed that four of the five clinical labor activities proposed by CMS in Table 5 are representative across imaging and could appropriately be used as standard times. The one exception was the clinical labor task “Technologist QC's images in PACS, checking for all images, reformats, and dose page”, in which the RUC stated the number of minutes would vary significantly depending on the procedure in question. For example, a cardiac MR with hundreds of images would require more quality control time than a single view X-ray of the chest. The RUC recommended that this line item remain nonstandard, and that specialties should continue to have the opportunity to make a recommendation on the appropriate number of minutes based on clinical judgment. Another commenter also supported standard clinical labor times for four out of the five tasks associated with digital technology, again excepting the activity “Technologist QC's images in PACS, checking for all images, reformats, and dose page.” This commenter stated that a survey of imaging providers had been conducted which suggested that the median time required to perform this clinical labor task was 10 minutes. The commenter stated that CMS did not have any data to support its belief in the standard time of 2 minutes, and recommended considering the commenter's data and information from other stakeholders regarding the appropriate standard minutes for the clinical labor tasks associated digital imaging. Response: With regard to the activity “Technologist QC's images in PACS, checking for all images, reformats, and dose page”, we agree that this task may require a variable length of time depending on the number of images to be reviewed. We believe that it may be appropriate to establish several different standard times for this clinical labor task for a low/medium/high quantity of images to be reviewed, in the same fashion that the clinical labor assigned to clean a surgical instrument package has two different standard times depending on the use of a basic pack (10 minutes) or a medium pack (30 minutes). We are interested in soliciting public comment and feedback on this subject, with the anticipation of including a proposal in next year's proposed rule. After consideration of comments received, we are finalizing standard times for clinical labor tasks associated with digital imaging at 2 minutes for “Availability of prior images confirmed”, 2 minutes for “Patient clinical information and questionnaire reviewed by technologist, order from physician confirmed and exam protocoled by radiologist”, 2 minutes for “Review examination with interpreting MD”, and 1 minute for “Exam documents scanned into PACS. Exam completed in RIS system to generate billing process and to populate images into Radiologist work queue.” We are not finalizing a standard time for clinical labor task “Technologist QC's images in PACS, checking for all images, reformats, and dose page” at this time, pending consideration of any additional public comment and future rulemaking, as described above. (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 supports 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. Therefore, we developed standard times that we have used in finalizing 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 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 solicited comments 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 (minutes) Accession specimen/prepare for examination 4 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 3 Clean room/equipment following procedure (including any equipment maintenance that must be done after the procedure) 1 Dispose of remaining specimens, spent chemicals/other consumables, and hazardous waste 1 Enter patient data, computational prep for antibody testing, generate and apply bar codes to slides, and enter data for automated slide stainer 1 Instrument start-up, quality control functions, calibration, centrifugation, maintaining specimen tracking, logs and labeling 13 Load specimen into flow cytometer, run specimen, monitor data acquisition and data modeling, and unload flow cytometer 7 Preparation: Labeling of blocks and containers and document location and processor used 0.5 Prepare automated stainer with solutions and load microscopic slides 4 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) 1 Print out histograms, assemble materials with paperwork to pathologists. Review histograms and gating with pathologist 2 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 5 Register the patient in the information system, including all demographic and billing information 4 Stain air dried slides with modified Wright stain. Review slides for malignancy/high cellularity (cross contamination) 3 Comment: Many commenters stated that they did not support the standardization of clinical labor activities across pathology services. Commenters stated that a single standard time for each clinical labor task was infeasible due to the differences in batch size or number of blocks across different pathology procedures. Several commenters indicated that it may be possible to standardize across codes with the same batch sizes, and urged CMS to consider pathology-specific details, such as batch size and block number, in the creation of any future standard times for clinical labor tasks. One commenter stated that the CMS clinical labor times were uniformly too low, and that CMS did not provide enough information about how it arrived at these revised standard times. The commenter provided five examples of inadequate labor times, and stated that CMS should provide stakeholders with information about the source of its data and why it rejected the RUC recommendations for these clinical labor tasks. Response: We appreciate the extensive feedback provided by commenters on the standard times for clinical labor tasks associated with pathology services. As we stated in the CY 2016 PFS proposed rule, we developed the proposed standard times based on our review and assessment of the current times included for these clinical labor tasks in the direct PE input database. We believe that clinical labor tasks with the same work description are comparable across different pathology procedures. We concur with commenters that accurate clinical labor times for pathology codes may be dependent on the number of blocks or batch size typically used for each individual service. However, we believe that it is possible to establish “per block” standards or standards varied by batch size assumptions for many clinical labor activities that will be comparable across a wide range of individual services. We have received detailed information regarding batch size and number of blocks during review of individual pathology services on an intermittent basis in the past. We request regular submission of these details on the PE worksheets as part of the review process for pathology procedures, as a means to assist in the determination of the most accurate direct PE inputs. Were we to receive this information as part of standard recommendations, we would include these assumptions as part of the information open for comment in proposed revaluations. We are also seeking comment regarding how to best establish clinical labor standards for pathology services on a “per block” or “per batch size” basis. We also believe that many of the clinical labor activities that we discussed in Table 6 are tasks that do not depend on number of blocks or batch size. Clinical labor activities such as “Clean room/equipment following procedure” and “Dispose of remaining specimens” would typically remain standard across different services without varying by block number or batch size, with the understanding of occasional allowance for additional time for clinical labor tasks of unusual difficulty. After consideration of comments received, we are finalizing standard times for clinical labor tasks associated with pathology services at 4 minutes for “Accession specimen/prepare for examination”, 0.5 minutes for “Assemble and deliver slides with paperwork to pathologists”, 0.5 minutes for “Assemble other light microscopy slides, open nerve biopsy slides, and clinical history, and present to pathologist to prepare clinical pathologic interpretation”, 1 minute for “Clean room/equipment following procedure”, 1 minute for “Dispose of remaining specimens, spent chemicals/other consumables, and hazardous waste”, and 1 minute for “Prepare, pack and transport specimens and records for in-house storage and external storage (where applicable).” We do not believe these activities would be dependent on number of blocks or batch size, and we believe that these values accurately reflect the typical time it takes to perform these clinical labor tasks. For the rest of the clinical labor tasks associated with pathology services, we are interested in soliciting further public comment and feedback on this subject as part of this final rule with comment period, with the anticipation of including a proposal in next year's proposed rule. (c) Clinical Labor Task: “Complete Botox Log” 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 proposed 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. The following is a summary of the comments we received regarding the clinical labor task “complete botox log.” Comment: Several commenters, including the RUC, did not agree with the proposal to eliminate the minutes associated with this clinical labor task. Commenters maintained that the clinical labor task of completing the botox log was a medically reasonable direct resource cost. One commenter stated that it was critical for clinical staff to maintain accurate bookkeeping of split botox vials, and that documentation must reflect the exact dosage of the drug given to patients and a statement that the unused portion of the drug was discarded. Response: We continue to believe that the clinical labor assigned for the task “complete botox log” is a form of indirect PE that is not allocated to individual services. We believe that this is a quality control issue for clinical staff. Maintaining accurate administrative records, even for public safety, is not a task we generally allocate to individual services, instead we consider these costs as attributable across a range of services, and therefore, as an indirect PE. After consideration of comments received, we are finalizing the proposal to eliminate the minutes assigned for the task “complete botox log” from the 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 proposed 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 proposed 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”) we proposed 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 ( e.g., kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, inclusive of all imaging guidance; lumbar), we proposed 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. The following is a summary of the comments we received regarding clinical labor input inconsistencies. Comment: Two commenters indicated that although they appreciated CMS' efforts to clean up errors in the direct PE database, they had specific concerns regarding the proposed changes. The commenters stated that for CPT code 22510, it appeared that the direct PE clinical time file had the second technologist listed at 90 minutes for the “Assist physician” task, not 45 minutes as recommended. The commenters indicated that CMS stated an intention to include 5 minutes for “Check dressings & wound” but this time did not appear to be included in the direct PE input labor file. The commenters also noted that the postoperative E/M visit for CPT code 22510 was also not listed in the CMS file. The commenters stated that for CPT code 22511, the CMS direct PE labor file correctly included the 45 minutes of “Assist physician” time for the second technologist, however, the 5 minutes for the RN/LPN/MTA blend (L037D) to “Check dressings & wound” was still not included in the CMS file. The commenter indicated that the postoperative E/M visit was also not included for this code. The commenters also stated that for CPT code 22514, CMS was proposing to include the 5 minutes for “Check dressings & wound” in the intraservice time for this service. The commenters indicated that this did not appear to be consistent with how CMS was proposing to handle the same clinical labor task in the prior two codes discussed. The commenters requested that CMS outline specifically which line items (from the PE spreadsheet) it proposed to change and the effects these changes would have on the direct inputs for these three codes. Response: We appreciate the detailed feedback from the commenters on the clinical labor inconsistencies in these three codes. We agree with the commenters that there were remaining clinical labor errors in these procedures beyond those detailed in the CY 2016 PFS proposed rule, and appreciate the opportunity to clarify the discrepancies in clinical labor for these three procedures. For CPT code 22510, we agree with the commenters that the clinical labor assigned to the RadTech (L041B) for “Assist Physician” was incorrectly listed twice in our direct PE input database. The clinical labor staff type was also incorrectly entered as L041C, which is priced at the same rate but refers to a second Radiologic Technologist for Vertebroplasty. We will remove the duplicative clinical labor and assign type L041B to the “Assist Physician” activity. We do not agree with the commenters that the time for clinical labor task “Check dressings & wound” was missing, as it is present in the database. We agree with the commenters that the clinical labor time for the office visit was missing from CPT code 22510, and we will add it to the direct PE database. For CPT code 22511, the commenters are correct that the time for clinical labor task “Assist physician” was entered at the correct value of 45 minutes, and the 5 minutes of clinical labor for “Check dressings & wound” does not appear in the non-facility setting. This clinical labor time appears to have been incorrectly entered for the facility setting instead; we will remove this time and add it to its proper non-facility setting. We agree with the commenters that the clinical labor time for the office visit was again missing from CPT code 22511, and we will add it to the direct PE input database. For CPT code 22514, the time for clinical labor task “Assist physician” has been refined to 50 minutes as detailed in the CY 2016 PFS proposed rule. We agree with the commenters that the 5 minutes of clinical labor time for “Check dressings & wound” is missing from the direct PE input database. We agree that the clinical labor for this activity should not be treated differently from the rest of the codes in the family, and therefore these 5 minutes are included in the direct PE input database. The postoperative office visit is included in the direct PE input database for CPT code 22514. After consideration of comments received, we are finalizing our proposed changes to clinical labor along with the additional corrections described above. (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 proposed 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. We did not receive comments on this proposal, and therefore, we are finalizing as proposed. (5) Updates to Price for Existing Direct [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2015-28005. Public record. Not legal advice.