Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2017; Medicare Advantage Pricing Data Release; Medicare Advantage and Part D Medical Low Ratio Data Release; Medicare Advantage Provider Network Requirements; Expansion of Medicare Diabetes Prevention Program Model

Federal RegisterJul 15, 2016

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 411, 414, 417, 422, 423, 424, 425, and 460

[CMS-1654-P]

RIN 0938-AS81

Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2017; Medicare Advantage Pricing Data Release; Medicare Advantage and Part D Medical Low Ratio Data Release; Medicare Advantage Provider Network Requirements; Expansion of Medicare Diabetes Prevention Program Model

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This major proposed rule addresses changes to the physician fee schedule and other Medicare Part B payment policies, such as changes to the Value Modifier, 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. This proposed rule also includes proposals related to the Medicare Shared Saving Program, and the release of certain pricing data from Medicare Advantage bids and medical loss ratio reports from Medicare health and drug plans. In addition, this rule proposes to expand the Medicare Diabetes Prevention Program model.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on September 6, 2016.

ADDRESSES:

In commenting, please refer to file code CMS-1654-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

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

Electronically.

You may submit electronic comments on this regulation to

www.regulations.gov

. Follow the instructions for “submitting a comment.”

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1654-P, P.O. Box 8013, Baltimore, MD 21244-8013.

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

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1654-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

By hand or courier.

If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses:

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

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

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

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

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

FOR FURTHER INFORMATION CONTACT:

Jessica Bruton, (410) 786-5991 for issues related to any physician payment issues not identified below.

Gail Addis, (410) 786-4522, for issues related to diabetes self-management training.

Jaime Hermansen, (410) 786-2064, for issues related to moderate sedation coding and anesthesia services.

Jessica Bruton, (410) 786-5991, for issues related to identification of potentially misvalued services.

Roberta Epps, (410) 786-4503, for issues related to PAMA section 218(a) policy and the transition from traditional x-ray imaging to digital radiography.

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

Ann Marshall, (410) 786-3059, for primary care issues related to chronic care management (CCM), burden reduction and evaluation and management services.

Emily Yoder, (410) 786-1804, for primary care issues related to resource intensive services and other primary care issues.

Lindsey Baldwin, (410) 786-1694, for primary care issues related to behavioral health integration services.

Geri Mondowney, (410) 786-4584, and Donta Henson, (410) 786-1947, for issues related to geographic practice cost indices.

Michael Soracoe, (410) 786-6312, for issues related to the target and phase-in provisions, the practice expense methodology, impacts, conversion factor, and the valuation of surgical procedures.

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

Patrick Sartini, (410) 786-9252, for issues related to malpractice RVUs, radiation treatment, mammography and other imaging services.

Kathy Bryant, (410) 786-3448, for issues related to collecting data on resources used in furnishing global services.

Donta Henson, (410) 786-1947, for issues related to pathology and ophthalmology services.

Corinne Axelrod, (410) 786-5620, for issues related to rural health clinics or federally qualified health centers for comprehensive care management services furnished incident to.

Simone Dennis (410) 786-8409, for issues related to FQHC-specific market basket.

JoAnna Baldwin (410) 786-7205, or Sarah Fulton (410) 786-2749, for issues related to appropriate use criteria for advanced diagnostic imaging services.

Erin Skinner (410) 786-0157, for issues related to open payments.

Sean O'Grady (410) 786-2259, or Julie Uebersax (410) 786-9284, for issues related to release of pricing data from Medicare Advantage bids and release of medical loss ratio data submitted by Medicare Advantage organizations and Part D sponsors.

Sara Vitolo (410) 786-5714, for issues related to prohibition on billing qualified Medicare beneficiary individuals for Medicare cost-sharing.

Michelle Peterman (410) 786-2591, for issues on the technical correction for PQRS.

Katie Mucklow (410) 786-0537 or John Spiegel (410) 786-1909, for issues related to Provider Enrollment Medicare Advantage Program.

Jen Zhu (410) 786-3725, Carlye Burd (410) 786-1972, or Nina Brown (410)

786-6103, for issues related to Medicare Diabetes Prevention Program model expansion.

Rabia Khan or Terri Postma, (410) 786-8084 or

ACO@cms.hhs.gov

, for issues related to Medicare Shared Savings Program.

Sabrina Ahmed (410) 786-7499, or Fiona Larbi (410) 786-7224, for issues related to Value-based Payment Modifier and Physician Feedback Program.

Lisa Ohrin Wilson (410) 786-8852, or Gabriel Scott (410) 786-3928, for issues related to physician self-referral updates.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

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

http://www.regulations.gov

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

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

Table of Contents

I. Executive Summary and Background

A. Executive Summary

B. Background

II. Provisions of the Proposed Rule for PFS

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

B. Determination of Malpractice Relative Value Units (MRVUs)

C. Medicare Telehealth Services

D. Potentially Misvalued Services Under the Physician Fee Schedule

1. Background

2. Progress in Identifying and Reviewing Potentially Misvalued Codes

3. Validating RVUs of Potentially Misvalued Codes

4. CY 2017 Identification and Review of Potentially Misvalued Services

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

6. Collecting Data on Resources Used in Furnishing Global Services

E. Improving Payment Accuracy for Primary Care, Care Management Services, and Patient-Centered Services

F. Improving Payment Accuracy for Preventive Services: Diabetes Self-Management Training (DSMT)

G. Target for Relative Value Adjustments for Misvalued Services

H. Phase-In of Significant RVU Reductions

I. Geographic Practice Cost Indices (GPCIs)

J. Payment Incentive for the Transition From Traditional X-Ray Imaging to Digital Radiography and Other Imaging Services

K. Procedures Subject to the Multiple Procedure Payment Reduction (MPPR) and the OPPS Cap

L. Valuation of Specific Codes

III. Other Provisions of the Proposed Rule for PFS

A. Chronic Care Management (CCM) and Transitional Care Management (TCM) Supervision Requirements in Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

B. FQHC-Specific Market Basket

C. Appropriate Use Criteria for Advanced Diagnostic Imaging Services

D. Reports of Payments or Other Transfers of Value to Covered Recipients: Solicitation of Public Comments

E. Release of Part C Medicare Advantage Bid Pricing Data and Part C and Part D Medical Loss Ratio (MLR) Data

F. Prohibition on Billing Qualified Medicare Beneficiary Individuals for Medicare Cost-Sharing

G. Recoupment or Offset of Payments to Providers Sharing the Same Taxpayer Identification Number

H. Accountable Care Organization (ACO) Participants Who Report Physician Quality Reporting System (PQRS) Quality Measures Separately

I. Medicare Advantage Provider Enrollment

J. Proposed Expansion of the Diabetes Prevention Program (DPP) Model

K. Medicare Shared Savings Program

L. Value-Based Payment Modifier and Physician Feedback Program

M. Physician Self-referral Updates

IV. Collection of Information Requirements

V. Response to Comments

VI. Regulatory Impact Analysis

Regulations Text

Acronyms

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

A1c—Hemoglobin A1c

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

CoA—Certificate of Accreditation

CoC—Certificate of Compliance

CoR—Certificate of Registration

CNM—Certified nurse-midwife

CP—Clinical psychologist

CPC—Comprehensive Primary Care

CPEP—Clinical Practice Expert Panel

CPT—[Physicians] Current Procedural Terminology (

)

CQM—Clinical quality measure

CSW—Clinical social worker

CT—Computed tomography

CW—Certificate of Waiver

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

ED—Emergency Department

EHR—Electronic health record

E/M—Evaluation and management

EMT—Emergency Medical Technician

EP—Eligible professional

eRx—Electronic prescribing

ESRD—End-stage renal disease

FAR—Federal Acquisition Regulations

FDA—Food and Drug Administration

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

MACRA—Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10)

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

PPM—Provider-Performed Microscopy

PQRS—Physician Quality Reporting System

PPIS—Physician Practice Expense Information Survey

PT—Physical therapy

PT—Proficiency Testing

PT/INR—Prothrombin Time/International Normalized Ratio

PY—Performance year

QA—Quality Assessment

QC—Quality Control

QCDR—Qualified clinical data registry

QRUR—Quality and Resources Use Report

RBRVS—Resource-based relative value scale

RFA—Regulatory Flexibility Act

RHC—Rural health clinic

RIA—Regulatory impact analysis

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

RUCA—Rural Urban Commuting Area

RVU—Relative value unit

SBA—Small Business Administration

SGR—Sustainable growth rate

SIM—State Innovation Model

SLP—Speech-language pathology

SMS—Socioeconomic Monitoring System

SNF—Skilled nursing facility

TAP—Technical Advisory Panel

TC—Technical component

TIN—Tax identification number

UAF—Update adjustment factor

UPIN—Unique Physician Identification Number

USPSTF—United States Preventive Services Task Force

VBP—Value-based purchasing

VM—Value-Based Payment Modifier

Addenda Available Only Through the Internet on the CMS Web Site

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

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

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

Federal Register

and other related documents. For the CY 2017 PFS Proposed Rule, refer to item CMS-1654-P. Readers who experience any problems accessing any of the Addenda or other documents referenced in this rule and posted on the CMS Web site identified above should contact Jessica Bruton at (410) 786-5991.

CPT (Current Procedural Terminology) Copyright Notice

Throughout this proposed rule, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2015 American Medical Association. All Rights Reserved. CPT is a registered trademark of the American Medical Association (AMA). Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

I. Executive Summary and Background

A. Executive Summary

1. Purpose

This major proposed rule proposes to revise payment polices under the Medicare Physician Fee Schedule (PFS) and make other policy changes related to Medicare Part B payment. These changes would be applicable to services furnished in CY 2017. In addition, this proposed rule includes proposals related to: the Medicare Shared Savings Program and release of pricing data submitted to CMS by Medicare Advantage (MA) organizations; and medical loss ratio reports submitted by MA plans and Part D plans. These additional proposals are addressed in section III. of this proposed rule.

2. Summary of the Major Provisions

The statute 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 statute requires that RVUs be established for three categories of resources: work, practice expense (PE); and malpractice (MP) expense; and, that we establish by regulation each year's payment amounts for all physicians' services paid under the PFS, incorporating geographic adjustments to reflect the variations in the costs of furnishing services in different geographic areas. In this major proposed rule, we are proposing to establish RVUs for CY 2017 for the PFS, and other Medicare Part B payment policies, to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute. In addition, this proposed rule includes discussions and proposals regarding:

• Potentially Misvalued PFS Codes.

• Telehealth Services.

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

• Target for Relative Value Adjustments for Misvalued Services.

• Phase-in of Significant RVU Reductions.

• Chronic Care Management (CCM) and Transitional Care Management (TCM) Supervision Requirements in Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs).

• FQHC-Specific Market Basket.

• Appropriate Use Criteria for Advanced Diagnostic Imaging Services.

• Reports of Payments or Other Transfers of Value to Covered Recipients: Solicitation of Public Comments.

• Release of Part C Medicare Advantage Bid Pricing Data and Part C and Part D Medical Loss Ratio (MLR) Data.

• Prohibition on Billing Qualified Medicare Beneficiary Individuals for Medicare Cost-Sharing.

• Recoupment or Offset of Payments to Providers Sharing the Same Taxpayer Identification Number.

• Accountable Care Organization (ACO) Participants Who Report Physician Quality Reporting System (PQRS) Quality Measures Separately.

• Medicare Advantage Provider Enrollment.

• Proposed Expansion of the Diabetes Prevention Program (DPP) Model.

• Medicare Shared Savings Program.

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

• Physician Self-referral Updates.

3. Summary of Costs and Benefits

The statute 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 proposed in this proposed rule would affect the specialty distribution of Medicare expenditures. When considering the combined impact of proposed work, PE, and MP RVU changes, the projected payment impacts would be small for most specialties; however, the impact would be larger for a few specialties.

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

B. Background

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

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

1. Development of the Relative Values

a. Work RVUs

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

As specified in section 1848(c)(1)(A) of the Act, the work component of physicians' services means the portion of the resources used in furnishing the service that reflects physician time and intensity. We establish work RVUs for new, revised and potentially misvalued codes based on our review of information that generally includes, but is not limited to, recommendations received from the American Medical Association/Specialty Society Relative Value Update Committee (RUC), the Health Care Professionals Advisory Committee (HCPAC), the Medicare Payment Advisory Commission (MedPAC), and other public commenters; medical literature and comparative databases; as well as a comparison of the work for other codes within the Medicare PFS, and consultation with other physicians and health care professionals within CMS and the federal government. We also assess the methodology and data used to develop the recommendations submitted to us by the RUC and other public commenters, and the rationale for their recommendations. In the CY 2011 PFS final rule with comment period (75 FR 73328 through 73329), we discussed a variety of methodologies and approaches used to develop work RVUs, including survey data, building blocks, crosswalk to key reference or similar codes, and magnitude estimation. More information on these issues is available in that rule.

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 proposed rule.

d. Refinements to the RVUs

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

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

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

In addition to the five-year reviews, beginning for CY 2009, CMS and the RUC have identified and reviewed a number of potentially misvalued codes on an annual basis based on various identification screens. This annual review of work and PE RVUs for potentially misvalued codes was supplemented by the amendments to section 1848 of the Act, as enacted by section 3134 of the Affordable Care Act, which requires the agency to periodically identify, review and adjust values for potentially misvalued codes.

e. Application of Budget Neutrality to Adjustments of RVUs

As described in section VI.C. of this proposed rule, in accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions to the RVUs 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.

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 ensure 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 (Pub. L. 113-93, enacted on April 1, 2014) (PAMA) 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 (Division B of Pub. L. 113-295, enacted December 19, 2014) (ABLE) 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 was finalized in the CY 2016 PFS final rule with comment period, and proposed revisions are discussed in section II.G. of this proposed rule.

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 was finalized in the CY 2016 PFS final rule with comment period and proposed revisions in this year's rulemaking are discussed in section II.H. of this proposed rule.

II. Provisions of the Proposed Rule for PFS

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

1. Overview

Practice expense (PE) is the portion of the resources used in furnishing a service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages, but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act. As required by section 1848(c)(2)(C)(ii) of the Act, we use a resource-based system for determining PE RVUs for each physicians' service. We develop PE RVUs by considering the direct and indirect practice resources involved in furnishing each service. Direct expense categories include clinical labor, medical supplies, and medical equipment. Indirect expenses include administrative labor, office expense, and all other expenses. The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service-specific PE RVUs. We refer readers to the CY 2010 PFS final rule with comment period (74 FR 61743 through 61748) for a more detailed explanation of the PE methodology.

2. Practice Expense Methodology

a. Direct Practice Expense

We determine the direct PE for a specific service by adding the costs of the direct resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing that service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are generally based on our review of recommendations received from the RUC and those provided in response to public comment periods. For a detailed explanation of the direct PE methodology, including examples, we refer readers to the Five-Year Review of Work Relative Value Units under the PFS and Proposed Changes to the Practice Expense Methodology proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).

b. Indirect Practice Expense per Hour Data

We use survey data on indirect PEs incurred per hour worked in developing the indirect portion of the PE RVUs. Prior to CY 2010, we primarily used the practice expense per hour (PE/HR) by specialty that was obtained from the AMA's Socioeconomic Monitoring Surveys (SMS). The AMA administered a new survey in CY 2007 and CY 2008, the Physician Practice Expense Information Survey (PPIS). The PPIS is a multispecialty, nationally representative, PE survey of both physicians and nonphysician practitioners (NPPs) paid under the PFS using a survey instrument and methods highly consistent with those used for the SMS and the supplemental surveys. The PPIS gathered information from 3,656 respondents across 51 physician specialty and health care professional groups. We believe the PPIS is the most comprehensive source of PE survey information available. We used the PPIS data to update the PE/HR data for the CY 2010 PFS for almost all of the Medicare-recognized specialties that participated in the survey.

When we began using the PPIS data in CY 2010, we did not change the PE RVU methodology itself or the manner in which the PE/HR data are used in that methodology. We only updated the PE/HR data based on the new survey. Furthermore, as we explained in the CY 2010 PFS final rule with comment period (74 FR 61751), because of the magnitude of payment reductions for some specialties resulting from the use of the PPIS data, we transitioned its use over a 4-year period from the previous PE RVUs to the PE RVUs developed using the new PPIS data. As provided in the CY 2010 PFS final rule with comment period (74 FR 61751), the transition to the PPIS data was complete for CY 2013. Therefore, PE RVUs from CY 2013 forward are developed based entirely on the PPIS data, except as noted in this section.

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

Supplemental survey data on independent labs from the College of American Pathologists were implemented for payments beginning in CY 2005. Supplemental survey data from the National Coalition of Quality Diagnostic Imaging Services (NCQDIS), representing independent diagnostic testing facilities (IDTFs), were blended with supplementary survey data from the American College of Radiology (ACR) and implemented for payments beginning in CY 2007. Neither IDTFs, nor independent labs, participated in the PPIS. Therefore, we continue to use the PE/HR that was developed from their supplemental survey data. Consistent with our past practice, the previous indirect PE/HR values from the supplemental surveys for these specialties were updated to CY 2006 using the Medicare Economic Index (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). We have incorporated the available utilization data for interventional cardiology, which became a recognized Medicare specialty during 2014. We finalized the use of a proxy PE/HR value for interventional cardiology in the CY 2016 final rule with comment period (80 FR 70892), as there are no PPIS data for this specialty, by crosswalking the PE/HR for from

Cardiology, since the specialties furnish similar services in the Medicare claims data.

c. Allocation of PE to Services

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

(1) Direct Costs

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

(2) Indirect Costs

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

• For a given service, we 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.

(3) 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. 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. For this reason, 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.

(4) Services With Technical Components (TCs) and Professional Components (PCs)

Diagnostic services are generally composed 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.)

(5) 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). We also direct interested readers to the file called “Calculation of PE RVUs under Methodology for Selected Codes” which is available on our Web site under downloads for the CY 2017 PFS proposed rule at

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

. This file contains a table that illustrates the calculation of PE RVUs as described below for individual PFS codes.

(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.

Step 2:

Calculate the aggregate pool of direct PE costs for the current year. We 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.

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 factor to ensure that the aggregate pool of direct PE costs calculated in Step 3 does not vary from the aggregate pool of direct PE costs for the current year. Apply the scaling factor to the direct costs for each service (as calculated in Step 1).

Step 5:

Convert the results of Step 4 to an RVU scale for each service. To do this, divide the results of Step 4 by the CF. Note that the actual value of the CF used in this calculation does not

influence the final direct cost PE RVUs, as long as the same CF is used in Step 2 and Step 5. Different CFs will result in different direct PE scaling factors, but this has no effect on the final direct cost PE RVUs since changes in the CFs and changes in the associated direct scaling factors offset one another.

Create indirect allocators.

Step 6:

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

Step 7:

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

We use an average of the 3 most recent years of available Medicare claims data to determine the specialty mix assigned to each code. As we stated in the CY 2016 final rule with comment period (80 FR 70894), we believe that the 3-year average will mitigate the need to use dominant or expected specialty instead of the claims data. Because we are incorporating CY 2015 claims data for use in the CY 2017 proposed rates, we believe that the proposed PE RVUs associated with the CY 2017 PFS proposed rule provide a first opportunity to determine whether service-level overrides of claims data are necessary. Currently, in the development of PE RVUs we apply only the overrides that also apply to the MP RVU calculation. Since the proposed PE RVUs include a new year of claims into the 3 year average for the first time, we are seeking comment on the proposed CY 2017 PFS rates and whether or not the incorporation of a new year of utilization data into a three year average mitigates the need for alternative service-level overrides such as a claims-based approach (dominant specialty) or stakeholder-recommended approach (expected specialty) in the development of PE (and MP) RVUs for low-volume codes. Prior year RVUs are available at several locations on the PFS Web site located at

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

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 the download file called “Calculation of PE RVUs under Methodology for Selected Codes”, 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 8 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 5 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 sum of steps 5 and 17 of to the proposed aggregate work RVUs scaled by the ratio of current aggregate PE and work RVUs. This adjustment ensures that all PE RVUs in the PFS account for the fact that certain specialties are excluded from the calculation of PE RVUs but included in maintaining overall PFS budget neutrality. (See “Specialties excluded from ratesetting calculation” later in this section.)

(e) Setup File Information

•

Specialties excluded from ratesetting calculation:

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

Table 1—Specialties Excluded From Ratesetting Calculation

Specialty code

Specialty description

Ambulatory surgical center.

Nurse practitioner.

Medical supply company with certified orthotist.

Medical supply company with certified prosthetist.

Medical supply company with certified prosthetist-orthotist.

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

Individual certified orthotist.

Individual certified prosthetist.

Individual certified prosthetist-orthotist.

Medical supply company with registered pharmacist.

Ambulance service supplier,

e.g.,

private ambulance companies, funeral homes, etc.

Public health or welfare agencies.

Voluntary health or charitable agencies.

Mass immunization roster biller.

Radiation therapy centers.

All other suppliers (

e.g.,

drug and department stores).

Unknown supplier/provider specialty.

Certified clinical nurse specialist.

Optician.

Physician assistant.

Hospital.

SNF.

Intermediate care nursing facility.

Nursing facility, other.

HHA.

Pharmacy.

Medical supply company with respiratory therapist.

Department store.

Pedorthic personnel.

Medical supply company with pedorthic personnel.

•

Crosswalk certain low volume physician specialties:

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

•

Physical therapy utilization:

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

•

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

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

•

Payment modifiers:

Payment modifiers are accounted for in the creation of the file consistent with current payment policy as implemented in claims processing. For example, services billed with the assistant at surgery modifier are paid 16 percent of the PFS amount for that service; therefore, the utilization file is modified to only account for 16 percent of any service that contains the assistant at surgery modifier. Similarly, for those services to which volume adjustments are made to account for the payment modifiers, time adjustments are applied as well. For time adjustments to surgical services, the intraoperative portion in the work time file is used; where it is not present, the intraoperative percentage from the payment files used by contractors to process Medicare claims is used instead. Where neither is available, we use the payment adjustment ratio to adjust the time accordingly. Table 2 details the manner in which the modifiers are applied.

Table 2—Application of Payment Modifiers to Utilization Files

Modifier

Description

Volume adjustment

Time adjustment

80, 81, 82

Assistant at Surgery

16%

Intraoperative portion.

Assistant at Surgery—Physician Assistant

14% (85% * 16%)

Intraoperative portion.

50 or LT and RT

Bilateral Surgery

150%

150% of work time.

Multiple Procedure

50%

Intraoperative portion.

Reduced Services

50%

50%.

Discontinued Procedure

50%

50%.

Intraoperative Care only

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

Preoperative + Intraoperative portion.

Postoperative Care only

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

Postoperative portion.

Co-surgeons

62.5%

50%.

Team Surgeons

33%

33%.

We also make adjustments to volume and time that correspond to other payment rules, including special multiple procedure endoscopy rules and multiple procedure payment reductions (MPPRs). We note that section 1848(c)(2)(B)(v) of the Act exempts certain reduced payments for multiple imaging procedures and multiple therapy services from the BN calculation under section 1848(c)(2)(B)(ii)(II) of the Act. These MPPRs are not included in the development of the RVUs.

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

•

Work RVUs:

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

(6) Equipment Cost Per Minute

The equipment cost per minute is calculated as:

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

Where:

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

usage = 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.

Stakeholders have often suggested that particular equipment items are used less frequently than 50 percent of the time in the typical setting and that CMS should reduce the equipment utilization rate based on these recommendations. We appreciate and share stakeholders' interest in using the most accurate assumption regarding the equipment utilization rate for particular equipment items. However, we believe that absent robust, objective, auditable data regarding the use of particular items, the 50 percent assumption is the most appropriate within the relative value system. We welcome the submission of data that illustrates an alternative rate.

Maintenance:

This factor for maintenance was proposed and finalized during rulemaking for CY 1998 PFS (62 FR 33164).

We continue to investigate potential avenues for determining equipment maintenance costs across a broad range of equipment items.

Interest Rate:

In the CY 2013 PFS 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 are not proposing any changes to these interest rates for CY 2017.

Table 3—SBA Maximum Interest Rates

Price

Useful life

(years)

Interest rate

(%)

<$25K

7.50

$25K to $50K

6.50

>$50K

5.50

<$25K

8.00

$25K to $50K

7.00

>$50K

6.00

d. Proposed Changes to Direct PE Inputs for Specific Services

This section focuses on specific PE inputs. The direct PE inputs are included in the CY 2017 direct PE input database, which is available on our Web site under downloads for the CY 2017 PFS proposed rule 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 the CY 2015 PFS rulemaking cycle, 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 previously specified list of codes since these items were 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 had been become typically used in furnishing imaging services. However, since we did not receive any invoices for the PACS system prior to that year's proposed rule, we were unable to determine the appropriate pricing to use for the inputs. For CY 2015, we 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 (79 FR 67561-67563). We used the 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. We received invoices from one stakeholder that facilitated a proposed price update for the PACS workstation in the CY 2016 PFS proposed rule, and we updated the price for the PACS workstation to $5,557 in the CY 2016 PFS final rule with comment period (80 FR 70899).

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 PFS 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, such as the view box equipment. Given that the majority of these services are reported globally in the nonfacility setting, we believe it is appropriate to include these costs as direct inputs for the associated HCPCS codes. Based on our established methodology in which single codes with professional and technical components are constructed by assigning work RVUs exclusively to the professional component and direct PE inputs exclusively to the technical components, these costs would be incorporated into the PE RVUs of the global and technical component of the HCPCS code.

We stated in the CY 2016 PFS final rule with comment period that the costs of the professional workstation may be analogous to costs related to the use of film previously incorporated as direct PE inputs for these services. We also 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. Commenters responded by indicating their approval of the concept of a professional PACS workstation used for interpretation of digital images. We received invoices for the pricing of a professional PACS workstation, as well as additional invoices for the pricing of a mammography-specific version of the professional PACS workstation. The RUC also included these new equipment items in its recommendations for the CY 2017 PFS rulemaking cycle.

Based on our analysis of submitted invoices, we are proposing to price the professional PACS workstation (ED053) at $14,616.93. We are not proposing a change in price for the current technical PACS workstation (ED050), which will remain at a price of $5,557.00.

The price of the professional PACS workstation is based upon individual invoices submitted for the cost of a PC Tower ($1531.52), a pair of 3 MP monitors ($10,500.00 in total), a keyboard and mouse ($84.95), a UPS power backup devices for TNP ($1098.00), and a switch for PACS monitors/workstations ($1402.46).

We are proposing to add the professional PACS workstation to many CPT codes in the 70000 series that use the current technical PACS workstation (ED050) and include professional work for which such a workstation would be used. We are not proposing to add the equipment item to add-on codes since the base codes would include minutes for the item. We are also not proposing to add the item to codes that are therapeutic in nature, as the professional PACS workstation is intended for use in diagnostic services. We are therefore not proposing to add the item to codes in the Radiation Therapy section (77261 through 77799) or the Nuclear Medicine Cardiology section (78414-78499). We also are not proposing to add the item to image guidance codes where the dominant provider is not a radiologist (77002, 77011, 77071, 77077, and 77081) according to the most recent year of claims data, since we believe a single workstation would be more typical in those cases. We have identified approximately 426 codes to which we are proposing to add a professional PACS workstation. Please see Table 4 for the full list of affected codes.

For the professional PACS workstation, we are proposing to assign equipment time equal to the intraservice work time plus half of the preservice work time associated with the codes, since the work time generally reflects the time associated with the professional interpretation. We are proposing half of the preservice work time for the professional PACS workstation, as we do not believe that the practitioner would typically spend all of the preservice work period using the equipment. For older codes that do not have a breakdown of physician work time by service period, and only have an overall physician work time, we are proposing to use half the total work time as an approximation of the intraservice work time plus one half of the preservice work time. In our review of services that contained an existing PACS workstation and had a breakdown of physician work time, we found that half of the total time was a reasonable approximation for the value of intraservice work time plus one half of preservice work time where no such breakdown existed. We also considered using an equipment time formula of the physician intraservice time plus 1 minute (as a stand-in for the physician preservice work time). We are seeking public comment on the most accurate equipment time formula for the professional PACS workstation.

We are seeking public comment on the proposed list of codes that would incorporate either the professional PACS workstation. We are interested in public comment on the codes for which a professional PACS workstation should be included, and whether one of these professional workstations should be included for codes outside the 70000 series. In cases within the 70000 series where radiologists are not the typical specialty reporting the code, such as CPT codes 77002 and 77011, we are asking whether it would be appropriate to add one of the professional PACS workstations to these services.

Table 4—Codes With Professional PACS Workstation in the Proposed Direct PE Input Database

HCPCS

ED053

minutes

70015

70030

70100

70110

70120

70130

70134

70140

70150

70160

70190

70200

70210

70220

70240

70250

70260

70300

70310

70320

70328

70330

70332

70336

70350

70355

70360

70370

70371

70380

70390

70450

70460

70470

70480

70481

70482

70490

70491

70492

70540

70542

70543

70544

70545

70546

70547

70548

70549

70551

70552

70553

70554

71010

71015

71020

71021

71022

71023

71030

71034

71035

71100

71101

71110

71111

71120

71130

71250

71260

71270

71275

71550

71551

71552

71555

72020

72040

72050

72052

72070

72072

72074

72080

72081

72082

72083

72084

72100

72110

72114

72120

72125

72126

72127

72128

72129

72130

72131

72132

72133

72141

72142

72146

72147

72148

72149

72156

72157

72158

72159

72170

72190

72191

72192

72193

72194

72195

72196

72197

72198

72200

72202

72220

72240

72255

72265

72270

72275

72285

72295

73000

73010

73020

73030

73040

73050

73060

73070

73080

73085

73090

73092

73100

73110

73115

73120

73130

73140

73200

73201

73202

73206

73218

73219

73220

73221

73222

73223

73225

73501

73502

73503

73521

73522

73523

73525

73551

73552

73560

73564

73565

73580

73590

73592

73600

73610

73615

73620

73630

73650

73660

73700

73701

73702

73706

73718

73719

73720

73721

73722

73723

73725

74000

74010

74020

74022

74150

74160

74170

74174

74175

74176

74177

74178

74181

74182

74183

74185

74210

74220

74230

74240

74241

74245

74246

74247

74249

74250

74251

74260

74261

74262

74263

74270

74280

74283

74290

74400

74410

74415

74430

74440

74455

74485

74710

74712

74740

75557

75559

75561

75563

75571

75572

75573

75574

75600

75605

75625

75630

75635

75658

75705

75710

75716

75726

75731

75733

75736

75741

75743

75746

75756

75791

75809

75820

75822

75825

75827

75831

75833

75840

75842

75860

75870

75872

75880

75885

75887

75889

75891

75893

75901

75902

75962

75966

75978

75984

75989

76000

76010

76080

76098

76100

76101

76102

76120

76376

76380

76390

76506

76536

76604

76700

76705

76770

76775

76776

76800

76801

76805

76811

76813

76815

76816

76817

76818

76819

76820

76821

76825

76826

76830

76831

76856

76857

76870

76872

76873

76881

76885

76886

76936

76942

76970

77012

77014

77021

77053

77054

77058

77059

77072

77074

77075

77076

77084

78012

78013

78014

78015

78016

78018

78070

78071

78072

78075

78102

78103

78104

78135

78140

78185

78190

78195

78201

78202

78205

78206

78215

78216

78226

78227

78230

78231

78232

78258

78261

78262

78264

78265

78266

78278

78290

78291

78300

78305

78306

78315

78320

78579

78580

78582

78597

78598

78600

78601

78605

78606

78607

78610

78630

78635

78645

78647

78650

78660

78700

78701

78707

78708

78709

78710

78740

78761

78800

78801

78802

78803

78804

78805

78806

78807

79440

G0389

767X1

(2) Standardization of Clinical Labor Tasks

As we noted in the CY 2015 PFS rule (79 FR 67640-67641), 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 preservice, service, and postservice 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 would facilitate the identification of the usual numbers of minutes for clinical labor tasks and the identification of exceptions to the usual values. It would 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 preservice time packages. We believe such standards would 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.

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 the CY 2015 PFS rule, 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 for each code the minutes 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 that occur in multiple codes, 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 services for purposes of reviewing individual services at present, and for possible broad-based standardization once the changes to the direct PE input database facilitate our ability to adjust time across services. During the CY 2016 PFS rulemaking cycle, we proposed appropriate standard minutes for five different clinical labor tasks associated with services that use digital imaging technology. In the CY 2016 PFS final rule with comment period (80 FR 70901), we finalized appropriate standard minutes for four of those five activities, which are listed in Table 5.

Table 5—Clinical Labor Tasks Associated With Digital Imaging Technology

Clinical labor task

Typical

minutes

Availability of prior images confirmed

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

Review examination with interpreting MD

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

We did not finalize standard minutes for the activity “Technologist QC's images in PACS, checking for all images, reformats, and dose page.” We agreed with commenters that this task may require a variable length of time depending on the number of images to be reviewed. We stated 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 solicited public comment and feedback on this subject, with the anticipation of including a proposal in the CY 2017 proposed rule.

We received many comments suggesting that this clinical labor activity should not have a standard time value. Commenters stated that the number of minutes varies significantly for different imaging modalities; and the time is not simply based on the quantity of images to be reviewed, but also the complexity of the images. The commenters recommended that time for this clinical labor activity should be assigned on a code by code basis. We agree with the commenters that the amount of clinical labor needed to check images in a PACS workstation may vary depending on the service. However, we do not believe that this precludes the possibility of establishing standards for clinical labor tasks as we have done in the past by creating multiple standard times, for example, those assigned to cleaning different kinds of scopes. We continue to believe that the use of clinical labor standards provides greater consistency among codes that share the same clinical labor tasks and can improve relativity of values among codes. We are proposing to establish a range of appropriate standard minutes for the clinical labor activity Technologist QCs images in PACS, checking for all images, reformats, and dose page. These standard minutes will be applied to new and revised codes that make use of this clinical labor activity when they are reviewed by us for valuation. We are proposing 2 minutes as the standard for the simple case, 3 minutes as the standard for the intermediate case, and 4 minutes as the standard for the complex case. We are proposing the simple case of 2 minutes as the standard for the typical procedure code involving routine use of imaging. These values are based upon a review of the existing minutes assigned for this clinical labor activity; we have determined that 2 minutes is the duration for most services and a small number of codes with more complex forms of digital imaging have higher values. We are proposing to use 2 minutes for services involving routine x-rays (simple), 3 minutes for services involving CTs and MRIs (intermediate), and 4 minutes for the most highly complex services which would exceed these more typical cases. We are soliciting comments regarding the most accurate category—simple, intermediate, or complex for existing codes, and in particular what criteria

might be used to identify complex cases systematically.

(b) Pathology Clinical Labor Tasks

As with the clinical labor tasks associated with digital imaging, many of the currently assigned times for the specialized clinical labor tasks associated with pathology services are not consistent across codes. In reviewing past RUC 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 high degree of specificity with which the tasks are described. We continue to believe that, in general, a clinical labor task will tend to take the same amount of time to perform as the same clinical labor task when it is performed in a clinically similar service.

Therefore, we developed standard times for clinical labor tasks that we have used in finalizing direct PE inputs in recent years, starting in the CY 2012 PFS final rule with comment period (76 FR 73213). These times were based on our review and assessment of the current times included for these clinical labor tasks in the direct PE input database. We proposed in the CY 2016 PFS proposed rule to establish standard times for a list of 17 clinical labor tasks related to pathology services, and solicited public feedback regarding our proposed standards. Many commenters stated in response to our proposal that they did not support the standardization of clinical labor activities across pathology services. Commenters stated that establishing 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 might be possible to standardize across codes with the same batch sizes, and urged us to consider pathology-specific details, such as batch size and block number, in the creation of any future standard times for clinical labor tasks related to 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, generally speaking, clinical labor tasks with the same description are comparable across different pathology procedures. We believe this to be true based on the comparability of clinical labor tasks in non-pathology services, as well as the high degree of specificity with which most pathology tasks are described relative to clinical labor tasks associated with other PFS services. We concurred 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 also believe that it is appropriate and feasible to establish “per block” standards or standards varied by batch size assumptions for many clinical labor activities that would 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 requested regular submission of these details on the PE worksheets supplied by the RUC as part of the review process for pathology services, as a means to assist in the determination of the most accurate direct PE inputs.

We also stated our belief that many of the clinical labor activities for which we proposed to establish standard times were 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 that additional time may be required above the standard value for a clinical labor task that is part of an unusually complex or difficult service. As a result, we ultimately finalized standard times for 6 of the 17 proposed clinical labor activities in the CY 2016 final rule with comment period (80 FR 70902). We have listed the finalized standard times in Table 6. We are currently proposing no further action on the remaining 11 clinical labor activities pending further action by the RUC (see below).

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

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

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

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

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

We remain committed to the process of establishing standard clinical labor times for tasks associated with pathology services. This may include establishing standards on a per-block or per-batch basis, as we indicated during the previous rulemaking cycle. However, we are aware that the PE Subcommittee of the RUC is currently working to standardize the pathology clinical labor activities they use in making their recommendations. We believe the RUC's efforts to narrow the current list of several hundred pathology clinical labor tasks to a more manageable number through the consolidation of duplicative or highly similar activities into a single description may serve PFS relativity and facilitate greater transparency in PFS ratesetting. We also believe that the RUC's standardization of pathology clinical labor tasks would facilitate our capacity to establish standard times for pathology clinical labor tasks in future rulemaking. Therefore, we are not proposing any additional change to clinical labor tasks associated with pathology services at this time.

(3) Equipment Recommendations for Scope Systems

During our routine reviews of direct PE input recommendations, we have regularly found unexplained inconsistencies involving the use of scopes and the video systems associated with them. Some of the scopes include video systems bundled into the

equipment item, some of them include scope accessories as part of their price, and some of them are standalone scopes with no other equipment included. It is not always clear which equipment items related to scopes fall into which of these categories. We have also frequently found anomalies in the equipment recommendations, with equipment items that consist of a scope and video system bundle recommended along with a separate scope video system. Based on our review, the variations do not appear to be consistent with the different code descriptions.

To promote appropriate relativity among the services and facilitate the transparency of our review process, during review of recommended direct PE inputs for the CY 2017 PFS proposed rule, we developed a structure that separates the scope and the associated video system as distinct equipment items for each code. Under this approach, we are proposing standalone prices for each scope, and separate prices for the video systems that are used with scopes. We would define the scope video system as including: (1) A monitor; (2) a processor; (3) a form of digital capture; (4) a cart; and (5) a printer. We believe that these equipment components represent the typical case for a scope video system. Our model for this system is the “video system, endoscopy (processor, digital capture, monitor, printer, cart)” equipment item (ES031), which we are proposing to re-price as part of this separate pricing approach. We obtained current pricing invoices for the endoscopy video system as part of our investigation of these issues involving scopes, which we are proposing to use for this re-pricing. We understand that there may be other accessories associated with the use of scopes; we are proposing to separately price any scope accessories, and individually evaluate their inclusion or exclusion as direct PE inputs for particular codes as usual under our current policy based on whether they are typically used in furnishing the services described by the particular codes.

We are also proposing standardizing refinements to the way scopes have been defined in the direct PE input database. We believe that there are four general types of scopes: Non-video scopes; flexible scopes; semi-rigid scopes, and rigid scopes. Flexible scopes, semi-rigid scopes, and rigid scopes would typically be paired with one of the video scope systems, while the non-video scopes would not. The flexible scopes can be further divided into diagnostic (or non-channeled) and therapeutic (or channeled) scopes. We are proposing to identify for each anatomical application: (1) A rigid scope; (2) a semi-rigid scope; (3) a non-video flexible scope; (4) a non-channeled flexible video scope; and (5) a channeled flexible video scope. We are proposing to classify the existing scopes in our direct PE database under this classification system, to improve the transparency of our review process and improve appropriate relativity among the services. We plan to propose input prices for these equipment items through future rulemaking.

We have proposed these changes only for the reviewed codes that make use of scopes; this applies to the codes in the Flexible Laryngoscopy family (CPT codes 31575, 31576, 31577, 31578, 315X1, 315X2, 315X3, 31579) (see section II.L) and the Laryngoplasty family (CPT codes 31580, 31584, 31587, 315Y1, 315Y2, 315Y3, 315Y4, 315Y5, 315Y6) (see section II.L) along with updated prices for the equipment items related to scopes utilized by these services. We are also soliciting comment on this separate pricing structure for scopes, scope video systems, and scope accessories, which we could consider proposing to apply to other PFS codes in future rulemaking.

(4) Technical Corrections to Direct PE Input Database

Subsequent to the publication of the CY 2016 PFS final rule with comment period, stakeholders alerted us to several clerical inconsistencies in the direct PE database. We propose to correct these inconsistencies as described below and reflected in the CY 2017 direct PE input database displayed on our Web site under downloads for the CY 2017 PFS proposed rule at

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

For CY 2017, we are proposing the following technical corrections:

• For CPT codes 72081-72084, a stakeholder informed us that the equipment time for the PACS workstation (ED050) should be equal to the clinical labor during the service period; the equipment time formula we used for these codes for CY 2016 erroneously included 4 minutes of preservice clinical labor. We agree with the stakeholder that the PACS workstation should use the standard equipment time formula for a PACS workstation for these codes. As a result, we are proposing to refine the ED050 equipment time to 21 minutes for CPT code 72081, 36 minutes for CPT code 72082, 44 minutes for CPT code 72083, and 53 minutes for CPT code 72084 to reflect the clinical labor time associated with these codes. This same commenter also indicated that a number of clinical labor activities had been entered in the database in the incorrect service period for CPT codes 37215, 50432, 50694, and 72081. These clinical labor activities were incorrectly listed in the “postservice” period instead of the “service post” period. We are proposing to make these technical corrections as well so that the minutes are assigned to the appropriate service period within the direct PE input database.

• Another stakeholder alerted us that Ileoscopy codes 44380, 44381 and 44382 did not include the direct PE input equipment item called the Gomco suction machine (EQ235) and indicated that this omission appeared to be inadvertent. We agree that it was. We have included the item EQ235 in the proposed direct PE input database for CPT code 44380 at a time of 29 minutes, for CPT code 44381 at a time of 39 minutes, and to CPT code 44382 at a time of 34 minutes.

The PE RVUs displayed in Addendum B on our Web site were calculated with the inputs displayed in the CY 2017 direct PE input database.

(5) Restoration of Inputs

Several of the PE worksheets included in the RUC recommendations for CY 2016 contained time for the equipment item “xenon light source” (EQ167). Because there appeared to be two special light sources already present (the fiberoptic headlight and the endoscope itself) in the services for which this equipment item was recommended by the RUC, we believed that the use of only one of these light sources would be typical and removed the xenon light equipment time. In the CY 2016 PFS final rule with comment period, we restored the xenon light (EQ167) and removed the fiberoptic headlight (EQ170) with the same number of equipment minutes for CPT codes 30300, 31295, 31296, 31297, and 92511.

We received comments expressing approval for the restoration of the xenon light. However, the commenters also stated that the two light sources were not duplicative, but rather, both a headlight and a xenon light source are required concurrently for otolaryngology procedures when scopes are utilized. The commenters requested that the fiberoptic headlight be restored to these codes.

We agree with the commenters that the use of both light sources would be typical for these procedures. We are therefore proposing to add the fiberoptic headlight (EQ170) to CPT codes 30300,

31295, 31296, 31297, and 92511 at the same number of equipment minutes as the xenon light (EQ167).

(6) Updates to Prices for Existing Direct PE Inputs

In the CY 2011 PFS final rule with comment period (75 FR 73205), we finalized a process to act on public requests to update equipment and supply price and equipment useful life inputs through annual rulemaking beginning with the CY 2012 PFS proposed rule. For CY 2017, we are proposing the following price updates for existing direct PE inputs:

Several commenters wrote to discuss the price of the Antibody Estrogen Receptor monoclonal (SL493). We received information including three invoices with new pricing information regarding the SL493 supply. We are proposing to use this information to propose for the supply item SL493 a price of $14.00 per test, which is the average price based on the invoices that we received in total for the item.

We are also proposing to update the price for two supplies in response to the submission of new invoices. The proposed price for “antigen, venom” supply (SH009) reflects an increase from $16.67 to $20.14 per milliliter, and the proposed price for “antigen, venom, tri-vespid” supply (SH010) reflects an increase from $30.22 to $44.05 per milliliter.

We routinely accept public submission of invoices as part of our process for developing payment rates for new, revised, and potentially misvalued codes. Often these invoices are submitted in conjunction with the RUC recommended values for the codes. For CY 2017, we note that some stakeholders have submitted invoices for new, revised, or potentially misvalued codes since the February deadline established for code valuation recommendations. To be included a given year's proposed rule, we generally need to receive invoices by the same February deadline. Of course, we will consider invoices submitted as public comments during the comment period following the publication of the proposed rule, and will consider any invoices received after February and/or outside of the public comment process as part of our established annual process for requests to update supply and equipment prices.

B. Determination of Malpractice Relative Value Units (RVUs)

1. Overview

Section 1848(c) of the Act requires that each service paid under the PFS be composed of three components: Work, PE, and malpractice expense (MP). As required by section 1848(c)(2)(C)(iii) of the Act, beginning in CY 2000, MP RVUs are resource based. Malpractice RVUs for new codes after 1991 were extrapolated from similar existing codes or as a percentage of the corresponding work RVU. Section 1848(c)(2)(B)(i) of the Act also requires that we review, and if necessary adjust, RVUs no less often than every 5 years. In the CY 2015 PFS final rule with comment period, we implemented the third review and update of MP RVUs. For a comprehensive discussion of the third review and update of MP RVUs see the CY 2015 proposed rule (79 FR 40349 through 40355) and final rule with comment period (79 FR 67591 through 67596).

To determine MP RVUs for individual PFS services, our MP methodology uses three primary kinds of data: Specialty-level risk factors based on the collection of specialty-specific MP premium data that represent the actual expense incurred by practitioners to obtain MP insurance; Medicare claims data to determine service level risk factors based on a weighted average risk factors of the specialties that furnish each service, and the higher of the work RVU or clinical labor RVU to adjust the service level risk factor for the intensity and complexity of the service. Prior to CY 2016, MP RVUs were only updated once every 5 years, except in the case of new and revised codes.

As explained in the CY 2011 PFS final rule with comment period (75 FR 73208), MP RVUs for new and revised codes effective before the next 5-year review of MP RVUs were determined either by a direct crosswalk from a similar source code or by a modified crosswalk to account for differences in work RVUs between the new/revised code and the source code. For the modified crosswalk approach, we adjust (or scale) the MP RVU for the new/revised code to reflect the difference in work RVU between the source code and the new/revised work RVU (or, if greater, the difference in the clinical labor portion of the fully implemented PE RVU) for the new code. For example, if the proposed work RVU for a revised code were 10 percent higher than the work RVU for its source code, the MP RVU for the revised code would be increased by 10 percent over the source code MP RVU. Under this approach the same risk factor is applied for the new/revised code and source code, but the work RVU for the new/revised code is used to adjust the MP RVUs for risk.

In the CY 2016 PFS final rule with comment period (80 FR 70906 through 70910), we finalized a policy to begin conducting annual MP RVU updates to reflect changes in the mix of practitioners providing services (using Medicare claims data), and to adjust MP RVUs for risk for intensity and complexity (using the work RVU or clinical labor RVU). We also finalized a policy to modify the specialty mix assignment methodology (for both MP and PE RVU calculations) to use an average of the 3 most recent years of data instead of a single year of data. We stated that under this approach, the specialty-specific risk factors would continue to be updated through notice and comment rulemaking every 5 years using updated premium data, but would remain unchanged between the 5-year reviews.

For CY 2016, we did not propose to discontinue our current approach for determining MP RVUs for new/revised codes. For the new and revised codes for which we proposed work RVUs and PE inputs, we also published the proposed MP crosswalks used to determine their MP RVUs. We address comments regarding valuation of new and revised codes in section II.L of this proposed rule, which makes clear the codes with interim final values for CY 2016 have newly proposed values for CY 2017, all of which are again open for comment. The MP crosswalks for new and revised codes with interim final values were established in the CY 2016 PFS final rule with comment period; we will respond to comments regarding these interim final values in the CY 2017 PFS final rule.

2. Updating Specialty Specific Risk Factors

The proposed CY 2017 GPCI update (eighth update), discussed in section II.E of this proposed rule, reflects updated MP premium data, collected for the purpose of proposing updates to the MP GPCIs. While we could use the updated MP premium data obtained for the purposes of the proposed eighth GPCI update to propose updates to the specialty risk factors used in the calculation of MP RVUs, this would not be consistent with the policy we previously finalized in the CY 2016 PFS final rule with comment period. In that rule, we indicated that the specialty-specific risk factors would continue to be updated through notice and comment rulemaking every 5 years using updated premium data, but would remain unchanged between the 5-year reviews. Additionally, consistent with the statutory requirement at section 1848(e)(1)(C) of the Act, only

1/2

of the adjustment to MP GPCIs would be applied for CY 2017 based on the new

MP premium data. As such, we do not think it would be appropriate to propose to update the specialty risk factors for CY 2017 based on the updated MP premium data that is reflected in the proposed CY 2017 GPCI update. Therefore, we are not currently proposing to update the specialty-risk factors based on the new premium data collected for the purposes of the 3-year GPCI update for CY 2017 at this time. However, we seek comment on whether we should consider doing so, perhaps as early as for 2018, prior to the fourth review and update of MP RVUs that must occur no later than CY 2020.

C. Medicare Telehealth Services

1. Billing and Payment for Telehealth Services

Several conditions must be met for Medicare to make payments for telehealth services under the PFS. The service must be on the list of Medicare telehealth services and meet all of the following additional requirements:

• The service must be furnished via an interactive telecommunications system.

• The service must be furnished by a physician or other authorized practitioner.

• The service must be furnished to an eligible telehealth individual.

• The individual receiving the service must be located in a telehealth originating site.

When all of these conditions are met, Medicare pays a facility fee to the originating site and makes a separate payment to the distant site practitioner furnishing the service.

Section 1834(m)(4)(F)(i) of the Act defines Medicare telehealth services to include consultations, office visits, office psychiatry services, and any additional service specified by the Secretary, when furnished via a telecommunications system. We first implemented this statutory provision, which was effective October 1, 2001, in the CY 2002 PFS final rule with comment period (66 FR 55246). We established a process for annual updates to the list of Medicare telehealth services as required by section 1834(m)(4)(F)(ii) of the Act in the CY 2003 PFS final rule with comment period (67 FR 79988).

As specified at § 410.78(b), we generally require that a telehealth service be furnished via an interactive telecommunications system. Under § 410.78(a)(3), an interactive telecommunications system is defined as multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site physician or practitioner.

Telephones, facsimile machines, and stand-alone electronic mail systems do not meet the definition of an interactive telecommunications system. An interactive telecommunications system is generally required as a condition of payment; however, section 1834(m)(1) of the Act allows the use of asynchronous “store-and-forward” technology when the originating site is part of a federal telemedicine demonstration program in Alaska or Hawaii. As specified in § 410.78(a)(1), asynchronous store-and-forward is the transmission of medical information from an originating site for review by the distant site physician or practitioner at a later time.

Medicare telehealth services may be furnished to an eligible telehealth individual notwithstanding the fact that the practitioner furnishing the telehealth service is not at the same location as the beneficiary. An eligible telehealth individual is an individual enrolled under Part B who receives a telehealth service furnished at a telehealth originating site.

Practitioners furnishing Medicare telehealth services are reminded that these services are subject to the same non-discrimination laws as other services, including the effective communication requirements for persons with disabilities of section 504 of the Rehabilitation Act and language access for persons with limited English proficiency, as required under Title VI of the Civil Rights Act of 1964. For more information, see

http://www.hhs.gov/ocr/civilrights/resources/specialtopics/hospitalcommunication

Practitioners furnishing Medicare telehealth services submit claims for telehealth services to the MACs that process claims for the service area where their distant site is located. Section 1834(m)(2)(A) of the Act requires that a practitioner who furnishes a telehealth service to an eligible telehealth individual be paid an amount equal to the amount that the practitioner would have been paid if the service had been furnished without the use of a telecommunications system.

Originating sites, which can be one of several types of sites specified in the statute where an eligible telehealth individual is located at the time the service is being furnished via a telecommunications system, are paid a facility fee under the PFS for each Medicare telehealth service. The statute specifies both the types of entities that can serve as originating sites and the geographic qualifications for originating sites. With regard to geographic qualifications, § 410.78(b)(4) limits originating sites to those located in rural health professional shortage areas (HPSAs) or in a county that is not included in a metropolitan statistical area (MSA).

Historically, we have defined rural HPSAs to be those located outside of MSAs. Effective January 1, 2014, we modified the regulations regarding originating sites to define rural HPSAs as those located in rural census tracts as determined by the Office of Federal Rural Health Policy (FORHP) of the Health Resources and Services Administration (HRSA) (78 FR 74811). Defining “rural” to include geographic areas located in rural census tracts within MSAs allows for broader inclusion of sites within HPSAs as telehealth originating sites. Adopting the more precise definition of “rural” for this purpose expands access to health care services for Medicare beneficiaries located in rural areas. HRSA has developed a Web site tool to provide assistance to potential originating sites to determine their geographic status. To access this tool, see the CMS Web site at

https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/index.html

An entity participating in a federal telemedicine demonstration project that has been approved by, or received funding from, the Secretary as of December 31, 2000 is eligible to be an originating site regardless of its geographic location.

Effective January 1, 2014, we also changed our policy so that geographic status for an originating site would be established and maintained on an annual basis, consistent with other telehealth payment policies (78 FR 74400). Geographic status for Medicare telehealth originating sites for each calendar year is now based upon the status of the area as of December 31 of the prior calendar year.

For a detailed history of telehealth payment policy, see 78 FR 74399.

2. Adding Services to the List of Medicare Telehealth Services

As noted previously, in the December 31, 2002

Federal Register

(67 FR 79988), we established a process for adding services to or deleting services from the list of Medicare telehealth services. This process provides the public with an ongoing opportunity to submit requests for adding services. Under this process, we assign any qualifying request to make additions to the list of telehealth services to one of two categories. Revisions to criteria that

we use to review requests in the second category were finalized in the November 28, 2011

Federal Register

(76 FR 73102). The two categories are:

•

Category 1:

Services that are similar to professional consultations, office visits, and office psychiatry services that are currently on the list of telehealth services. In reviewing these requests, we look for similarities between the requested and existing telehealth services for the roles of, and interactions among, the beneficiary, the physician (or other practitioner) at the distant site and, if necessary, the telepresenter, a practitioner who is present with the beneficiary in the originating site. We also look for similarities in the telecommunications system used to deliver the proposed service; for example, the use of interactive audio and video equipment.

•

Category 2:

Services that are not similar to the current list of telehealth services. Our review of these requests includes an assessment of whether the service is accurately described by the corresponding code when furnished via telehealth and whether the use of a telecommunications system to deliver the service produces demonstrated clinical benefit to the patient. Submitted evidence should include both a description of relevant clinical studies that demonstrate the service furnished by telehealth to a Medicare beneficiary improves the diagnosis or treatment of an illness or injury or improves the functioning of a malformed body part, including dates and findings, and a list and copies of published peer reviewed articles relevant to the service when furnished via telehealth. Our evidentiary standard of clinical benefit does not include minor or incidental benefits.

Some examples of clinical benefit include the following:

• Ability to diagnose a medical condition in a patient population without access to clinically appropriate in-person diagnostic services.

• Treatment option for a patient population without access to clinically appropriate in-person treatment options.

• Reduced rate of complications.

• Decreased rate of subsequent diagnostic or therapeutic interventions (for example, due to reduced rate of recurrence of the disease process).

• Decreased number of future hospitalizations or physician visits.

• More rapid beneficial resolution of the disease process treatment.

• Decreased pain, bleeding, or other quantifiable symptom.

• Reduced recovery time.

For the list of telehealth services, see the CMS Web site at

https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/index.html

Requests to add services to the list of Medicare telehealth services must be submitted and received no later than December 31 of each calendar year to be considered for the next rulemaking cycle. For example, qualifying requests submitted before the end of CY 2016 will be considered for the CY 2018 proposed rule. Each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requester wishes us to consider as we review the request. Because we use the annual PFS rulemaking process as a vehicle for making changes to the list of Medicare telehealth services, requesters should be advised that any information submitted is subject to public disclosure for this purpose. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to mail these requests, see the CMS Web site at

https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/index.html

3. Submitted Requests To Add Services to the List of Telehealth Services for CY 2017

Under our existing policy, we add services to the telehealth list on a category 1 basis when we determine that they are similar to services on the existing telehealth list for the roles of, and interactions among, the beneficiary, physician (or other practitioner) at the distant site and, if necessary, the telepresenter. As we stated in the CY 2012 final rule with comment period (76 FR 73098), we believe that the category 1 criteria not only streamline our review process for publicly requested services that fall into this category, but also expedite our ability to identify codes for the telehealth list that resemble those services already on this list.

We received several requests in CY 2015 to add various services as Medicare telehealth services effective for CY 2017. The following presents a discussion of these requests, and our proposals for additions to the CY 2017 telehealth list. Of the requests received, we found that four services were sufficiently similar to ESRD-related services currently on the telehealth list to qualify on a category 1 basis. Therefore, we propose to add the following services to the telehealth list on a category 1 basis for CY 2017:

• CPT codes 90967 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients younger than 2 years of age; 90968 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients 2-11 years of age; 90969 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients 12-19 years of age); and 90970 (End-stage renal disease (ESRD) related services for dialysis less than a full month of service, per day; for patients 20 years of age and older).

As we indicated in the CY 2015 final rule (80 FR 41783) for the ESRD-related services (CPT codes 90963-90966) added to the telehealth list for CY 2016, the required clinical examination of the catheter access site must be furnished face-to-face “hands on” (without the use of an interactive telecommunications system) by a physician, CNS, NP, or PA. This requirement also applies to CPT codes 90967-90970.

While we did not receive a specific request, we also propose to add two advance care planning services to the telehealth list. We have determined that these services are similar to the annual wellness visits (HCPCS codes G0438 & G0439) currently on the telehealth list:

• CPT codes 99497 (advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; first 30 minutes, face-to-face with the patient, family member(s), or surrogate); and 99498 (advance care planning including the explanation and discussion of advance directives such as standard forms (with completion of such forms, when performed), by the physician or other qualified health care professional; each additional 30 minutes (list separately in addition to code for primary procedure)).

We also received requests to add services to the telehealth list that do not meet our criteria for Medicare telehealth services. We are not proposing to add the following procedures for the reasons noted:

a. Observation Care: CPT codes—

• 99217 (observation care discharge day management (this code is to be utilized to report all services provided to a patient on discharge from “observation status” if the discharge is on other than the initial date of “observation status.” To report services to a patient designated as “observation status” or “inpatient status” and discharged on the same date, use the codes for observation or inpatient care services [including admission and discharge services, 99234-99236 as appropriate.]));

• 99218 (initial observation care, per day, for the evaluation and management

of a patient which requires these three key components: A detailed or comprehensive history; a detailed or comprehensive examination; and medical decision making that is straightforward or of low complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the problem(s) requiring admission to “observation status” are of low severity. Typically, 30 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99219 (initial observation care, per day, for the evaluation and management of a patient, which requires these three key components: A comprehensive history; a comprehensive examination; and medical decision making of moderate complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the problem(s) requiring admission to “observation status” are of moderate severity. Typically, 50 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99220 (initial observation care, per day, for the evaluation and management of a patient, which requires these three key components: A comprehensive history; a comprehensive examination; and medical decision making of high complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the problem(s) requiring admission to “observation status” are of high severity. Typically, 70 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99224 (subsequent observation care, per day, for the evaluation and management of a patient, which requires at least two of these three key components: Problem focused interval history; problem focused examination; medical decision making that is straightforward or of low complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the patient is stable, recovering, or improving. Typically, 15 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99225 (subsequent observation care, per day, for the evaluation and management of a patient, which requires at least two of these three key components: An expanded problem focused interval history; an expanded problem focused examination; medical decision making of moderate complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the patient is responding inadequately to therapy or has developed a minor complication. Typically, 25 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99226 (subsequent observation care, per day, for the evaluation and management of a patient, which requires at least two of these three key components: A detailed interval history; a detailed examination; medical decision making of high complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the patient is unstable or has developed a significant complication or a significant new problem. Typically, 35 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99234 (observation or inpatient hospital care, for the evaluation and management of a patient including admission and discharge on the same date, which requires these three key components: A detailed or comprehensive history; a detailed or comprehensive examination; and medical decision making that is straightforward or of low complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually the presenting problem(s) requiring admission are of low severity. Typically, 40 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99235 (observation or inpatient hospital care, for the evaluation and management of a patient including admission and discharge on the same date, which requires these three key components: A comprehensive history; a comprehensive examination; and medical decision making of moderate complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually the presenting problem(s) requiring admission are of moderate severity. Typically, 50 minutes are spent at the bedside and on the patient's hospital floor or unit);

• 99236 (observation or inpatient hospital care, for the evaluation and management of a patient including admission and discharge on the same date, which requires these three key components: A comprehensive history; a comprehensive examination; and medical decision making of high complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually the presenting problem(s) requiring admission are of high severity. Typically, 55 minutes are spent at the bedside and on the patient's hospital floor or unit);

The request to add these observation services referenced various studies supporting the use of observation units. The studies indicated that observation units provide safe, cost effective care to patients that need ongoing evaluation and treatment beyond the emergency department visit by having reduced hospital admissions, shorter lengths of stay, increased safety and reduced cost. Additional studies cited indicated that observation units reduce the work load on emergency department physicians, and reduce emergency department overcrowding.

In the CY 2005 PFS proposed rule (69 FR 47510), we considered a request but did not propose to add the observation CPT codes 99217-99220 to the list of Medicare telehealth services on a category two basis for the reasons described in that rule. The most recent request did not include any information that would cause us to question the previous evaluation under the category one criterion, which has not changed, regarding the significant differences in patient acuity between these services and services on the telehealth list. (69 FR 66277) While the request included evidence of the general benefits of observation units, it did not include specific information demonstrating that the services described by these codes provided clinical benefit when furnished via telehealth, which is necessary for us to consider these codes on a category two basis. Therefore, we are not proposing to add these services to the list of approved telehealth services.

b. Emergency Department Visits: CPT Codes—

• 99281 (emergency department visit for the evaluation and management of a patient, which requires these three key components: A problem focused history; a problem focused examination; and straightforward medical decision making. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the presenting problem(s) are self-limited or minor);

• 99282 (emergency department visit for the evaluation and management of a patient, which requires these three key components: An expanded problem focused history; an expanded problem focused examination; and medical decision making of low complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the presenting problem(s) are of low to moderate severity);

• 99283 (emergency department visit for the evaluation and management of a patient, which requires these three key components: An expanded problem focused history; an expanded problem focused examination; and medical decision making of moderate complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the presenting problem(s) are of moderate severity);

• 99284 (emergency department visit for the evaluation and management of a patient, which requires these three key components: A detailed history; a detailed examination; and medical decision making of moderate complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the presenting problem(s) are of high severity, and require urgent evaluation by the physician, or other qualified health care professionals but do not pose an immediate significant threat to life or physiologic function); and

• 99285 (emergency department visit for the evaluation and management of a patient, which requires these three key components within the constraints imposed by the urgency of the patient's clinical condition and mental status: A comprehensive history; a comprehensive examination; and medical decision making of high complexity. Counseling and coordination of care with other physicians, other qualified health care professionals, or agencies are provided consistent with the nature of the problem(s) and the patient's and family's needs. Usually, the presenting problem(s) are of high severity and pose an immediate significant threat to life or physiologic function).

In the CY 2005 PFS proposed rule (69 FR 47510), we considered a request but did not propose to add the emergency department visit CPT codes 99281-99285 to the list of Medicare telehealth services for the reasons described in that rule.

The current request to add the emergency department E/M services stated that the codes are similar to outpatient visit codes (CPT codes 99201-99215) that have been on the telehealth list since CY 2002. As we noted in the CY 2005 PFS final rule, while the acuity of some patients in the emergency department might be the same as in a physician's office; we believe that, in general, more acutely ill patients are more likely to be seen in the emergency department, and that difference is part of the reason there are separate codes describing evaluation and management visits in the Emergency Department setting. The practice of emergency medicine often requires frequent and fast-paced patient reassessments, rapid physician interventions, and sometimes the continuous physician interaction with ancillary staff and consultants. This work is distinctly different from the pace, intensity, and acuity associated with visits that occur in the office or outpatient setting. Therefore, we are not proposing to add these services to the list of approved telehealth services on a category one basis.

The requester did not provide any studies supporting the clinical benefit of managing emergency department patients with telehealth which is necessary for us to consider these codes on a category two basis. Therefore, we are not proposing to add these services to the list of approved telehealth services on a category two basis.

Many requesters of additions to the telehealth list urged us to consider the potential value of telehealth for providing beneficiaries access to needed expertise. We note that if clinical guidance or advice is needed in the emergency department setting, a consultation may be requested from an appropriate source, including consultations that are currently included on the list of telehealth services.

c. Critical Care Evaluation and Management: CPT Codes—

• 99291 (critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); and 99292 (critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (list separately in addition to code for primary service).

We previously considered and rejected adding these codes to the list of Medicare telehealth services in the CY 2009 PFS final rule (74 FR 69744) on a category 1 basis because, due to the acuity of critically ill patients, we did not believe critical care services are similar to any services on the current list of Medicare telehealth services. In that rule, we said that critical care services must be evaluated as category 2 services. Because we considered critical care services under category 2, we needed to evaluate whether these are services for which telehealth can be an adequate substitute for a face-to-face encounter, based on the category 2 criteria at the time of that request. We had no evidence suggesting that the use of telehealth could be a reasonable surrogate for the face-to-face delivery of this type of care.

The American Telemedicine Association (ATA) submitted a new request for CY 2016 that cited several studies to support adding these services on a category 2 basis. To qualify under category 2, we would need evidence that the service furnished via telehealth is still described accurately by the requested code and produces a clinical benefit for the patient via telehealth. However, in reviewing the information provided by the ATA and a study titled, “Impact of an Intensive Care Unit Telemedicine Program on Patient Outcomes in an Integrated Health Care System,” published July 2014 in

JAMA Internal Medicine,

which found no evidence that the implementation of ICU telemedicine significantly reduced mortality rates or hospital length of stay, which could be indicators of clinical benefit. Therefore, we stated that we do not believe that the submitted evidence demonstrates a clinical benefit to patients. Therefore, we did not propose to add these services on a category 2 basis to the list of Medicare telehealth services for CY 2016 (80 FR 71061).

This year, requesters cited additional studies to support adding critical care

services on a category 2 basis. Eight of the studies dealt with telestroke and one with teleneurology. Telestroke is an approach that allows a neurologist to provide remote treatment to vascular stroke victims. Teleneurology offers consultations for neurological problems from a remote location. It may be initiated by a physician or a patient, for conditions such as headaches, dementia, strokes, multiple sclerosis and epilepsy.

However, according to the literature, the management of stroke via telehealth requires more than a single practitioner and is distinct from the work described by the E/M codes. One additional study cited involved pediatric patients, while another noted that the Department of Defense has used telehealth to provide critical care services to hospitals in Guam for many years. Another reference study indicated that consulting intensivists thought that telemedicine consultations were superior to telephone consultations. In all of these cases, we believe the evidence demonstrates that interaction between these patients and distant site practitioners can have clinical benefit. However, we do not agree that the kinds of services described in the study are those that are included in the critical care E/M codes. We note that CPT guidance makes clear that a variety of other services are bundled into the payment rates for critical care, including gastric intubations and vascular access procedures among others We do not believe these kinds of services are furnished via telehealth. Public comments, included cited studies, can be viewed at

https://www.regulations.gov/#!documentDetail;D=CMS-2015-0081-0002

. Therefore, we are not proposing to add these services to the list of Medicare telehealth services for CY 2017.

However, we are persuaded by the requests that we recognize the potential benefit of critical care consultation services that are furnished remotely. We note that there are currently codes on the telehealth list that could be reported when consultation services are furnished to critically ill patients. But in consideration of these public requests, we recognize that there may be greater resource costs involved in furnishing these services relative to the existing telehealth consultation codes. We also agree with the requesters that there may be potential benefits of remote care by specialists for these patients. For these reasons, we think it would be advisable to create a coding distinction between telehealth consultations for critically ill patients relative to telehealth consultations for other hospital patients. Such a coding distinction would allow us to recognize the additional resource costs in terms of time and intensity involved in furnishing such services under the conditions where remote, intensive consultation is required to provide access to appropriate care for the critically ill patient. We recognize that the current set of codes may not adequately describe such services because current E/M coding presumes that the services are occurring in-person, in which case the expert care would be furnished in a manner described by the current codes for critical care.

Therefore, we are proposing to make payment through new codes, initial and subsequent, used to describe critical care consultations furnished via telehealth. This coding would provide a mechanism to report an intensive telehealth consultation service, initial or subsequent, for the critically ill patient under the circumstance when a qualified health care professional has in-person responsibility for the patient but the patient benefits from additional services from a distant-site consultant specially trained in providing critical care services. We propose limiting these services to once per day per patient. Like the other telehealth consultations, these services would be valued relative to existing E/M services (see Section II.L.2.b for proposed code valuations).

More details on the new coding (GTTT1 and GTTT2) and proposed valuation for these services are discussed in section II.L. of this proposed rule and the proposed RVUs for this service are included in Addendum B of this proposed rule. Like the other telehealth consultation codes, we are proposing that these services would be added to the telehealth list and would be subject to the geographic and other statutory restrictions that apply to telehealth services.

We request comment on this proposal, specifically as to whether the use of new coding would create a helpful distinction between telehealth consultations for critically ill patients relative to telehealth consultations for other hospital patients. We are also specifically interested in comments on how these services would be distinguished from existing critical care services and examples of different scenarios when each code would be appropriate. Such comments will help us to refine provider communication materials.

d. Psychological Testing: CPT Codes—

• 96101 (psychological testing (includes psychodiagnostic assessment of emotionality, intellectual abilities, personality and psychopathology,

e.g.,

MMPI, Rorschach, WAIS), per hour of the psychologist's or physician's time, both face-to-face time administering tests to the patient and time interpreting these test results and preparing the report);

• 96102 psychological testing (includes psychodiagnostic assessment of emotionality, intellectual abilities, personality and psychopathology,

e.g.,

MMPI and WAIS), with qualified health care professional interpretation and report, administered by technician, per hour of technician time, face-to-face);

• 96118 Neuropsychological testing (

e.g.,

Halstead-Reitan neuropsychological battery, Wechsler memory scales and Wisconsin card sorting test), per hour of the psychologist's or physician's time, both face-to-face time administering tests to the patient and time interpreting these test results and preparing the report); and,

• 96119 Neuropsychological testing (

e.g.,

Halstead-Reitan neuropsychological battery, Wechsler memory scales and Wisconsin card sorting test), with qualified health care professional interpretation and report, administered by technician, per hour of technician time, face-to-face).

Requesters indicated that there is nothing in the Minnesota Multiphasic Personality Inventory (MMPI), the Rorschach inkblot test, the Wechsler Adult Intelligence Scale (WAIS), the Halstead-Reitan Neuropsychological Battery and Allied Procedures, or the Wisconsin Card Sorting Test (WCST), that cannot be done via telehealth nor is different than neurological tests done for Parkinson's disease, seizure medication side effects, gait assessment, nor any of the many neurological examinations done via telehealth with the approved outpatient office visit and inpatient visit CPT codes currently on the telehealth list. As an example, requesters indicated that the MPPI is administered by a computer, which generates a report that is interpreted by the clinical psychologist, and that the test requires no interaction between the clinician and the patient.

We previously considered the request to add these codes to the Medicare telehealth list in the CY 2015 final rule (79 FR 67600). We decided not to add these codes, indicating that these services are not similar to other services on the telehealth list because they require close observation of how a patient responds. We noted that the requesters did not submit evidence supporting the clinical benefit of furnishing these services via telehealth so that we could evaluate them on a

category 2 basis. While we acknowledge that requesters believe that some of these tests require minimal, if any, interaction between the clinician and patient, we disagree. We continue to believe that successful completion of the tests listed as examples in these codes require the clinical psychologist to closely observe the patient's response, which cannot be performed via telehealth. Some patient responses, for example, sweating and fine tremors, may be missed when the patient and examiner are not in the same room. Therefore, we are not proposing to add these services to the list of Medicare telehealth services for CY 2017.

e. Physical and Occupational Therapy and Speech-Language Pathology Services: CPT Codes—

• 92507 (treatment of speech, language, voice, communication, and auditory processing disorder; individual); and, 92508 (treatment of speech, language, voice, communication, and auditory processing disorder; group, 2 or more individuals); 92521 (evaluation of speech fluency (

e.g.,

stuttering, cluttering)); 92522 (evaluation of speech sound production (

e.g.,

articulation, phonological process, apraxia, dysarthria)); 92523 (evaluation of speech sound production (

e.g.,

articulation, phonological process, apraxia, dysarthria); with evaluation of language comprehension and expression (

e.g.,

receptive and expressive language)); 92524 (behavioral and qualitative analysis of voice and resonance); (evaluation of oral and pharyngeal swallowing function); 92526 (treatment of swallowing dysfunction or oral function for feeding); 92610 (evaluation of oral and pharyngeal swallowing function); CPT codes 97001 (physical therapy evaluation); 97002 (physical therapy re-evaluation); 97003 (occupational therapy evaluation); 97004 (occupational therapy re-evaluation); 97110 (therapeutic procedure, 1 or more areas, each 15 minutes; therapeutic exercises to develop strength and endurance, range of motion and flexibility); 97112 (therapeutic procedure, 1 or more areas, each 15 minutes; neuromuscular reeducation of movement, balance, coordination, kinesthetic sense, posture, or proprioception for sitting or standing activities); 97116 (therapeutic procedure, 1 or more areas, each 15 minutes; gait training (includes stair climbing)); 97532 (development of cognitive skills to improve attention, memory, problem solving (includes compensatory training), direct (one-on-one) patient contact, each 15 minutes); 97533 (sensory integrative techniques to enhance sensory processing and promote adaptive responses to environmental demands, direct (one-on-one) patient contact, each 15 minutes); 97535 (self-care/home management training (

e.g.,

activities of daily living (adl) and compensatory training, meal preparation, safety procedures, and instructions in use of assistive technology devices/adaptive equipment) direct one-on-one contact, each 15 minutes); 97537 (community/work reintegration training (

e.g.,

shopping, transportation, money management, avocational activities or work environment/modification analysis, work task analysis, use of assistive technology device/adaptive equipment), direct one-on-one contact, each 15 minutes); 97542 (wheelchair management (

e.g.,

assessment, fitting, training), each 15 minutes); 97750 (physical performance test or measurement (

e.g.,

musculoskeletal, functional capacity), with written report, each 15 minutes); 97755 (assistive technology assessment (

e.g.,

to restore, augment or compensate for existing function, optimize functional tasks and maximize environmental accessibility), direct one-on-one contact, with written report, each 15 minutes); 97760 Orthotic(s) management and training (including assessment and fitting when not otherwise reported), upper extremity(s), lower extremity(s) and/or trunk, each 15 minutes); 97761 (prosthetic training, upper and lower extremity(s), each 15 minutes); and 97762 (checkout for orthotic/prosthetic use, established patient, each 15 minutes).

The statute defines who is an authorized practitioner of telehealth services. Physical therapists, occupational therapists and speech-language pathologists are not authorized practitioners of telehealth under section 1834(m)(4)(E) of the Act, as defined in section 1842(b)(18)(C) of the Act. Because the above services are predominantly furnished by physical therapists, occupational therapists and speech-language pathologists, we do not believe it would be appropriate to add them to the list of telehealth services at this time. One requester suggested that we can add telehealth practitioners without legislation, as evidenced by the addition of nutritional professionals. However, we do not believe we have such authority and note that nutritional professionals are included as practitioners in the definition at section 1834(b)(18)(C)(vi) of the Act, and thus, are within the statutory definition of telehealth practitioners. Therefore, we are not proposing to add these services to the list of Medicare telehealth services for CY 2017.

In summary, we propose to add the following codes to the list of Medicare telehealth services beginning in CY 2017 on a category 1 basis:

• ESRD-related services 90967 through 90970. The required clinical examination of the catheter access site must be furnished face-to-face “hands on” (without the use of an interactive telecommunications system) by a physician, CNS, NP, or PA.

• Advance care planning (CPT codes 99497 and 99498).

• Telehealth Consultations for a Patient Requiring Critical Care Services (GTTT1 and GTTT2)

We remind all interested stakeholders that we are currently soliciting public requests to add services to the list of Medicare telehealth services. To be considered during PFS rulemaking for CY 2018, these requests must be submitted and received by December 31, 2016. Each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requester wishes us to consider as we review the request. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to mail these requests, we refer readers to the CMS Web site at

https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/index.html

4. Place of Service (POS) Code for Telehealth Services

CMS has received multiple requests from various stakeholders to establish a POS code to identify services furnished via telehealth. These requests have come from other payers, but may also be related to confusion concerning whether to use the POS where the distant site physician is located or the POS where the patient is located. The process for establishing POS codes, is managed by the POS Workgroup within CMS, is available for use by all payers, and is not contingent upon Medicare PFS rulemaking. However, if such a POS code were to be created, in order to make it valid for use in Medicare, we would have to determine the appropriate payment rules associated with the code. Therefore, we are proposing how a POS code for telehealth would be used under the PFS with the expectation that, if such a code is available, it would be used as early as January 1, 2017. We propose that the physicians or practitioners furnishing telehealth services would be required to report the telehealth POS code to

indicate that the billed service is furnished as a telehealth service from a distant site.

Our proposed requirement for physicians and practitioners to use the telehealth POS code to report that telehealth services were furnished from a distant site would improve payment accuracy and consistency in telehealth claims submission. Currently, for services furnished via telehealth, we have instructed practitioners to report the POS code that would have been reported had the service been furnished in person. However, some practitioners use the POS where they are located when the service is furnished, while others use the POS corresponding to the patient's location.

Under the PFS, the POS code determines whether a service is paid using the facility or non-facility practice expense relative value units (PE RVUs). The facility rate is paid when a service is furnished in a location where Medicare is making a separate facility payment to an entity other than the physician or practitioner that is intended to reflect the facility costs associated with the service (clinical staff, supplies and equipment). We note that in accordance with section 1834(m)(2)(B) of the Act, the payment amount for the telehealth facility fee paid to the originating site is a national fee, paid without geographic or site of service adjustments that generally are made for payments to different kinds of Medicare providers and suppliers. In the case of telehealth services, we believe that facility costs (clinical staff, supplies, and equipment) associated with the provision of the service would generally be incurred by the originating site, where the patient is located, and not by the practitioner at the distant site. And, by statute, the Medicare pays a fee to the site that hosts the patient. This is analogous to the circumstances under which the facility PE RVUs are used to pay for services under the PFS. Therefore, we are proposing to use the facility PE RVUs to pay for telehealth services reported by physicians or practitioners with the telehealth POS code. We note that there are only three codes on the telehealth list with a difference greater than 1.0 PE RVUs between the facility PE RVUs and the non-facility PE RVUs. The remainder of the physician payments for telehealth services would be unchanged by this proposal. We do not anticipate that this proposal would result in a significant change in the total payment for the majority of services on the telehealth list. Moreover, many practitioners already use a facility POS when billing for telehealth services (those that report the POS of the originating site where the beneficiary is located). The proposed policy to use the telehealth POS code for telehealth services would not affect payment for telehealth services for these practitioners.

The POS code for telehealth would not apply to originating sites billing the facility fee. Originating sites are not furnishing a service via telehealth since the patient is physically present in the facility. Accordingly, the originating site would continue to use the POS code that applies to the type of facility where the patient is located.

We are also proposing a change to our regulation at § 414.22(b)(5)(i)(A) that addresses the PE RVUs used in different settings. These proposed revisions would improve clarity regarding our current and proposed policies. Specifically, we are proposing to amend this section to specify that the facility PE RVUs are paid for practitioner services furnished via telehealth under § 410.78. In addition, we are proposing a change to resolve any potential ambiguity and clarify that payment under the PFS is made at the facility rate (facility PE RVUs) when services are furnished in a hospital but for which the hospital is not being paid. Finally, to streamline the existing regulation, we are also proposing to delete § 414.32 of our regulation that refers to the calculating of payments for certain services prior to 2002.

This proposed change is aligned with regulatory changes being proposed in the “Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Organ Procurement Organization Reporting and Communication; Transplant Outcome Measures and Documentation Requirements; Electronic Health Record (EHR) Incentive Programs; Payment to Certain Off-Campus Provider-Based Departments” proposed rule to implement section 603 of the Bipartisan Budget Act of 2015. In that proposed rule, we discuss payment rates for services furnished to patients in off-campus provider-based departments.

D. Potentially Misvalued Services Under the Physician Fee Schedule

1. Background

Section 1848(c)(2)(B) of the Act directs the Secretary to conduct a periodic review, not less often than every 5 years, of the RVUs established under the PFS. Section 1848(c)(2)(K) of the Act requires the Secretary to periodically identify potentially misvalued services using certain criteria and to review and make appropriate adjustments to the relative values for those services. Section 1848(c)(2)(L) to the Act also requires the Secretary to develop a process to validate the RVUs of certain potentially misvalued codes under the PFS, using the same criteria used to identify potentially misvalued codes, and to make appropriate adjustments.

As discussed in section II.B. of this proposed rule, each year we develop appropriate adjustments to the RVUs taking into account recommendations provided by the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC), the Medicare Payment Advisory Commission (MedPAC), and others. For many years, the RUC has provided us with recommendations on the appropriate relative values for new, revised, and potentially misvalued PFS services. We review these recommendations on a code-by-code basis and consider these recommendations in conjunction with analyses of other data, such as claims data, to inform the decision-making process as authorized by the law. We may also consider analyses of work time, work RVUs, or direct PE inputs using other data sources, such as Department of Veteran Affairs (VA), National Surgical Quality Improvement Program (NSQIP), the Society for Thoracic Surgeons (STS), and the Physician Quality Reporting System (PQRS) databases. In

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