Medicare Program; CY 2020 Revisions to Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment Policies; Medicare Shared Savings Program Requirements; Medicaid Promoting Interoperability Program Requirements for Eligible Professionals; Establishment of an Ambulance Data Collection System; Updates to the Quality Payment Program; Medicare Enrollment of Opioid Treatment Programs and Enhancements to Provider Enrollment Regulations Concerning Improper Prescribing and Patient Harm; and Amendments to Physician Self-Referral Law Advisory Opinion Regulations

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 403, 410, 414, 415, 416, 418, 424, 425, 489, and 498

[CMS-1715-P]

RIN 0938-AT72

Medicare Program; CY 2020 Revisions to Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment Policies; Medicare Shared Savings Program Requirements; Medicaid Promoting Interoperability Program Requirements for Eligible Professionals; Establishment of an Ambulance Data Collection System; Updates to the Quality Payment Program; Medicare Enrollment of Opioid Treatment Programs and Enhancements to Provider Enrollment Regulations Concerning Improper Prescribing and Patient Harm; and Amendments to Physician Self-Referral Law Advisory Opinion Regulations

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This major proposed rule addresses: Changes to the physician fee schedule (PFS); other changes to Medicare Part B payment policies to ensure that payment systems are updated to reflect changes in medical practice, relative value of services, and changes in the statute; Medicare Shared Savings Program quality reporting requirements; Medicaid Promoting Interoperability Program requirements for eligible professionals; the establishment of an ambulance data collection system; updates to the Quality Payment Program; Medicare enrollment of Opioid Treatment Programs and enhancements to provider enrollment regulations concerning improper prescribing and patient harm; and amendments to Physician Self-Referral Law advisory opinion regulations.

DATES:

Comment date:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on September 27, 2019.

ADDRESSES:

In commenting, please refer to file code CMS-1715-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

1.

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov

. Follow the “Submit a comment” instructions.

2.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1715-P, P.O. Box 8016, Baltimore, MD 21244-8016.

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

3.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1715-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FURTHER INFORMATION CONTACT:

Jamie Hermansen, (410) 786-2064, for any issues not identified below.

Michael Soracoe, (410) 786-6312, for issues related to practice expense, work RVUs, conversion factor, and impacts.

Geri Mondowney, (410) 786-1172, or Tourette Jackson, (410) 786-4735, for issues related to malpractice RVUs and geographic practice cost indicies (GPCIs).

Larry Chan, (410) 786-6864, for issues related to potentially misvalued services under the PFS.

Lindsey Baldwin, (410) 786-1694, or Emily Yoder, (410) 786-1804, for issues related to telehealth services.

Pierre Yong, (410) 786-8896, or Lindsey Baldwin, (410) 786-1694, for issues related to Medicare coverage of opioid use disorder treatment services furnished by opioid treatment programs (OTPs).

Lindsey Baldwin, (410) 786-1694, for issues related to bundled payments under the PFS for substance use disorders.

Emily Yoder, (410) 786-1804, or Christiane LaBonte, (410) 786-7237, for issues related to the comment solicitation on opportunities for bundled payments under the PFS.

Regina Walker-Wren, (410) 786-9160, for issues related to physician supervision for physician assistant (PA) services and review and verification of medical record documentation.

Ann Marshall, (410) 786-3059, Emily Yoder, (410) 786-1804, Liane Grayson, (410) 786-6583, or Christiane LaBonte, (410) 786-7237, for issues related to care management services.

Kathy Bryant, (410) 786-3448, for issues related to coinsurance for colorectal cancer screening tests.

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

Ann Marshall, (410) 786-3059, Emily Yoder, (410) 786-1804, or Christiane LaBonte, (410) 786-7237, for issues related to payment for evaluation and management services.

Kathy Bryant, (410) 786-3448, for issues related to global surgery data collection.

Thomas Kessler, (410) 786-1991, for issues related to ambulance physician certification statement.

Felicia Eggleston, (410) 786-9287, or Amy Gruber, (410) 786-1542, for issues related to the ambulance fee schedule-BBA of 2018 requirements for Medicare ground ambulance services data collection system.

Linda Gousis, (410) 786-8616, for issues related to intensive cardiac rehabilitation.

David Koppel, (303) 844-2883, or Elizabeth LeBreton, (202) 615-3816, for issues related to the Medicaid Promoting Interoperability Program.

Fiona Larbi, (410) 786-7224, for issues related to the Medicare Shared Savings Program (Shared Savings Program) Quality Measures.

Katie Mucklow, (410) 786-0537, or Diana Behrendt, (410) 786-6192, for issues related to open payments.

Cheryl Gilbreath, (410) 786-5919, for issues related to home infusion therapy benefit.

Joseph Schultz, (410) 786-2656, for issues related to Medicare enrollment of opioid treatment programs, and enhancements to provider enrollment regulations concerning improper prescribing and patient harm.

Jacqueline Leach, (410) 786-4282, for issues related to Deferring to State Scope of Practice Requirements: Ambulatory Surgical Centers (ASC).

Mary Rossi-Coajou, (410) 786-6051, for issues related to Deferring to State Scope of Practice Requirements: Hospice.

1877AdvisoryOpinion@cms.hhs.gov

, for issues related to Advisory Opinions on Application of the Physician Self-referral law.

Molly MacHarris, (410) 786-4461, for inquiries related to Merit-based Incentive Payment System (MIPS).

Megan Hyde, (410) 786-3247, for inquiries related to Alternative Payment Models (APMs).

SUPPLEMENTARY INFORMATION:

Addenda Available Only Through the Internet on the CMS Website

The PFS Addenda along with other supporting documents and tables referenced in this proposed rule are available on the CMS website 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 2020 PFS proposed rule, refer to item CMS-1715-P. Readers with questions related to accessing any of the Addenda or other supporting documents referenced in this proposed rule and posted on the CMS website identified above should contact Jamie Hermansen at (410) 786-2064.

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 2019 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

A. Purpose

This major proposed rule proposes to revise payment polices under the Medicare PFS and make other policy changes, including proposals to implement certain provisions of the Bipartisan Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123, February 9, 2018) and the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (the SUPPORT Act) (Pub. L. 115-271, October 24, 2018), related to Medicare Part B payment, applicable to services furnished in CY 2020 and thereafter. In addition, this proposed rule includes proposals related to payment policy changes that are addressed in section III. of this proposed rule. We are requesting public comments on all of the proposals being made in this proposed rule.

1. 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. In addition, the statute requires 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 2020 for the PFS 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 discussions and proposals regarding several other Medicare Part B payment policies, Medicare Shared Savings Program quality reporting requirements, Medicaid Promoting Interoperability Program requirements for eligible professionals, the establishment of an ambulance data collection system, updates to the Quality Payment Program, Medicare enrollment of Opioid Treatment Programs and enhancements to provider enrollment regulations concerning improper prescribing and patient harm; and amendments to Physician Self-Referral Law advisory opinion regulations. This proposed rule addresses:

• Practice Expense RVUs (section II.B.)

• Malpractice RVUs (section II.C.)

• Geographic Practice Cost Indices (GPCIs) (section II.D.)

• Potentially Misvalued Services Under the PFS (section II.E.)

• Telehealth Services (section II.F.)

• Medicare Coverage for Opioid Use Disorder Treatment Services Furnished by Opioid Treatment Programs (section II.G.)

• Bundled Payments Under the PFS for Substance Use Disorders (section II.H.)

• Physician Supervision for Physician Assistant (PA) Services (section II.I.)

• Review and Verification of Medical Record Documentation (section II.J.)

• Care Management Services (section II.K.)

• Coinsurance for Colorectal Cancer Screening Tests (section II.L.)

• Therapy Services (section II.M.)

• Valuation of Specific Codes (section II.N.)

• Comment Solicitation on Opportunities for Bundled Payments Under the PFS (section II.O.)

• Payment for Evaluation and Management (E/M) Services (section II.P.)

• Ambulance Coverage Services—Physician Certification Statement (section III.A.)

• Ambulance Fee Schedule—Medicare Ground Ambulance Services Data Collection System (section III.B.)

• Intensive Cardiac Rehabilitation (section III.C.)

• Medicaid Promoting Interoperability Program Requirements for Eligible Professionals (EPs) (section III.D.)

• Medicare Shared Savings Program Quality Measures (section III.E.)

• Open Payments (section III.F.)

• Home Infusion Therapy Benefit (section III.G.)

• Medicare Enrollment of Opioid Treatment Programs and Enhancements to Existing General Enrollment Policies Related to Improper Prescribing and Patient Harm (section III.H.)

• Deferring to State Scope of Practice Requirements (section III.I.)

• Advisory Opinions on the Application of the Physician Self-Referral Law (section III.J.)

• Updates to the Quality Payment Program (section III.K.)

2. Summary of Costs and Benefits

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.

II. Provisions of the Proposed Rule for the PFS

A. Background

Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Act, “Payment for Physicians' Services.” The PFS relies on national relative values that are established for work, practice expense (PE), and malpractice (MP), which are adjusted for geographic cost variations. These values are multiplied by a conversion factor (CF) to convert the relative value units (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 in the November 25, 1991

Federal Register

(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 the services they furnish to Medicare beneficiaries.

1. Development of the RVUs

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 Scale 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 MP 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 of 1997) delayed implementation of the resource-based PE RVU system until January 1, 1999. In addition, section 4505(b) of the BBA of 1997 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 the November 2, 1998 final rule (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 PFS 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 resource 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 specific facility resource costs 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 of 1997 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' MP insurance premium data from all the states, the District of Columbia, and Puerto Rico. For more information on MP RVUs,

see

section II.C. of this proposed rule, Determination of Malpractice Relative Value Units.

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 5-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 5-year reviews, beginning for CY 2009, CMS and the RUC 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, that require 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. of this proposed rule, the Regulatory Impact Analysis, 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 do 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. Please refer to the CY 2017 PFS final rule with comment period for a discussion of the last GPCI update (81 FR 80261 through 80270).

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 PFS 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 CF, 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 CF 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.

B. Determination of PE 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 MP 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 5-year review of work relative value units under the PFS and proposed changes to the practice expense methodology CY 2007 PFS 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 PE/HR by specialty that was obtained from the AMA's 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 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 use crosswalks for specialties that did not participate in the PPIS. These crosswalks have been generally established through notice and comment rulemaking and are available in the file called “CY 2020 PFS Proposed Rule PE/HR” on the CMS website under downloads for the CY 2020 PFS proposed rule at

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

For CY 2020, we have incorporated the available utilization data for two new specialties, each of which became a recognized Medicare specialty during 2018. These specialties are Medical Toxicology and Hematopoietic Cell Transplantation and Cellular Therapy. We are proposing to use proxy PE/HR values for these new specialties, as there are no PPIS data for these specialties, by crosswalking the PE/HR as follows from specialties that furnish similar services in the Medicare claims data:

• Medical Toxicology from Emergency Medicine; and

• Hematopoietic Cell Transplantation and Cellular Therapy from Hematology/Oncology.

These updates are reflected in the “CY 2020 PFS Proposed Rule PE/HR” file available on the CMS website under the supporting data files for the CY 2020 PFS proposed rule at

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

c. Allocation of PE to Services

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

(1) Direct Costs

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

(2) Indirect Costs

We allocate the indirect costs at 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 incorporate the survey data described earlier in the PE/HR discussion. The general approach to developing the indirect portion of the PE RVUs is as follows:

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

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

• Next, we incorporate the specialty-specific indirect PE/HR data into the calculation. In our example, if, based on the survey data, the average indirect cost of the specialties furnishing the first service with an allocator of 10.00 was half of the average indirect cost of the specialties furnishing the second service with an indirect allocator of 5.00, the indirect portion of the PE RVUs of the first service would be equal to that of the second service.

(3) Facility and Nonfacility Costs

For procedures that can be furnished in a physician's office, as well as in a facility setting, where Medicare makes a separate payment to the facility for its costs in furnishing a service, 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.

(4) Services With Technical Components and Professional Components

Diagnostic services are generally comprised of two components: A professional component (PC); and a technical component (TC). The PC and TC may be furnished independently or by different providers, or they may be

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

(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 readers to the file called “Calculation of PE RVUs under Methodology for Selected Codes” which is available on our website under downloads for the CY 2020 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 in this proposed rule for individual 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 projected 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, use the CF to calculate a direct PE scaling adjustment to ensure that the aggregate pool of direct PE costs calculated in Step 3 does not vary from the aggregate pool of direct PE costs for the current year. Apply the scaling adjustment to the direct costs for each service (as calculated in Step 1).

Step 5:

Convert the results of Step 4 to a 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 4 and Step 5. Different CFs would result in different direct PE scaling adjustments, but this has no effect on the final direct cost PE RVUs since changes in the CFs and changes in the associated direct scaling adjustments offset one another.

(c) Create the Indirect Cost PE RVUs

Create indirect allocators.

Step 6:

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

Step 7:

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

We generally use an average of the 3 most recent years of available Medicare claims data to determine the specialty mix assigned to each code. Codes with low Medicare service volume require special attention since billing or enrollment irregularities for a given year can result in significant changes in specialty mix assignment. We finalized a policy in the CY 2018 PFS final rule (82 FR 52982 through 59283) to use the most recent year of claims data to determine which codes are low volume for the coming year (those that have fewer than 100 allowed services in the Medicare claims data). For codes that fall into this category, instead of assigning specialty mix based on the specialties of the practitioners reporting the services in the claims data, we instead use the expected specialty that we identify on a list developed based on medical review and input from expert stakeholders. We display this list of expected specialty assignments as part of the annual set of data files we make available as part of notice and comment rulemaking and consider recommendations from the RUC and other stakeholders on changes to this list on an annual basis. Services for which the specialty is automatically assigned based on previously finalized policies under our established methodology (for example, “always therapy” services) are unaffected by the list of expected specialty assignments. We also finalized in the CY 2018 PFS final rule (82 FR 52982 through 59283) a policy to apply these service-level overrides for both PE and MP, rather than one or the other category.

For CY 2020, we are proposing to clarify the expected specialty assignment for a series of cardiothoracic services. Prior to the creation of the expected specialty list for low volume services in CY 2018, we previously finalized through rulemaking a crosswalk to the thoracic surgery specialty for a series of cardiothoracic services that typically had fewer than 100 services reported each year (

see,

for example, the CY 2012 PFS final rule (76 FR 73188-73189)). However, we noted that for many of the affected codes, the expected specialty list for low volume services incorrectly listed a crosswalk to the cardiac surgery specialty instead of the thoracic surgery specialty. We are proposing to update the expected specialty list to accurately reflect the previously finalized crosswalk to thoracic surgery for these services. The affected codes are shown in Table 1.

Table 1—Proposed Updates to Expected Specialty

CPT code

CY 2019 expected specialty

Updated CY 2020 expected specialty

33414

Cardiac Surgery

Thoracic Surgery.

33468

Cardiac Surgery

Thoracic Surgery.

33470

Cardiac Surgery

Thoracic Surgery.

33471

Cardiac Surgery

Thoracic Surgery.

33476

Cardiac Surgery

Thoracic Surgery.

33478

Cardiac Surgery

Thoracic Surgery.

33502

Cardiac Surgery

Thoracic Surgery.

33503

Cardiac Surgery

Thoracic Surgery.

33504

Cardiac Surgery

Thoracic Surgery.

33505

Cardiac Surgery

Thoracic Surgery.

33506

Cardiac Surgery

Thoracic Surgery.

33507

Cardiac Surgery

Thoracic Surgery.

33600

Cardiac Surgery

Thoracic Surgery.

33602

Cardiac Surgery

Thoracic Surgery.

33606

Cardiac Surgery

Thoracic Surgery.

33608

Cardiac Surgery

Thoracic Surgery.

33610

Cardiac Surgery

Thoracic Surgery.

33611

Cardiac Surgery

Thoracic Surgery.

33612

Cardiac Surgery

Thoracic Surgery.

33615

Cardiac Surgery

Thoracic Surgery.

33617

Cardiac Surgery

Thoracic Surgery.

33619

Cardiac Surgery

Thoracic Surgery.

33620

Cardiac Surgery

Thoracic Surgery.

33621

Cardiac Surgery

Thoracic Surgery.

33622

Cardiac Surgery

Thoracic Surgery.

33645

Cardiac Surgery

Thoracic Surgery.

33647

Cardiac Surgery

Thoracic Surgery.

33660

Cardiac Surgery

Thoracic Surgery.

33665

Cardiac Surgery

Thoracic Surgery.

33670

Cardiac Surgery

Thoracic Surgery.

33675

Cardiac Surgery

Thoracic Surgery.

33676

Cardiac Surgery

Thoracic Surgery.

33677

Cardiac Surgery

Thoracic Surgery.

33684

Cardiac Surgery

Thoracic Surgery.

33688

Cardiac Surgery

Thoracic Surgery.

33690

Cardiac Surgery

Thoracic Surgery.

33692

Cardiac Surgery

Thoracic Surgery.

33694

Cardiac Surgery

Thoracic Surgery.

33697

Cardiac Surgery

Thoracic Surgery.

33702

Cardiac Surgery

Thoracic Surgery.

33710

Cardiac Surgery

Thoracic Surgery.

33720

Cardiac Surgery

Thoracic Surgery.

33722

Cardiac Surgery

Thoracic Surgery.

33724

Cardiac Surgery

Thoracic Surgery.

33726

Cardiac Surgery

Thoracic Surgery.

33730

Cardiac Surgery

Thoracic Surgery.

33732

Cardiac Surgery

Thoracic Surgery.

33735

Cardiac Surgery

Thoracic Surgery.

33736

Cardiac Surgery

Thoracic Surgery.

33737

Cardiac Surgery

Thoracic Surgery.

33750

Cardiac Surgery

Thoracic Surgery.

33755

Cardiac Surgery

Thoracic Surgery.

33762

Cardiac Surgery

Thoracic Surgery.

33764

Cardiac Surgery

Thoracic Surgery.

33766

Cardiac Surgery

Thoracic Surgery.

33767

Cardiac Surgery

Thoracic Surgery.

33768

Cardiac Surgery

Thoracic Surgery.

33770

Cardiac Surgery

Thoracic Surgery.

33771

Cardiac Surgery

Thoracic Surgery.

33774

Cardiac Surgery

Thoracic Surgery.

33775

Cardiac Surgery

Thoracic Surgery.

33776

Cardiac Surgery

Thoracic Surgery.

33777

Cardiac Surgery

Thoracic Surgery.

33778

Cardiac Surgery

Thoracic Surgery.

33779

Cardiac Surgery

Thoracic Surgery.

33780

Cardiac Surgery

Thoracic Surgery.

33781

Cardiac Surgery

Thoracic Surgery.

33782

Cardiac Surgery

Thoracic Surgery.

33783

Cardiac Surgery

Thoracic Surgery.

33786

Cardiac Surgery

Thoracic Surgery.

33788

Cardiac Surgery

Thoracic Surgery.

33800

Cardiac Surgery

Thoracic Surgery.

33802

Cardiac Surgery

Thoracic Surgery.

33803

Cardiac Surgery

Thoracic Surgery.

33813

Cardiac Surgery

Thoracic Surgery.

33814

Cardiac Surgery

Thoracic Surgery.

33820

Cardiac Surgery

Thoracic Surgery.

33822

Cardiac Surgery

Thoracic Surgery.

33824

Cardiac Surgery

Thoracic Surgery.

33840

Cardiac Surgery

Thoracic Surgery.

33845

Cardiac Surgery

Thoracic Surgery.

33851

Cardiac Surgery

Thoracic Surgery.

33852

Cardiac Surgery

Thoracic Surgery.

33853

Cardiac Surgery

Thoracic Surgery.

33917

Cardiac Surgery

Thoracic Surgery.

33920

Cardiac Surgery

Thoracic Surgery.

33922

Cardiac Surgery

Thoracic Surgery.

33924

Cardiac Surgery

Thoracic Surgery.

33925

Cardiac Surgery

Thoracic Surgery.

33926

Cardiac Surgery

Thoracic Surgery.

35182

Cardiac Surgery

Thoracic Surgery.

We note that the cardiac surgery and thoracic surgery specialties are similar to one another, sharing the same PE/HR data for PE valuation and nearly identical MP risk factors for MP valuation. As a result, we do not anticipate this proposal having a discernible effect on the valuation of the codes listed above. For additional discussion on this issue, we refer readers to section II.C of this proposed rule, Malpractice. The complete list of expected specialty assignments for individual low volume services, including the assignments for the codes identified in Table 1, is available on our website under downloads for the CY 2020 PFS proposed rule at

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

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 would be allocated using the work RVUs, and for the TC service, indirect PEs would 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 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 proposed rule.)

Step 19:

Apply the phase-in of significant RVU reductions and its associated adjustment. Section 1848(c)(7) of the Act specifies that for services that are not new or revised codes, if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the applicable

adjustments in work, PE, and MP RVUs shall be phased in over a 2-year period. In implementing the phase-in, we consider a 19 percent reduction as the maximum 1-year reduction for any service not described by a new or revised code. This approach limits the year one reduction for the service to the maximum allowed amount (that is, 19 percent), and then phases in the remainder of the reduction. To comply with section 1848(c)(7) of the Act, we adjust the PE RVUs to ensure that the total RVUs for all services that are not new or revised codes decrease by no more than 19 percent, and then apply a relativity adjustment to ensure that the total pool of aggregate PE RVUs remains relative to the pool of work and MP RVUs. For a more detailed description of the methodology for the phase-in of significant RVU changes, we refer readers to the CY 2016 PFS final rule with comment period (80 FR 70927 through 70931).

(e) Setup File Information

•

Specialties excluded from ratesetting calculation:

For the purposes of calculating the PE and MP RVUs, we exclude certain specialties, such as certain NPPs 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 2.

Table 2—Specialties Excluded From Ratesetting Calculation

Specialty code

Specialty description

49

Ambulatory surgical center.

50

Nurse practitioner.

51

Medical supply company with certified orthotist.

52

Medical supply company with certified prosthetist.

53

Medical supply company with certified prosthetist-orthotist.

54

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

55

Individual certified orthotist.

56

Individual certified prosthetist.

57

Individual certified prosthetist-orthotist.

58

Medical supply company with registered pharmacist.

59

Ambulance service supplier,

e.g.,

private ambulance companies, funeral homes, etc.

60

Public health or welfare agencies.

61

Voluntary health or charitable agencies.

73

Mass immunization roster biller.

74

Radiation therapy centers.

87

All other suppliers (

e.g.,

drug and department stores).

88

Unknown supplier/provider specialty.

89

Certified clinical nurse specialist.

96

Optician.

97

Physician assistant.

A0

Hospital.

A1

SNF.

A2

Intermediate care nursing facility.

A3

Nursing facility, other.

A4

HHA.

A5

Pharmacy.

A6

Medical supply company with respiratory therapist.

A7

Department store.

A8

Grocery store.

B1

Supplier of oxygen and/or oxygen related equipment (eff. 10/2/2007).

B2

Pedorthic personnel.

B3

Medical supply company with pedorthic personnel.

B4

Rehabilitation Agency.

B5

Ocularist.

C1

Centralized Flu.

C2

Indirect Payment Procedure.

C5

Dentistry.

•

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 3 details the manner in which the modifiers are applied.

Table 3—Application of Payment Modifiers to Utilization Files

Modifier

Description

Volume adjustment

Time adjustment

80,81,82

Assistant at Surgery

16%

Intraoperative portion.

AS

Assistant at Surgery—Physician Assistant

14% (85% * 16%)

Intraoperative portion.

50 or LT and RT

Bilateral Surgery

150%

150% of work time.

51

Multiple Procedure

50%

Intraoperative portion.

52

Reduced Services

50%

50%.

53

Discontinued Procedure

50%

50%.

54

Intraoperative Care only

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

Preoperative + Intraoperative portion.

55

Postoperative Care only

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

Postoperative portion.

62

Co-surgeons

62.5%

50%.

66

Team Surgeons

33%

33%.

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

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

•

Work RVUs:

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

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 in this proposed rule.

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 would support an alternative rate.

Maintenance:

This factor for maintenance was finalized in the CY 1998 PFS final rule with comment period (62 FR 33164). As we previously stated in the CY 2016 PFS final rule with comment period (80 FR 70897), we do not believe the annual maintenance factor for all equipment is precisely 5 percent, and we concur that the current rate likely understates the true cost of maintaining some equipment. We also believe it likely overstates the maintenance costs for other equipment. When we solicited comments regarding sources of data containing equipment maintenance rates, commenters were unable to identify an auditable, robust data source that could be used by CMS on a wide scale. We do not believe that voluntary submissions regarding the maintenance costs of individual equipment items would be an appropriate methodology for determining costs. As a result, in the absence of publicly available datasets regarding equipment maintenance costs or another systematic data collection methodology for determining a different maintenance factor, we do not believe that we have sufficient information at present to propose a variable maintenance factor for equipment cost per minute pricing. 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 (

see

77 FR 68902 for a thorough discussion of this issue). 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). We are not proposing any changes to these interest rates for CY 2020. The Interest rates are listed in Table 4.

Table 4—SBA Maximum Interest Rates

Price

Useful life

years

Interest rate

(%)

<$25K

<7

7.50

$25K to $50K

<7

6.50

>$50K

<7

5.50

<$25K

7+

8.00

$25K to $50K

7+

7.00

>$50K

7+

6.00

3. Changes to Direct PE Inputs for Specific Services

This section focuses on specific PE inputs. The direct PE inputs are included in the CY 2020 direct PE input public use files, which are available on the CMS website under downloads for the CY 2020 PFS proposed rule at

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

.

a. Standardization of Clinical Labor Tasks

As we noted in the CY 2015 PFS final rule with comment period (79 FR 67640-67641), we continue to make improvements 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 level of detail 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 detailed 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 that setting and maintaining 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 simultaneously for all codes with the applicable clinical labor tasks, instead of waiting for individual codes to be reviewed.

In the CY 2016 PFS final rule with comment period (80 FR 70901), we solicited comments on the appropriate standard minutes for the clinical labor tasks associated with services that use digital technology. After consideration of comments received, we finalized standard times for clinical labor tasks associated with digital imaging at 2 minutes for “Availability of prior images confirmed”, 2 minutes for “Patient clinical information and questionnaire reviewed by technologist, order from physician confirmed and exam protocoled by radiologist”, 2 minutes for “Review examination with interpreting MD”, and 1 minute for “Exam documents scanned into PACS.” Exam completed in RIS system to generate billing process and to populate images into Radiologist work queue.” In the CY 2017 PFS final rule (81 FR 80184 through 80186), we finalized a policy 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 finalized a policy to establish 2 minutes as the standard for the simple case, 3 minutes as the standard for the intermediate case, 4 minutes as the standard for the complex case, and 5 minutes as the standard for the highly complex case. These values were based upon a review of the existing minutes assigned for this clinical labor activity; we 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 also finalized standard times for clinical labor tasks associated with pathology services in the CY 2016 PFS final rule with comment period (80 FR 70902) at 4 minutes for “Accession specimen/prepare for examination”, 0.5 minutes for “Assemble and deliver slides with paperwork to pathologists”, 0.5 minutes for “Assemble other light microscopy slides, open nerve biopsy slides, and clinical history, and present to pathologist to prepare clinical pathologic interpretation”, 1 minute for “Clean room/equipment following procedure”, 1 minute for “Dispose of remaining specimens, spent chemicals/other consumables, and hazardous waste”, and 1 minute for “Prepare, pack and transport specimens and records for in-house storage and external storage (where applicable).” We do not believe these activities would be dependent on number of blocks or batch size, and we believe that these values accurately reflect the typical time it takes to perform these clinical labor tasks.

In reviewing the RUC-recommended direct PE inputs for CY 2019, we noticed that the 3 minutes of clinical labor time traditionally assigned to the “Prepare room, equipment and supplies” (CA013) clinical labor activity were split into 2 minutes for the “Prepare room, equipment and supplies” activity and 1 minute for the “Confirm order, protocol exam” (CA014) activity. We proposed to maintain the 3 minutes of clinical labor time for the “Prepare room, equipment and supplies” activity and remove the clinical labor time for the “Confirm order, protocol exam” activity wherever we observed this pattern in the RUC-recommended direct PE inputs. Commenters explained in response that when the new version of the PE worksheet introduced the activity codes for clinical labor, there was a need to translate old clinical labor tasks into the new activity codes, and that a prior clinical labor task was split into two of the new clinical labor activity codes: CA007 (“Review patient clinical extant information and questionnaire”) in the preservice period, and CA014 (“Confirm order, protocol exam”) in the service period. Commenters stated that the same clinical labor from the old PE worksheet was now divided into the CA007 and CA014 activity codes, with a standard of 1 minute for each activity. We agreed with commenters that we would finalize the RUC-recommended 2 minutes of clinical labor time for the CA007 activity code and 1 minute for the CA014 activity code in situations where this was the case. However, when reviewing the clinical labor for the reviewed codes affected by this issue, we found that several of the codes did not include this old clinical labor task, and we also noted that several of the reviewed codes that contained the CA014 clinical labor activity code did not contain any clinical labor for the CA007 activity. In these situations, we continue to believe that in these cases the 3 total minutes of clinical staff time would be more accurately described by the CA013 “Prepare room, equipment and supplies” activity code, and we finalized these clinical labor refinements. For additional details, we direct readers to the discussion in the CY 2019 PFS final rule (83 FR 59463-59464).

Historically, the RUC has submitted a “PE worksheet” that details the recommended direct PE inputs for our use in developing PE RVUs. The format of the PE worksheet has varied over time and among the medical specialties developing the recommendations. These variations have made it difficult for both the RUC's development and our review of code values for individual codes. Beginning with its recommendations for CY 2019, the RUC has mandated the use of a new PE worksheet for purposes of their recommendation development process that standardizes the clinical labor tasks and assigns them a clinical labor activity code. We believe the RUC's use of the new PE worksheet in developing and submitting recommendations will help us to simplify and standardize the hundreds of different clinical labor tasks currently listed in our direct PE database. As we did in previous calendar years, to facilitate rulemaking for CY 2020, we are continuing to display two versions of the Labor Task Detail public use file: One version with the old listing of clinical labor tasks, and one with the same tasks crosswalked to the new listing of clinical labor activity codes. These lists are available on the CMS website under downloads for the CY 2020 PFS proposed rule at

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

.

b. 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 the review of the recommended direct PE inputs for the CY 2017 PFS proposed rule, we developed a structure that separates the scope, the associated video system, and any scope accessories that might be typical as distinct equipment items for each code. Under this approach, we proposed standalone prices for each scope, and separate prices for the video systems and accessories that are used with scopes.

(1) Scope Equipment

Beginning in the CY 2017 PFS proposed rule (81 FR 46176 through 46177), we proposed 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 scope video 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 proposed 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 proposed 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 planned to propose input prices for these equipment items through future rulemaking.

We proposed these changes only for the reviewed codes for CY 2017 that made use of scopes, along with updated prices for the equipment items related to scopes utilized by these services. We did not propose to apply these policies to codes with inputs reviewed prior to CY 2017. We also solicited comment on this separate pricing structure for scopes, scope video systems, and scope accessories, which we could consider proposing to apply to other codes in future rulemaking. We did not finalize price increases for a series of other scopes and scope accessories, as the invoices submitted for these components indicated that they are different forms of equipment with different product IDs and different prices. We did not receive any data to indicate that the equipment on the newly submitted invoices was more typical in its use than the equipment that we were currently using for pricing.

We did not make further changes to existing scope equipment in CY 2017 to allow the RUC's PE Subcommittee the opportunity to provide feedback. However, we believed there was some miscommunication on this point, as the RUC's PE Subcommittee workgroup that was created to address scope systems stated that no further action was required following the finalization of our proposal. Therefore, we made further proposals in the CY 2018 PFS proposed rule (82 FR 33961 through 33962) to continue clarifying scope equipment inputs, and sought comments regarding the new set of scope proposals. We considered creating a single scope equipment code for each of the five categories detailed in this rule: (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. Under the current classification system, there are many different scopes in each category depending on the medical specialty furnishing the service and the part of the body affected. We stated our belief that the variation between these scopes was not significant enough to warrant maintaining these distinctions, and we believed that creating and pricing a single scope equipment code for each category would help provide additional clarity. We sought public comment on the merits of this potential scope organization, as well as any pricing information regarding these five new scope categories.

After considering the comments on the CY 2018 PFS proposed rule, we did not finalize our proposal to create and price a single scope equipment code for each of the five categories previously identified. Instead, we supported the recommendation from the commenters to create scope equipment codes on a per-specialty basis for six categories of scopes as applicable, including the addition of a new sixth category of multi-channeled flexible video scopes. Our goal was to create an administratively simple scheme that would be easier to maintain and help to reduce administrative burden. In 2018, the RUC convened a Scope Equipment Reorganization Workgroup to incorporate feedback from expert stakeholders with the intention of making recommendations to us on scope organization and scope pricing. Since the workgroup was not convened in time to submit recommendations for the CY 2019 PFS rulemaking cycle, we delayed proposals for any further changes to scope equipment until CY 2020 in order to incorporate the feedback from the aforementioned workgroup.

(2) Scope Video System

We proposed in the CY 2017 PFS proposed rule (81 FR 46176 through 46177) to 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 was the “video system, endoscopy (processor, digital capture, monitor, printer, cart)” equipment item (ES031), which we proposed 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 proposed to use for this re-pricing. In response to comments, we finalized the addition of a digital capture device to the endoscopy video system (ES031) in the CY 2017 PFS final rule (81 FR 80188). We finalized our proposal to price the system at $33,391, based on component prices of $9,000 for the processor, $18,346 for the digital capture device, $2,000 for the monitor, $2,295 for the printer, and $1,750 for the cart. In the CY 2018 PFS final rule (82 FR 52991 through 52993), we outlined, but did not finalize, a proposal to add an LED light source into the cost of the scope video system (ES031), which would remove the need for a separate light source in these procedures. We also described a proposal to increase the price of the scope video system by $1,000 to cover the expense of miscellaneous small equipment associated with the system that falls below the threshold of individual equipment pricing as scope accessories (such as cables, microphones, foot pedals, etc.). With the addition of the LED light (equipment code EQ382 at a price of $1,915), the updated total price of the scope video system would be set at $36,306.

We did not finalize this updated pricing to the scope video system in CY 2018, but we did propose and finalize the updated pricing for CY 2019 to $36,306 along with changing the name of the ES031 equipment item to “scope video system (monitor, processor, digital capture, cart, printer, LED light)” to reflect the fact that the use of the ES031 scope video system is not limited to endoscopy procedures.

(3) Scope Accessories

We understand that there may be other accessories associated with the use of scopes. We finalized a proposal in the CY 2017 PFS final rule (81 FR 80188) to separately price any scope accessories outside the use of the scope video system, 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.

(4) Scope Proposals for CY 2020

The Scope Equipment Reorganization Workgroup organized by the RUC submitted detailed recommendations to CMS for consideration in the CY 2020 rule cycle, describing 23 different types of scope equipment, the HCPCS codes associated with each scope type, and a series of invoices for scope pricing. We

appreciate the information provided by the workgroup and continue to welcome additional comments and feedback from stakeholders. Based on the recommendations from the workgroup, we are proposing to establish 23 new scope equipment codes (

see

Table 5).

Table 5—CY 2020 Proposed New Scope Equipment Codes

CMS code

Proposed scope equipment description

Proposed

price

Number of

invoices

ES070

rigid scope, cystoscopy

0

ES071

rigid scope, hysteroscopy

0

ES072

rigid scope, otoscopy

0

ES073

rigid scope, nasal/sinus endoscopy

0

ES074

rigid scope, proctosigmoidoscopy

0

ES075

rigid scope, laryngoscopy

$3,966.08

5

ES076

rigid scope, colposcopy

14,500.00

1

ES077

non-channeled flexible digital scope, hysteroscopy

0

ES078

non-channeled flexible digital scope, nasopharyngoscopy

0

ES079

non-channeled flexible digital scope, bronchoscopy

0

ES080

non-channeled flexible digital scope, laryngoscopy

21,485.51

7

ES081

channeled flexible digital scope, cystoscopy

0

ES082

channeled flexible digital scope, hysteroscopy

0

ES083

channeled flexible digital scope, bronchoscopy

0

ES084

channeled flexible digital scope, laryngoscopy

18,694.39

5

ES085

multi-channeled flexible digital scope, flexible sigmoidoscopy

17,360.00

1

ES086

multi-channeled flexible digital scope, colonoscopy

38,058.81

6

ES087

multi-channeled flexible digital scope, esophagoscopy gastroscopy duodenoscopy (EGD)

0

ES088

multi-channeled flexible digital scope, esophagoscopy

34,585.35

5

ES089

multi-channeled flexible digital scope, ileoscopy

0

ES090

multi-channeled flexible digital scope, pouchoscopy

0

ES091

ultrasound digital scope, endoscopic ultrasound

0

ES092

non-video flexible scope, laryngoscopy

5,078.04

4

We note that we did not receive invoices for many of the new scope equipment items. There also was some inconsistency in the workgroup recommendations regarding the non-channeled flexible digital scope, laryngoscopy (ES080) equipment item and the non-video flexible scope, laryngoscopy (ES092) equipment item. These scopes were listed as a single equipment item in some of the workgroup materials and listed as separate equipment items in other materials. We are proposing to establish them as separate equipment items based on the submitted invoices, which demonstrated that these were two different types of scopes with distinct price points of approximately $17,000 and $5,000 respectively.

We noted a similar issue with the submitted invoices for the rigid scope, laryngoscopy (ES075) equipment item. Among the eight total invoices, five of them were clustered around a price point of approximately $4,000 while the other three invoices had prices of roughly $15,000 apiece. The invoices indicated that these prices came from two distinct types of equipment, and as a result we are proposing to consider these items separately. We are proposing to use the initial five invoices to establish a proposed price of $3,966.08 for the rigid scope, laryngoscopy (ES075) equipment item. We note that this is a close match for the current price of $3,178.08 used by the endoscope, rigid, laryngoscopy (ES010) equipment, which is the closest equivalent scope equipment. The other three invoices appear to describe a type of stroboscopy system rather than a scope, and they have an average price of $14,737. This is a reasonably close match for the price of our current stroboscoby system (ES065) equipment, which has a CY 2020 price of $17,950.28 as it transitions to a final CY 2022 destination price of $16,843.87 (

see

the 4-year pricing transition of the market-based supply and equipment pricing update discussed later in this section for more information). We believe that these invoices reinforce the value established by the market-based pricing update for the stroboscoby system carried out last year, and we are not proposing to update the price of the ES065 equipment at this time. However, we are open to feedback from stakeholders if they believe it would be more accurate to assign a price of $14,737 to the stroboscoby system based on these invoice submissions, as opposed to maintaining the current pricing transition to a CY 2022 price of $16,843.87.

For the eight new scope equipment items where we have submitted invoices for pricing, we are proposing to replace the existing scopes with the new scope equipment. We received recommendations from the RUC's scope workgroup regarding which HCPCS codes make use of the new scope equipment items, and we are proposing to make this scope replacement for approximately 100 HCPCS codes in total (

see

Table 6).

BILLING CODE 4120-01-P

EP14AU19.000

EP14AU19.001

EP14AU19.002

EP14AU19.003

BILLING CODE 4120-01-C

In all but three cases, we are proposing for the new scope equipment item to replace the existing scope with the identical amount of equipment time. For CPT codes 92612 (

Flexible endoscopic evaluation of swallowing by cine or video recording

), 92614 (

Flexible endoscopic evaluation, laryngeal sensory testing by cine or video recording

), and 92616 (

Flexible endoscopic evaluation of swallowing and laryngeal sensory testing by cine or video recording

), the current scopes in use are the FEES video system (ES027) and the FEESST video system (ES028). Since we are proposing the use of a non-channeled flexible digital scope that requires a corresponding scope video system, we are adding the ES080 equipment at the same equipment time

to these three procedures rather than replacing the ES027 and ES028 equipment. In all other cases, we are proposing to replace the current scope equipment listed in Table 6 with the new scope equipment, while maintaining the same amount of equipment time.

We identified inconsistencies with the workgroup recommendations for a small number of HCPCS codes. CPT code 45350 (

Sigmoidoscopy, flexible; with band ligation(s) (e.g., hemorrhoids)

) was recommended to include a multi-channeled flexible digital scope, flexible sigmoidoscopy (ES085), however, we noted that this CPT code does not include any scopes among its current direct PE inputs. CPT code 31595 was recommended to include a non-channeled flexible digital scope, laryngoscopy (ES080) but it no longer exists as a CPT code after having been deleted for CY 2019. CPT code 43232 (

Esophagoscopy, flexible, transoral; with transendoscopic ultrasound-guided intramural or transmural fine needle aspiration/biopsy(s)

) was recommended to include a multi-channeled flexible digital scope, esophagoscopy (ES088), but it does not include a scope amongst its direct PE inputs any longer following clarification from the same workgroup recommendations that CPT code 43232 is never performed in the nonfacility setting. In all three of these cases, we are not proposing to add one of the new scope equipment items to these procedures.

We did not receive pricing information along with the workgroup recommendations for the other 15 new scope equipment items. For CY 2020, we are proposing to establish new equipment codes for these scopes as detailed in Table 5. However, due to a lack of pricing information, we are not proposing to replace existing scope equipment with the new equipment items as we did for the other eight new scope equipment items for CY 2020. We welcome additional feedback from stakeholders regarding the pricing of these scope equipment items, especially the submission of detailed invoices with pricing data. We are proposing to transition the scopes for which we do have pricing information over to the new equipment items for CY 2020, and we look forward to engaging with stakeholders to assist in pricing and then transitioning the remaining scopes in future rulemaking.

c. Technical Corrections to Direct PE Input Database and Supporting Files

Subsequent to the publication of the CY 2019 PFS final rule, stakeholders alerted us to several clerical inconsistencies in the direct PE database. We are proposing to correct these inconsistencies as described below and reflected in the CY 2020 proposed direct PE input database displayed on the CMS website under downloads for the CY 2020 PFS proposed rule at

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

.

For CY 2020, we are proposing to address the following inconsistencies:

• The RUC's Scope Equipment Reorganization Workgroup recommended deletion of the non-facility inputs for CPT codes 43231 (

Esophagoscopy, flexible, transoral; with endoscopic ultrasound examination

) and 43232 (

Esophagoscopy, flexible, transoral; with transendoscopic ultrasound-guided intramural or transmural fine needle aspiration/biopsy(s)

). The gastroenterology specialty societies stated that these services are never performed in the non-facility setting. After our own review of these services, we agree with the workgroup's recommendation, and we are proposing to remove the non-facility direct PE inputs for these two CPT codes.

• In rulemaking for CY 2018, we reviewed a series of CPT codes describing nasal sinus endoscopy surgeries. At that time, we sought comments on whether the broader family of nasal sinus endoscopy surgery services should be subject to the special rules for multiple endoscopic procedures instead of the standard multiple procedure payment reduction. We received very few comments in response to our solicitation. In the CY 2018 PFS final rule (82 FR 53043), we indicated that we would continue to explore this option for future rulemaking. We are proposing to apply the special rule for multiple endoscopic procedures to this family of codes beginning in CY 2020. This proposal would treat this group of CPT codes consistently with other similar endoscopic procedures when codes within the CPT code family are billed together with another endoscopy service in the same family. Similar to other similar endoscopic procedure code families, we are proposing that CPT code 31231 (

Nasal endoscopy, diagnostic, unilateral or bilateral (separate procedure)

) would be the base procedure for the remainder of nasal sinus endoscopies. The codes affected by this proposal are as follows (

see

Table 7).

Table 7—Proposed Nasal Sinus Endoscopy Codes Subject to Special Rules for Multiple Endoscopic Procedures

CPT code

Short descriptor

31231

Nasal endoscopy dx.

31233

Nasal/sinus endoscopy dx.

31235

Nasal/sinus endoscopy dx.

31237

Nasal/sinus endoscopy surg.

31238

Nasal/sinus endoscopy surg.

31239

Nasal/sinus endoscopy surg.

31240

Nasal/sinus endoscopy surg.

31241

Nsl/sins ndsc w/artery lig.

31253

Nsl/sins ndsc total.

31254

Nsl/sins ndsc w/prtl ethmdct.

31255

Nsl/sins ndsc w/tot ethmdct.

31256

Exploration maxillary sinus.

31257

Nsl/sins ndsc tot w/sphendt.

31259

Nsl/sins ndsc sphn tiss rmvl.

31267

Endoscopy maxillary sinus.

31276

Nsl/sins ndsc frnt tiss rmvl.

31287

Nasal/sinus endoscopy surg.

31288

Nasal/sinus endoscopy surg.

31290

Nasal/sinus endoscopy surg.

31291

Nasal/sinus endoscopy surg.

31292

Nasal/sinus endoscopy surg.

31293

Nasal/sinus endoscopy surg.

31294

Nasal/sinus endoscopy surg.

31295

Sinus endo w/balloon dil.

31296

Sinus endo w/balloon dil.

31297

Sinus endo w/balloon dil.

31298

Nsl/sins ndsc w/sins dilat.

Special rules for multiple endoscopic procedures would apply if any of the procedures listed in Table 7 are billed together for the same patient on the same day. We apply the multiple endoscopy payment rules to a code family before ranking the family with other procedures performed on the same day (for example, if multiple endoscopies in the same family are reported on the same day as endoscopies in another family, or on the same day as a non-endoscopic procedure). If an endoscopic procedure is reported together with its base procedure, we do not pay separately for the base procedure. Payment for the base procedure is included in the payment for the other endoscopy. For additional information about the payment adjustment under the special rule for multiple endoscopic services, we refer readers to the CY 1992 PFS final rule where this policy was established (56 FR 59515) and to Pub. 100-04, Medicare Claims Processing Manual, Chapter 23 (available on the CMS website at

https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c23.pdf

).

d. 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 2020, we are proposing the following price updates for existing direct PE inputs.

We are proposing to update the price of one supply and one equipment item in response to the public submission of invoices. As these pricing updates were each part of the formal review for a code family, we are proposing that the new pricing take effect for CY 2020 for these items instead of being phased in over 4 years. For the details of these proposed price updates, please refer to Table 22, Proposed CY 2020 Invoices Received for Existing Direct PE Inputs in section II.N., Proposed Valuation of Specific Codes, of this proposed rule.

We are also proposing to update the name of the EP001 equipment item from “DNA/digital image analyzer (ACIS)” to “DNA/Digital Image Analyzer” due to clarification from stakeholders regarding the typical use of this equipment.

(1) Market-Based Supply and Equipment Pricing Update

Section 220(a) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) provides that the Secretary may collect or obtain information from any eligible professional or any other source on the resources directly or indirectly related to furnishing services for which payment is made under the PFS, and that such information may be used in the determination of relative values for services under the PFS. Such information may include the time involved in furnishing services; the amounts, types and prices of PE inputs; overhead and accounting information for practices of physicians and other suppliers, and any other elements that would improve the valuation of services under the PFS.

As part of our authority under section 1848(c)(2)(M) of the Act, we initiated a market research contract with StrategyGen to conduct an in-depth and robust market research study to update the PFS direct PE inputs (DPEI) for supply and equipment pricing for CY 2019. These supply and equipment prices were last systematically developed in 2004-2005. StrategyGen submitted a report with updated pricing recommendations for approximately 1300 supplies and 750 equipment items currently used as direct PE inputs. This report is available as a public use file displayed on the CMS website under downloads for the CY 2019 PFS final rule at

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

.

The StrategyGen team of researchers, attorneys, physicians, and health policy experts conducted a market research study of the supply and equipment items currently used in the PFS direct PE input database. Resources and methodologies included field surveys, aggregate databases, vendor resources, market scans, market analysis, physician substantiation, and statistical analysis to estimate and validate current prices for medical equipment and medical supplies. StrategyGen conducted secondary market research on each of the 2,072 DPEI medical equipment and supply items that CMS identified from the current DPEI. The primary and secondary resources StrategyGen used to gather price data and other information were:

• Telephone surveys with vendors for top priority items (Vendor Survey).

• Physician panel validation of market research results, prioritized by total spending (Physician Panel).

• The General Services Administration system (GSA).

• An aggregate health system buyers database with discounted prices (Buyers).

• Publicly available vendor resources, that is, Amazon Business, Cardinal Health (Vendors).

•

Federal Register

, current DPEI data, historical proposed and final rules prior to CY 2018, and other resources; that is, AMA RUC reports (References).

StrategyGen prioritized the equipment and supply research based on current share of PE RVUs attributable by item provided by CMS. StrategyGen developed the preliminary Recommended Price (RP) methodology based on the following rules in hierarchical order considering both data representativeness and reliability.

(1) If the market share, as well as the sample size, for the top three commercial products were available, the weighted average price (weighted by percent market share) was the reported RP. Commercial price, as a weighted average of market share, represents a more robust estimate for each piece of equipment and a more precise reference for the RP.

(2) If no data were available for commercial products, the current CMS prices were used as the RP.

GSA prices were not used to calculate the StrategyGen recommended prices, due to our concern that the GSA system curtails the number and type of suppliers whose products may be accessed on the GSA Advantage website, and that the GSA prices may often be lower than prices that are available to non-governmental purchasers. After reviewing the StrategyGen report, we proposed to adopt the updated direct PE input prices for supplies and equipment as recommended by StrategyGen.

StrategyGen found that despite technological advancements, the average commercial price for medical equipment and supplies has remained relatively consistent with the current CMS price. Specifically, preliminary data indicated that there was no statistically significant difference between the estimated commercial prices and the current CMS prices for both equipment and supplies. This cumulative stable pricing for medical equipment and supplies appears similar to the pricing impacts of non-medical technology advancements where some historically high-priced equipment (that is, desktop PCs) has been increasingly substituted with current technology (that is, laptops and tablets) at similar or lower price points. However, while there were no statistically significant differences in pricing at the aggregate level, medical specialties would experience increases or decreases in their Medicare payments if CMS were to adopt the pricing updates recommended by StrategyGen. At the service level, there may be large shifts in PE RVUs for individual codes that happened to contain supplies and/or equipment with major changes in pricing, although we note that codes with a sizable PE RVU decrease would be limited by the requirement to phase in significant reductions in RVUs, as required by section 1848(c)(7) of the Act. The phase-in requirement limits the maximum RVU reduction for codes that are not new or revised to 19 percent in any individual calendar year.

We believe that it is important to make use of the most current information available for supply and equipment pricing instead of continuing to rely on pricing information that is more than a decade old. Given the potentially significant changes in payment that would occur, both for specific services and more broadly at the specialty level, in the CY 2019 PFS proposed rule we proposed to phase in our use of the new direct PE input pricing over a 4-year period using a 25/75 percent (CY 2019), 50/50 percent (CY 2020), 75/25 percent (CY 2021), and 100/0 percent (CY 2022) split between new and old pricing. This approach is consistent with how we have previously incorporated significant new data into the calculation of PE RVUs, such as the 4-year transition period finalized in CY 2007 PFS final rule with comment period when changing to the “bottom-

up” PE methodology (71 FR 69641). This transition period will not only ease the shift to the updated supply and equipment pricing, but will also allow interested parties an opportunity to review and respond to the new pricing information associated with their services.

We proposed to implement this phase-in over 4 years so that supply and equipment values transition smoothly from the prices we currently include to the final updated prices in CY 2022. We proposed to implement this pricing transition such that one quarter of the difference between the current price and the fully phased-in price is implemented for CY 2019, one third of the difference between the CY 2019 price and the final price is implemented for CY 2020, and one half of the difference between the CY 2020 price and the final price is implemented for CY 2021, with the new direct PE prices fully implemented for CY 2022. An example of the transition from the current to the fully-implemented new pricing is provided in Table 8.

Table 8—Example of Direct PE Pricing Transition

Current Price

$100

Final Price

200

Year 1 (CY 2019) Price

125

1/4

difference between $100 and $200.

Year 2 (CY 2020) Price

150

1/3

difference between $125 and $200.

Year 3 (CY 2021) Price

175

1/2

difference between $150 and $200.

Final (CY 2022) Price

200

For new supply and equipment codes for which we establish prices during the transition years (CYs 2019, 2020 and 2021) based on the public submission of invoices, we proposed to fully implement those prices with no transition since there are no current prices for these supply and equipment items. These new supply and equipment codes would immediately be priced at their newly established values. We also proposed that, for existing supply and equipment codes, when we establish prices based on invoices that are submitted as part of a revaluation or comprehensive review of a code or code family, they will be fully implemented for the year they are adopted without being phased in over the 4-year pricing transition. The formal review process for a HCPCS code includes a review of pricing of the supplies and equipment included in the code. When we find that the price on the submitted invoice is typical for the item in question, we believe it would be appropriate to finalize the new pricing immediately along with any other revisions we adopt for the code valuation.

For existing supply and equipment codes that are not part of a comprehensive review and valuation of a code family and for which we establish prices based on invoices submitted by the public, we proposed to implement the established invoice price as the updated price and to phase in the new price over the remaining years of the proposed 4-year pricing transition. During the proposed transition period, where price changes for supplies and equipment are adopted without a formal review of the HCPCS codes that include them (as is the case for the many updated prices we proposed to phase in over the 4-year transition period), we believe it is important to include them in the remaining transition toward the updated price. We also proposed to phase in any updated pricing we establish during the 4-year transition period for very commonly used supplies and equipment that are included in 100 or more codes, such as sterile gloves (SB024) or exam tables (EF023), even if invoices are provided as part of the formal review of a code family. We would implement the new prices for any such supplies and equipment over the remaining years of the proposed 4-year transition period. Our proposal was intended to minimize any potential disruptive effects during the proposed transition period that could be caused by other sudden shifts in RVUs due to the high number of services that make use of these very common supply and equipment items (meaning that these items are included in 100 or more codes).

We believed that implementing the proposed updated prices with a 4-year phase-in would improve payment accuracy, while maintaining stability and allowing stakeholders the opportunity to address potential concerns about changes in payment for particular items. Updating the pricing of direct PE inputs for supplies and equipment over a longer time frame will allow more opportunities for public comment and submission of additional, applicable data. We welcomed feedback from stakeholders on the proposed updated supply and equipment pricing, including the submission of additional invoices for consideration.

We received many comments regarding the market-based supply and equipment pricing proposal following the publication of the CY 2019 PFS proposed rule. For a full discussion of these comments, we direct readers to the CY 2019 PFS final rule (83 FR 59475-59480). In each instance in which a commenter raised questions about the accuracy of a supply or equipment code's recommended price, the StrategyGen contractor conducted further research on the item and its price with special attention to ensuring that the recommended price was based on the correct item in question and the clarified unit of measure. Based on the commenters' requests, the StrategyGen contractor conducted an extensive examination of the pricing of any supply or equipment items that any commenter identified as requiring additional review. Invoices submitted by multiple commenters were greatly appreciated and ensured that medical equipment and supplies were re-examined and clarified. Multiple researchers reviewed these specified supply and equipment codes for accuracy and proper pricing. In most cases, the contractor also reached out to a team of nurses and their physician panel to further validate the accuracy of the data and pricing information. In some cases, the pricing for individual items needed further clarification due to a lack of information or due to significant variation in packaged items. After consideration of the comments and this additional price research, we updated the recommended prices for approximately 70 supply and equipment codes identified by the commenters. Table 9 in the CY 2019 PFS final rule lists the supply and equipment codes with price changes based on feedback from the commenters and the resulting additional research into pricing (83 FR 59479-59480).

After consideration of the public comments, we finalized our proposals associated with the market research study to update the PFS direct PE inputs for supply and equipment pricing. We continue to believe that implementing the proposed updated prices with a 4-year phase-in will improve payment

accuracy, while maintaining stability and allowing stakeholders the opportunity to address potential concerns about changes in payment for particular items. We continue to welcome feedback from stakeholders on the proposed updated supply and equipment pricing, including the submission of additional invoices for consideration.

For CY 2020, we received invoice submissions for approximately 30 supply and equipment codes from stakeholders as part of the second year of the market-based supply and equipment pricing update. These invoices were reviewed by the StrategyGen contractor and the submitted invoices were used in many cases to supplement the pricing originally proposed for the CY 2019 PFS rule cycle. The contractor reviewed the invoices, as well as prior data for the relevant supply/equipment codes to make sure the item in the invoice was representative of the supply/equipment item in question and aligned with past research. Based on this research, we are proposing to update the prices of the following supply and equipment items:

BILLING CODE 4120-01-P

EP14AU19.004

BILLING CODE 4120-01-C

For most supply and equipment items, there was an alignment between the research carried out by the StrategyGen contractor and the submitted invoice. The updated CY 2020 pricing was calculated using an average between the previous market research and the newly submitted invoices in these cases. In some cases the submitted invoices were not representative of market prices, such as for the centrifuge with rotor (EP007) equipment item where the invoice price of $8,563 appeared to be an outlier. We did not use the invoices to calculate our pricing recommendation in these situations and instead continued to rely on our prior pricing data. In other instances, such as for the kit, probe, cryoablation, prostate (Galil-Endocare)

(SA099) supply item, our research indicated that the submitted invoice price was more representative of the commercial price than our CY 2019 research and pricing. We are proposing the new invoice prices for these supply and equipment items due to our belief in their greater accuracy.

For some of the remaining supply and equipment items, such as the five-gallon paraffin (EP031) equipment and the Olympus DP21 camera (EP089) equipment, we maintained the extant pricing for CY 2019 due to a lack of sufficient data to update the pricing. In these situations where we did not have an updated price for CY 2019, we believe that the newly submitted invoices are more representative of the current commercial prices that are being paid on the market. We are again proposing the new invoice prices for these supply and equipment items due to our belief in their greater accuracy.

In addition, we were alerted by stakeholders that the price of the EM visit pack (SA047) supply did not match the sum of the component prices of the supplies included in the pack. After reviewing the prices of the individual component supplies, we agree with the stakeholders that there was a discrepancy in the previous pricing of this supply pack. We are proposing to update the price of the EM visit pack to $5.47 to match the sum of the prices of the component supplies, and proposing to continue to transition towards this price over the remaining years of the phase-in period.

We finalized a policy last year to phase in the new supply and equipment pricing over 4 years so that supply and equipment values transition smoothly from their current prices to the final updated prices in CY 2022. We finalized our proposal to implement this pricing transition such that one quarter of the difference between the current price and the fully phased in price was implemented for CY 2019, one third of the difference between the CY 2019 price and the final price is implemented for CY 2020, and one half of the difference between the CY 2020 price and the final price is implemented for CY 2021, with the new direct PE prices fully implemented for CY 2022. An example of the transition from the current to the fully-implemented new pricing is provided in Table 8. For CY 2020, one third of the difference between the CY 2019 price and the final price will be implemented as per the previously finalized policy.

The full list of updated supply and equipment pricing as it will be implemented over the 4-year transition period will be made available as a public use file displayed on the CMS website under downloads for the CY 2020 PFS proposed rule at

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

(2) Invoice Submission

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 2020, we noted that some stakeholders have submitted invoices for new, revised, or potentially misvalued codes after the February 10th deadline established for code valuation recommendations. To be included in a given year's proposed rule, we generally need to receive invoices by the same February 10th deadline we noted for consideration of RUC recommendations. However, we would consider invoices submitted as public comments during the comment period following the publication of the PFS proposed rule, and would consider any invoices received after February 10th or outside of the public comment process as part of our established annual process for requests to update supply and equipment prices.

(3) Adjustment to Allocation of Indirect PE for Some Office-Based Services

In the CY 2018 PFS final rule (82 FR 52999 through 53000), we established criteria for identifying the services most affected by the indirect PE allocation anomaly that does not allow for a site of service differential that accurately reflects the relative indirect costs involved in furnishing services in nonfacility settings. We also finalized a modification in the PE methodology for allocating indirect PE RVUs to better reflect the relative indirect PE resources involved in furnishing these services. The methodology, as described, is based on the difference between the ratio of indirect PE to work RVUs for each of the codes meeting eligibility criteria and the ratio of indirect PE to work RVU for the most commonly reported visit code. We refer readers to the CY 2018 PFS final rule (82 FR 52999 through 53000) for a discussion of our process for selecting services subject to the revised methodology, as well as a description of the methodology, which we began implementing for CY 2018 as the first year of a 4-year transition. For CY 2020, we are proposing to continue with the third year of the transition of this adjustment to the standard process for allocating indirect PE.

C. 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 (MP) expense. As required by section 1848(c)(2)(C)(iii) of the Act, beginning in CY 2000, MP RVUs are resource based. 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). In the CY 2018 proposed rule (82 FR 33965 through 33970), we proposed to update the specialty-level risk factors used in the calculation of MP RVUs, prior to the next required 5 year update (CY 2020), using the updated MP premium data that were used in the eighth Geographic Practice Cost Index (GPCI) update for CY 2017; however the proposal was ultimately not finalized for CY 2018.

We consider the following factors when we determine MP RVUs for individual PFS services: (1) Specialty-level risk factors derived from data on specialty-specific MP premiums incurred by practitioners; (2) service-level risk factors derived from Medicare claims data of the weighted average risk factors of the specialties that furnish each service; and (3) an intensity/complexity of service adjustment to the service-level risk factor based on either the higher of the work RVU or clinical labor portion of the direct PE RVU. 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 adjusted (or scaled) 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 was 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 was applied for the new/revised code and source code, but the work RVU for the new/revised code was 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 three most recent years of data instead of a single year of data. Under this approach, for new and revised codes, we generally assign a specialty-level risk factor to individual codes based on the same utilization assumptions we make regarding specialty mix we use for calculating PE RVUs and for PFS budget neutrality. We continue to use the work RVU or clinical labor RVU to adjust the MP RVU for each code for intensity and complexity. In finalizing this policy, we stated that the specialty-level 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.

Section 1848(e)(1)(C) of the Act requires us to review, and if necessary, adjust the GPCIs at least every 3 years. For CY 2020, we are conducting the statutorily required 3-year review of the GPCIs, which coincides with the statutorily required 5-year review of the MP RVUs. We note that the MP premium data used to update the MP GPCIs are the same data used to determine the specialty-level risk factors, which are used in the calculation of MP RVUs. Going forward, we believe it would be logical and efficient to align the update of MP premium data used to determine the MP RVUs with the update of the MP GPCI. Therefore, we are proposing to align the update of MP premium data with the update to the MP GPCIs, that is, we are proposing to review, and if necessary update the MP RVUs at least every 3 years, similar to our review and update of the GPCIs. If we align the two updates, we would conduct the next statutorily-mandated review and update of both the GPCI and MP RVU for implementation in CY 2023. We are proposing to implement the fourth comprehensive review and update of MP RVUs for CY 2020 and are seeking comment on these proposals.

2. Methodology for the Proposed Revision of Resource-Based Malpractice RVUs

a. General Discussion

We calculated the proposed MP RVUs using updated malpractice premium data obtained from state insurance rate filings. The methodology used in calculating the proposed CY 2020 review and update of resource-based MP RVUs largely parallels the process used in the CY 2015 update; however, we are proposing to incorporate several methodological refinements, which are described below in this proposed rule. The MP RVU calculation requires us to obtain information on specialty-specific MP premiums that are linked to specific services, and using this information, we derive relative risk factors for the various specialties that furnish a particular service. Because MP premiums vary by state and specialty, the MP premium information must be weighted geographically and by specialty. We calculated the proposed MP RVUs using four data sources: Malpractice premium data presumed to be in effect as of December 31, 2017; CY 2018 Medicare payment and utilization data; higher of the CY 2020 proposed work RVUs or the clinical labor portion of the direct PE RVUs; and CY 2019 GPCIs. We will use the higher of the CY 2020 final work RVUs or clinical labor portion of the direct PE RVUs in our calculation to develop the CY 2020 final MP RVUs while maintaining overall PFS budget neutrality.

Similar to the CY 2015 update, the proposed MP RVUs were calculated using specialty-specific malpractice premium data because they represent the expense incurred by practitioners to obtain malpractice insurance as reported by insurers. For CY 2020, the most current malpractice premium data available, with a presumed effective date of no later than December 31, 2017, were obtained from insurers with the largest market share in each state. We identified insurers with the largest market share using the National Association of Insurance Commissioners (NAIC) market share report. This annual report provides state-level market share for entities that provide premium liability insurance (PLI) in a state. Premium data were downloaded from the System for Electronic Rates & Forms Filing Access Interface (SERFF) (accessed from the NAIC website) for participating states. For non-SERFF states, data were downloaded from the state-specific website (if available online) or obtained directly from the state's alternate access to filings. For SERFF states and non-SERFF states with online access to filings, the 2017 market share report was used to select companies. For non-SERFF states without online access to filings, the 2016 market share report was used to identify companies. These were the most current data available during the data collection and acquisition process.

Malpractice insurance premium data were collected from all 50 States, and the District of Columbia. Efforts were made to collect filings from Puerto Rico; however, no recent filings were submitted at the time of data collection and therefore filings from the previous update were used. Consistent with the CY 2015 update, no filings were collected for the other U.S. territories: American Samoa, Guam, Virgin Islands, or Northern Mariana Islands. Malpractice premiums were collected for coverage limits of $1 million/$3 million, mature, claims-made policies (policies covering claims made, rather than those covering losses occurring, during the policy term). A $1 million/$3 million liability limit policy means that the most that would be paid on any claim is $1 million and the most that the policy would pay for claims over the timeframe of the policy is $3 million. Adjustments were made to the premium data to reflect mandatory surcharges for patient compensation funds (PCF, funds used to pay for any claim beyond the state's statutory amount, thereby limiting an individual physician's liability in cases of a large suit) in states where participation in such funds is mandatory.

Premium data were included for all physician and NPP specialties, and all risk classifications available in the collected rate filings. Although premium data were collected from all states, the District of Columbia, and previous filings for Puerto Rico were utilized, not all specialties had distinct premium data in the rate filings from all states. In previous updates, specialties for which premium data were not available for at least 35 states, and specialties for which there were not distinct risk groups (surgical, non-surgical, and surgical with obstetrics) among premium data in the rate filings, were crosswalked to a similar specialty, either conceptually or based on available premium data. This resulted in not using those premium data because

the 35 state threshold was not met. In this proposed CY 2020 update, we note that the proposed methodological improvement discussed below in this proposed rule expands the specialties and amount of filings data used to develop the proposed risk factors, which are used to develop the proposed MP RVUs.

b. Proposed Methodological Refinements

For the CY 2020 update, we are proposing the following methodological improvements to the development of MP premium data:

(1) Downloading and using a broader set of filings from the largest market share insurers in each state, beyond those listed as “physician” and “surgeon” to obtain a more comprehensive data set.

(2) Combining minor surgery and major surgery premiums to create the surgery service risk group, which yields a more representative surgical risk factor. In the previous update, only premiums for major surgery were used in developing the surgical risk factor.

(3) Utilizing partial and total imputation to develop a more comprehensive data set when CMS specialty names are not distinctly identified in the insurer filings, which sometimes use unique specialty names.

In instances where insurers report data for some (but not all) specialties that explicitly corresponded to a CMS specialty, where those data were missing, we propose to use partial imputation based on available data to establish what the premiums would likely have been had that specialty been delineated in the filing. In instances where there are no data corresponding to a CMS specialty in the filing, we propose to use total imputation to establish premiums.

For example, if a specialty of Sleep Medicine is listed on the insurer's rate filing, this rate will be matched to the CMS specialty Sleep Medicine (C0). However, if the Sleep Medicine specialty is not listed on the insurer's rate filing, under our proposed methodology, the insurer's rate filing for General Practice would be matched to the CMS specialty of Sleep Medicine (C0). In this example, we believe General Practice is likely to be consistent with the rate that a Sleep Medicine provider would be charged by that insurer. This proposed methodological improvement means that instead of discarding specialty-specific information from some insurers' filings because other insurers lacked that same level of detail, we would instead impute the missing rates at the insurer/specialty level in an effort to utilize as much of the information from the filings as possible.

We are seeking comment on these proposed methodological improvements. Additional technical details are available in our interim report, “Interim Report for the CY 2020 Update of GPCIs and MP RVUs for the Medicare Physician Fee Schedule,” on our website. It is located under the supporting documents section for the CY 2020 PFS proposed rule located at

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

.

c. Steps for Calculating Malpractice RVUs

Calculation of the proposed MP RVUs conceptually follows the specialty-weighted approach used in the CY 2015 final rule with comment period (79 FR 67591), along with the above proposed methodological improvements. The specialty-weighted approach bases the MP RVUs for a given service on a weighted average of the risk factors of all specialties furnishing the service. This approach ensures that all specialties furnishing a given service are reflected in the calculation of the MP RVUs. The steps for calculating the proposed MP RVUs are described below.

Step (1):

Compute a preliminary national average premium for each specialty.

Insurance rating area malpractice premiums for each specialty are mapped to the county level. The specialty premium for each county is then multiplied by its share of the total U.S. population (from the U.S. Census Bureau's 2013-2017 American Community Survey (ACS) 5-year estimates). This is in contrast to the method used for creating national average premiums for each specialty in the 2015 update; in that update, specialty premiums were weighted by the total RVU per county, rather than by the county share of the total U.S. population. We refer readers to the CY 2016 PFS final rule with comment period (80 FR 70909) for a discussion of why we have adopted a weighting method based on share of total U.S. population. This calculation is then divided by the average MP GPCI across all counties for each specialty to yield a normalized national average premium for each specialty. The specialty premiums are normalized for geographic variation so that the locality cost differences (as reflected by the 2019 GPCIs) would not be counted twice. Without the geographic variation adjustment, the cost differences among fee schedule areas would be reflected once under the methodology used to calculate the MP RVUs and again when computing the service specific payment amount for a given fee schedule area.

Step (2):

Determine which premium service risk groups to use within each specialty.

Some specialties had premium rates that differed for surgery, surgery with obstetrics, and non-surgery. These premium classes are designed to reflect differences in risk of professional liability and the cost of malpractice claims if they occur. To account for the presence of different classes in the malpractice premium data and the task of mapping these premiums to procedures, we calculated distinct risk factors for surgical, surgical with obstetrics, and nonsurgical procedures where applicable. However, the availability of data by surgery and non-surgery varied across specialties. Historically, no single approach accurately addressed the variability in premium class among specialties, and we previously employed several methods for calculating average premiums by specialty. These methods are discussed below.

Developing Distinct Service Risk Groups:

We determined that there were sufficient data for surgery and non-surgery premiums, as well as sufficient differences in rates between classes for 15 specialties (there were 10 such specialties in the CY 2015 update). These specialties are listed in Table 10. Additionally, as described in the proposed methodological refinements, in some instances, we combined minor surgery and major surgery premiums to create a premium to develop the surgery service risk group, rather than discard minor surgery premium data as was done in the previous update. Therefore, we calculated a national average surgical premium and non-surgical premium for those specialties. For all other specialties (those that are not listed in Table 10) that typically do not distinguish premiums as described above, a single risk factor was calculated, and that specialty risk factor was applied to all services performed by those specialties.

This is consistent with prior practice; however, we have refined the nomenclature to more precisely describe that some specialties are delineated into service risk groups, as is the case for surgical, non-surgical, and surgical with obstetrics, and some specialties are not further delineated into service risk subgroups and are instead referred to as “All”—meaning that all services performed by that specialty receive the same risk factor.

Table 10—Proposed Specialties Subdivided Into Service Risk Groups

Service risk groups

Specialties

Surgery/No Surgery

Otolaryngology (04), Cardiology (06), Dermatology (07), Gastroenterology (10), Neurology (13), Ophthalmology (18), Urology (34), Geriatric Medicine (38), Nephrology (39), Endocrinology (46), Podiatry (48), Emergency Medicine (93).

Surgery/No Surgery/OB

General Practice (01), Family Practice (08), OB/GYN (16).

Step (3):

Calculate a risk factor for each specialty.

The relative differences in national average premiums between specialties are expressed in our methodology as a specialty-level risk factor. These risk factors are calculated by dividing the national average premium for each specialty by the national average premium for the specialty with the lowest premiums for which we had sufficient and reliable data, which remains allergy and immunology (03). For specialties with rate filings that are indicative of sufficient surgical and non-surgical premium data, we recognized those service-risk groups (that is, surgical, and non-surgical) as risk groups of the specialty and we calculated both a surgical and non-surgical risk factor. Similarly, for specialties with rate filings that distinguished surgical premiums with obstetrics, we recognized that service-risk subgroup of the specialty and calculated a separate surgical with obstetrics risk factor.

(a) Technical Component (TC) Only Services

We note that for determining the risk factor for suppliers of TC-only services in the CY 2015 update, we updated the premium data for independent diagnostic testing facilities (IDTFs) that we used in the CY 2010 update. Those data were obtained from a survey conducted by the Radiology Business Management Association (RBMA) in 2009; we ultimately used those data to calculate an updated TC specialty risk factor. We applied the updated TC specialty risk factor to suppliers of TC-only services. In the CY 2015 final rule with comment period (79 FR 67595), RBMA voluntarily submitted updated MP premium information collected from IDTFs in 2014, and requested that we use the data for calculating the CY 2015 MP RVUs for TC-only services. We declined to utilize the data and stated that we believe further study is necessary and we would consider this matter and propose any changes through future rulemaking. We continue to believe that data for a broader set of TC-only services are needed, and are working to acquire a broader set of data.

For CY 2020, we propose to assign a risk factor of 1.00 for TC-only services, which corresponds to the lowest physician specialty-level risk factor. We assigned the risk factor of 1.00 to the TC-only services because we do not have sufficient comparable professional liability premium data for the full range of clinicians that furnish TC-only services. In lieu of comprehensive, comparable data, we propose to assign 1.00, the lowest physician specialty-level risk factor calculated using the updated premium data, as the default minimum risk factor. However, we seek information on the most comparable and appropriate proxy for the broader set of TC-only services for future use, as well as any empirical information that would support assignment of an alternative risk factor for these services.

Table 11 shows the proposed risk factors by specialty type and service risk group.

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EP14AU19.005

EP14AU19.006

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Step (4):

Calculate malpractice RVUs for each CPT/HCPCS code.

Resource-based MP RVUs were calculated for each CPT/HCPCS code that has work or PE RVUs. The first step was to identify the percentage of services furnished by each specialty for each respective CPT/HCPCS code. This

percentage was then multiplied by each respective specialty's risk factor as calculated in Step 3. The products for all specialties for the CPT/HCPCS code were then added together, yielding a specialty-weighted service specific risk factor reflecting the weighted malpractice costs across all specialties furnishing that procedure. The service specific risk factor was multiplied by the greater of the work RVU or clinical labor portion of the direct PE RVU for that service, to reflect differences in the complexity and risk-of-service between services.

Low volume service codes:

As we discussed above in this proposed rule, for low volume services code, we finalized the proposal in the CY 2018 PFS final rule (82 FR 53000 through 53006) to apply the list of expected specialties instead of the claims-based specialty mix for low volume services to address stakeholder concerns about the year to year variability in PE and MP RVUs for low volume services (which also includes no volume services); these are defined as codes that have 100 allowed services or fewer. These service-level overrides are used to determine the specialty for low volume procedures for both PE and MP.

In the CY 2018 PFS final rule (82 FR 53000 through 53006), we also finalized our proposal to eliminate general use of an MP-specific specialty-mix crosswalk for new and revised codes. However, we indicated that we would continue to consider, in conjunction with annual recommendations, specific recommendations regarding specialty mix assignments for new and revised codes, particularly in cases where coding changes are expected to result in differential reporting of services by specialty, or where the new or revised code is expected to be low-volume. Absent such information, the specialty mix assumption for a new or revised code would derive from the analytic crosswalk in the first year, followed by the introduction of actual claims data, which is consistent with our approach for developing PE RVUs.

For CY 2020, we are soliciting public comment on the list of expected specialties. We also note that the list has been updated to include a column indicating if a service is identified as a low volume service for CY 2020, and therefore, whether or not the service-level override is being applied for CY 2020. The proposed list of codes and expected specialties is available on our website under downloads for the CY 2020 PFS proposed rule at

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

Step (5):

Rescale for budget neutrality.

The statute requires that changes to fee schedule RVUs must be budget neutral. Thus, the last step is to adjust for relativity by rescaling the proposed MP RVUs so that the total proposed resource based MP RVUs are equal to the total current resource based MP RVUs scaled by the ratio of the pools of the proposed and current MP and work RVUs. This scaling is necessary to maintain the work RVUs for individual services from year to year while also maintaining the overall relationship among work, PE, and MP RVUs.

Specialties Excluded from Ratesetting Calculation:

In section II.B. of this proposed rule, Determination of Practice Expense Relative Value Units, we discuss specialties that are excluded from ratesetting for the purposes of calculating PE RVUs. We are proposing to treat those excluded specialties in a consistent manner for the purposes of calculating MP RVUs. We note that all specialties are included for purposes of calculating the final BN adjustment. The list of specialties excluded from the ratesetting calculation for the purpose of calculating the PE RVUs that we are proposing to also exclude for the purpose of calculating MP RVUs is available in section II.B. of this proposed rule, Determination of Practice Expense Relative Value Units. The proposed resource based MP RVUs are shown in Addendum B, which is available on the CMS website under the downloads section of the CY 2020 PFS rule at

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

Because a different share of the resources involved in furnishing PFS services is reflected in each of the three fee schedule components, implementation of the resource-based MP RVU update will have much smaller payment effects than implementing updates of resource-based work RVUs and resource-based PE RVUs. On average, work represents about 50.9 percent of payment for a service under the fee schedule, PE about 44.8 percent, and MP about 4.3 percent. Therefore, a 25 percent change in PE RVUs or work RVUs for a service would result in a change in payment of about 11 to 13 percent. In contrast, a corresponding 25 percent change in MP values for a service would yield a change in payment of only about 1 percent. Estimates of the effects on payment by specialty type can be found in section VI. of this proposed rule, Regulatory Impact Analysis.

Additional information on our proposed methodology for updating the MP RVUs is available in the “Interim Report for the CY 2020 Update of GPCIs and MP RVUs for the Medicare Physician Fee Schedule,” which is available on the CMS website under the downloads section of the CY 2020 PFS proposed rule at

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

D. Geographic Practice Cost Indices (GPCIs)

1. Background

Section 1848(e)(1)(A) of the Act requires us to develop separate Geographic Practice Cost Indices (GPCIs) to measure relative cost differences among localities compared to the national average for each of the three fee schedule components (that is, work, practice expense (PE), and malpractice (MP)). We discuss the localities established under the PFS below in this section. Although the statute requires that the PE and MP GPCIs reflect full relative cost differences, section 1848(e)(1)(A)(iii) of the Act requires that the work GPCIs reflect only one-quarter of the relative cost differences compared to the national average. In addition, section 1848(e)(1)(G) of the Act sets a permanent 1.5 work GPCI floor for services furnished in Alaska beginning January 1, 2009, and section 1848(e)(1)(I) of the Act sets a permanent 1.0 PE GPCI floor for services furnished in frontier states (as defined in section 1848(e)(1)(I) of the Act) beginning January 1, 2011. Additionally, section 1848(e)(1)(E) of the Act provided for a 1.0 floor for the work GPCIs, which was set to expire at the end of 2017. Section 50201 of the Bipartisan Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123, enacted February 9, 2018) amended the statute to extend the 1.0 floor for the work GPCIs through CY 2019 (that is, for services furnished no later than December 31, 2019).

Section 1848(e)(1)(C) of the Act requires us to review and, if necessary, adjust the GPCIs at least every 3 years. Section 1848(e)(1)(C) of the Act requires that, if more than 1 year has elapsed since the date of the last previous GPCI adjustment, the adjustment to be applied in the first year of the next adjustment shall be

1/2

of the adjustment that otherwise would be made. Therefore, since the previous GPCI update was implemented in CYs 2017 and 2018, we are proposing to phase in

1/2

of the latest GPCI adjustment in CY 2020.

We have completed a review of the GPCIs and are proposing new GPCIs in this proposed rule. We also calculate a geographic adjustment factor (GAF) for each PFS locality. The GAFs are a weighted composite of each PFS localities work, PE and MP expense GPCIs using the national GPCI cost share weights. While we do not actually use GAFs in computing the fee schedule payment for a specific service, they are useful in comparing overall areas costs and payments. The actual effect on payment for any actual service would deviate from the GAF to the extent that the proportions of work, PE and MP RVUs for the service differ from those of the GAF.

As noted above, section 50201 of the BBA of 2018 extended the 1.0 work GPCI floor for services furnished only through December 31, 2019. Therefore, the proposed CY 2020 work GPCIs and summarized GAFs do not reflect the 1.0 work floor. However, as required by sections 1848(e)(1)(G) and (I) of the Act, the 1.5 work GPCI floor for Alaska and the 1.0 PE GPCI floor for frontier states are permanent, and therefore, applicable in CY 2020. See Addenda D and E to this proposed rule for the CY 2020 proposed GPCIs and summarized proposed GAFs available on the CMS website under the supporting documents section of the CY 2020 PFS proposed rule at

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

2. Payment Locality Background

Prior to 1992, Medicare payments for physicians' services were made under the reasonable charge system. Payments under this system largely reflected the charging patterns of physicians, which resulted in large differences in payment for physicians' services among types of services, physician specialties and geographic payment areas.

Local Medicare carriers initially established 210 payment localities, to reflect local physician charging patterns and economic conditions. These localities changed little between the inception of Medicare in 1967 and the beginning of the PFS in 1992. In 1994, we undertook a study that culminated in a comprehensive locality revision (based on locality resource cost differences as reflected by the GPCIs) that we implemented in 1997. The development of the current locality structure is described in detail in the CY 1997 PFS final rule (61 FR 34615) and the subsequent final rule with comment period (61 FR 59494). The revised locality structure reduced the number of localities from 210 to 89, and increased the number of statewide localities from 22 to 34.

Section 220(h) of the Protecting Access to Medicare Act (PAMA) (Pub. L. 113-93, enacted April 1, 2014) required modifications to the payment localities in California for payment purposes beginning with 2017. As a result, in the CY 2017 PFS final rule (81 FR 80265 through 80268) we established 23 additional localities, increasing the total number of PFS localities from 89 to 112. The 112 payment localities include 34 statewide areas (that is, only one locality for the entire state) and 75 localities in the other 16 states, with 10 states having two localities, two states having three localities, one state having four localities, and three states having five or more localities. The remainder of the 112 PFS payment localities are comprised as follows: The combined District of Columbia, Maryland, and Virginia suburbs; Puerto Rico; and the Virgin Islands. We note that the localities generally represent a grouping of one or more constituent counties.

The current 112 fee schedule areas are defined alternatively by state boundaries (for example, Wisconsin), metropolitan areas (for example, Metropolitan St. Louis, MO), portions of a metropolitan area (for example, Manhattan), or rest-of-state areas that exclude metropolitan areas (for example, Rest of Missouri). This locality configuration is used to calculate the GPCIs that are in turn used to calculate locality adjusted payments for physicians' services under the PFS.

As stated in the CY 2011 PFS final rule with comment period (75 FR 73261), changes to the PFS locality structure would generally result in changes that are budget neutral within a state. For many years, before making any locality changes, we have sought consensus from among the professionals whose payments would be affected. We refer readers to the CY 2014 PFS final rule with comment period (78 FR 74384 through 74386) for further discussion regarding additional information about locality configuration considerations.

3. GPCI Update

As required by the statute, we developed GPCIs to measure relative cost differences among payment localities compared to the national average for each of the three fee schedule components (that is, work, PE, and MP). We describe the data sources and methodologies we use to calculate each of the three GPCIs below in this section. Additional information on the CY 2020 GPCI update is available in an interim report, “Interim Report for the CY 2020 Update of GPCIs and MP RVUs for the Medicare Physician Fee Schedule,” on our website located under the supporting documents section for the CY 2020 PFS proposed rule at

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

a. Work GPCIs

The work GPCIs are designed to reflect the relative cost of physician labor by Medicare PFS locality. As required by statute, the work GPCI reflects one quarter of the relative wage differences for each locality compared to the national average.

To calculate the work GPCIs, we use wage data for seven professional specialty occupation categories, adjusted to reflect one-quarter of the relative cost differences for each locality compared to the national average, as a proxy for physicians' wages. Physicians' wages are not included in the occupation categories used in calculating the work GPCI because Medicare payments are a key determinant of physicians' earnings. Including physician wage data in calculating the work GPCIs would potentially introduce some circularity to the adjustment since Medicare payments typically contribute to or influence physician wages. That is, including physicians' wages in the physician work GPCIs would, in effect, make the indices, to some extent, dependent upon Medicare payments.

The work GPCI updates in CYs 2001, 2003, 2005, and 2008 were based on professional earnings data from the 2000 Census. However, for the CY 2011 GPCI update (75 FR 73252), the 2000 data were outdated and wage and earnings data were not available from the more recent Census because the “long form” was discontinued. Therefore, we used the median hourly earnings from the 2006 through 2008 Bureau of Labor Statistics (BLS) Occupational Employment Statistics (OES) wage data as a replacement for the 2000 Census data. The BLS OES data meet several criteria that we consider to be important for selecting a data source for purposes of calculating the GPCIs. For example, the BLS OES wage and employment data are derived from a large sample size of approximately 200,000 establishments of varying sizes nationwide from every metropolitan area and can be easily accessible to the public at no cost. Additionally, the BLS OES is updated regularly, and includes a comprehensive set of occupations and industries (for example, 800 occupations in 450 industries). For the CY 2014 GPCI update, we used updated BLS OES data (2009 through 2011) as a

replacement for the 2006 through 2008 data to compute the work GPCIs; and for the CY 2017 GPCI update, we used updated BLS OES data (2011 through 2014) as a replacement for the 2009 through 2011 data to compute the work GPCIs.

Because of its reliability, public availability, level of detail, and national scope, we believe the BLS OES data continue to be the most appropriate source of wage and employment data for use in calculating the work GPCIs (and as discussed below, the employee wage component and purchased services component of the PE GPCI). Therefore, for the proposed CY 2020 GPCI update, we used updated BLS OES data (2014 through 2017) as a replacement for the 2011 through 2014 data to compute the work GPCIs.

b. Practice Expense (PE) GPCIs

The PE GPCIs are designed to measure the relative cost difference in the mix of goods and services comprising PEs (not including MP expenses) among the PFS localities as compared to the national average of these costs. Whereas the physician work GPCIs (and as discussed later in this section, the MP GPCIs) are comprised of a single index, the PE GPCIs are comprised of four component indices (employee wages; purchased services; office rent; and equipment, supplies and other miscellaneous expenses). The employee wage index component measures geographic variation in the cost of the kinds of skilled and unskilled labor that would be directly employed by a physician practice. Although the employee wage index adjusts for geographic variation in the cost of labor employed directly by physician practices, it does not account for geographic variation in the cost of services that typically would be purchased from other entities, such as law firms, accounting firms, information technology consultants, building service managers, or any other third-party vendor. The purchased services index component of the PE GPCI (which is a separate index from employee wages) measures geographic variation in the cost of contracted services that physician practices would typically buy. For more information on the development of the purchased service index, we refer readers to the CY 2012 PFS final rule with comment period (76 FR 73084 through 73085). The office rent index component of the PE GPCI measures relative geographic variation in the cost of typical physician office rents. For the medical equipment, supplies, and miscellaneous expenses component, we believe there is a national market for these items such that there is not significant geographic variation in costs. Therefore, the equipment, supplies and other miscellaneous expense cost index component of the PE GPCI is given a value of 1.000 for each PFS locality.

For the previous update to the GPCIs (implemented in CY 2017), we used 2011 through 2014 BLS OES data to calculate the employee wage and purchased services indices for the PE GPCI. As discussed previously in this section, because of its reliability, public availability, level of detail, and national scope, we continue to believe the BLS OES is the most appropriate data source for collecting wage and employment data. Therefore, in calculating the proposed CY 2020 GPCI update, we used updated BLS OES data (2014 through 2017) as a replacement for the 2011 through 2014 data for purposes of calculating the employee wage component and purchased service index component of the PE GPCI. In calculating the proposed CY 2020 GPCI update, for the office rent index component of the PE GPCI we used the most recently available, 2013 through 2017, American Community Survey (ACS) 5-year estimates as a replacement for the 2009 through 2013 ACS data.

c. Malpractice Expense (MP) GPCIs

The MP GPCIs measure the relative cost differences among PFS localities for the purchase of professional liability insurance (PLI). The MP GPCIs are calculated based on insurer rate filings of premium data for $1 million to $3 million mature claims-made policies (policies for claims made rather than losses occurring during the policy term). For the CY 2017 GPCI update, we used 2014 and 2015 malpractice premium data. The proposed CY 2020 MP GPCI update reflects premium data presumed in effect as of December 30, 2017. We note that we finalized a few technical refinements to the MP GPCI methodology in CY 2017, and refer readers to the CY 2017 PFS final rule (81 FR 80270) for additional discussion.

d. GPCI Cost Share Weights

For CY 2020 GPCIs, we are proposing to continue to use the current cost share weights for determining the PE GPCI values and locality GAFs. We refer readers to the CY 2014 PFS final rule with comment period (78 FR 74382 through 74383), for further discussion regarding the 2006-based MEI cost share weights revised in CY 2014 that we also finalized for use in the CY 2017 GPCI update.

The proposed GPCI cost share weights for CY 2020 are displayed in Table 12.

Table 12—Proposed Cost Share Weights for CY 2020 GPCI Update

Expense category

Current

cost share weight

(%)

Proposed

CY 2020

cost share weight

(%)

Work

50.866

50.866

Practice Expense

44.839

44.839

—Employee Compensation

16.553

16.553

—Office Rent

10.223

10.223

—Purchased Services

8.095

8.095

—Equipment, Supplies, Other

9.968

9.968

Malpractice Insurance

4.295

4.295

Total

100.000

100.000

e. PE GPCI Floor for Frontier States

Section 10324(c) of the Affordable Care Act added a new subparagraph (I) under section 1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for physicians' services furnished in frontier states effective January 1, 2011. In accordance with section 1848(e)(1)(I) of the Act, beginning in CY 2011, we applied a 1.0 PE GPCI floor for physicians' services furnished in states determined to be frontier states. In general, a frontier state is one in which at least 50 percent of the counties are “frontier counties,” which are those that

have a population per square mile of less than 6. For more information on the criteria used to define a frontier state, we refer readers to the FY 2011 Inpatient Prospective Payment System (IPPS) final rule (75 FR 50160 through 50161). There are no changes in the states identified as Frontier States for the CY 2020 PFS proposed rule. The qualifying states are: Montana; Wyoming; North Dakota; South Dakota; and Nevada. In accordance with statute, we would apply a 1.0 PE GPCI floor for these states in CY 2020.

f. Methodology for Calculating GPCIs in the U.S. Territories

Prior to CY 2017, for all the island territories other than Puerto Rico, the lack of comprehensive data about unique costs for island territories had minimal impact on GPCIs because we used either the Hawaii GPCIs (for the Pacific territories: Guam; American Samoa; and Northern Mariana Islands) or used the unadjusted national averages (for the Virgin Islands). In an effort to provide greater consistency in the calculation of GPCIs given the lack of comprehensive data regarding the validity of applying the proxy data used in the States in accurately accounting for variability of costs for these island territories, in the CY 2017 PFS final rule (81 FR 80268 through 80270), we finalized a policy to treat the Caribbean Island territories (the Virgin Islands and Puerto Rico) in a consistent manner. We do so by assigning the national average of 1.0 to each GPCI index for both Puerto Rico and the Virgin Islands. We refer readers to the CY 2017 PFS final rule for a comprehensive discussion of this policy.

g. California Locality Update to the Fee Schedule Areas Used for Payment Under Section 220(h) of the Protecting Access to Medicare Act

Section 220(h) of the PAMA added a new section 1848(e)(6) to the Act that modified the fee schedule areas used for payment purposes in California beginning in CY 2017. Prior to CY 2017, the fee schedule areas used for payment in California were based on the revised locality structure that was implemented in 1997 as previously discussed. Beginning in CY 2017, section 1848(e)(6)(A)(i) of the Act required that the fee schedule areas used for payment in California must be Metropolitan Statistical Areas (MSAs) as defined by the Office of Management and Budget (OMB) as of December 31 of the previous year; and section 1848(e)(6)(A)(ii) of the Act required that all areas not located in an MSA must be treated as a single rest-of-state fee schedule area. The resulting modifications to California's locality structure increased its number of localities from 9 under the current locality structure to 27 under the MSA-based locality structure; although for the purposes of payment the actual number of localities under the MSA-based locality structure is 32. We refer readers to the CY 2017 PFS final rule (81 FR 80267) for a detailed discussion of this operational consideration.

Section 1848(e)(6)(D) of the Act defined transition areas as the fee schedule areas for 2013 that were the rest-of-state locality, and locality 3, which was comprised of Marin County, Napa County, and Solano County. Section 1848(e)(6)(B) of the Act specified that the GPCI values used for payment in a transition area are to be phased in over 6 years, from 2017 through 2022, using a weighted sum of the GPCIs calculated under the new MSA-based locality structure and the GPCIs calculated under the current PFS locality structure. That is, the GPCI values applicable for these areas during this transition period are a blend of what the GPCI values would have been for California under the current locality structure, and what the GPCI values would be for California under the MSA-based locality structure. For example, in CY 2020, which represents the fourth year, the applicable GPCI values for counties that were previously in rest-of-state or locality 3 and are now in MSAs are a blend of

2/3

of the GPCI value calculated for the year under the MSA-based locality structure, and

1/3

of the GPCI value calculated for the year under the current locality structure. The proportions continue to shift by

1/6

in each subsequent year so that, by CY 2021, the applicable GPCI values for counties within transition areas are a blend of

5/6

of the GPCI value for the year under the MSA-based locality structure, and

1/6

of the GPCI value for the year under the current locality structure. Beginning in CY 2022, the applicable GPCI values for counties in transition areas are the values calculated solely under the new MSA-based locality structure. For clarity, we reiterate that this incremental phase-in is only applicable to those counties that are in transition areas that are now in MSAs, which are only some of the counties in the 2013 California rest-of state locality and locality 3.

Additionally, section 1848(e)(6)(C) of the Act establishes a hold harmless for transition areas beginning with CY 201

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