# Medicare Program; CY 2021 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; Quality Payment Program; Coverage of Opioid Use Disorder Services Furnished by Opioid Treatment Programs; Medicare Enrollment of Opioid Treatment Programs; Electronic Prescribing for Controlled Substances for a Covered Part D Drug Under a Prescription Drug Plan or an MA-PD Plan; Payment for Office/Outpatient Evaluation and Management Services; Hospital IQR Program; Establish New Code Categories; and Medicare Diabetes Prevention Program (MDPP) Expanded Model Emergency Policy

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-17127

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** August 17, 2020
- **Citation:** 85 FR 50074

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 410, 414, 415, 423, 424, and 425
[CMS-1734-P]
RIN 0938-AU10
Medicare Program; CY 2021 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; Quality Payment Program; Coverage of Opioid Use Disorder Services Furnished by Opioid Treatment Programs; Medicare Enrollment of Opioid Treatment Programs; Electronic Prescribing for Controlled Substances for a Covered Part D Drug Under a Prescription Drug Plan or an MA-PD Plan; Payment for Office/Outpatient Evaluation and Management Services; Hospital IQR Program; Establish New Code Categories; and Medicare Diabetes Prevention Program (MDPP) Expanded Model Emergency Policy

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 requirements; Medicaid Promoting Interoperability Program requirements for Eligible Professionals; updates to the Quality Payment Program; Medicare coverage of opioid use disorder services furnished by opioid treatment programs; Medicare enrollment of Opioid Treatment Programs; payment for office/outpatient evaluation and management services; Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D drug under a prescription drug plan or an MA-PD plan and Medicare Diabetes Prevention Program (MDPP) expanded model Emergency Policy.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on October 5, 2020. (See the
SUPPLEMENTARY INFORMATION
section of this proposed rule for a list of provisions open for comment.)

ADDRESSES:

In commenting, please refer to file code CMS-1734-P.

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-1734-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-1734-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR 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 specialty-specific impacts of PFS proposals.

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

Emily Yoder, (410) 786-1804, Donta Henson, (410) 786-1947, and Patrick Sartini, (410) 786-9252, for issues related to telehealth and other services involving communications technology.

Liane Grayson, (410) 786-6583, for issues related to care management services and remote physiologic monitoring services.

Emily Yoder, (410) 786-1804, Christiane LaBonte, (410) 786-7237, Ann Marshall, (410) 786-3059, and Patrick Sartini, (410) 786-9252, for issues related to payment for office/outpatient evaluation and management visits.

Christiane LaBonte, (410) 786-7237, for issues related to teaching physician services.

Roberta Epps, (410) 786-4503, and Regina Walker-Wren, (410) 786-9160, for issues related to supervision of diagnostic tests.

Ann Marshall, (410) 786-3059, for issues related to incident to pharmacist services.

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

Sarah Leipnik, (410) 786-3933, for issues related to medical record documentation.

Lindsey Baldwin, (410) 786-1694 and Terry Simananda, (410) 786-8144, for issues related to Medicare coverage of opioid use disorder treatment services furnished by opioid treatment programs.

Laura Ashbaugh, (410) 786-1113, for issues related to Clinical Laboratory Fee Schedule: Revised Data Reporting Period and Phase-in of Payment Reductions.

Joseph Schultz, (410) 786-2656, for issues related to opioid treatment program provider enrollment regulation updates for institutional claim submissions.

Lisa Parker, (410) 786-4949, for issues related to RHCs and FQHCs, primary care management services, and the FQHC market basket.

Rachel Katonak, (410) 786-8564, for issues related to comprehensive screenings for seniors: Section 2002 of the Substance Use-Disorder Prevention that Promote Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act).

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 performance standard and quality reporting requirements.

Janae James, (410) 786-0801, or Elizabeth November, (410) 786-4518, or
SharedSavingsProgram@cms.hhs.gov,
for issues related to Shared Savings Program beneficiary assignment and repayment mechanism requirements.

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

Heather Hostetler, (410) 786-4515, for issues related to removal of selected national coverage determinations.

Joella Roland, (410) 786-7638, for issues related to requirement for electronic prescribing for controlled substances for a covered Part D drug under a prescription drug plan or an MA-PD plan.

Edmund Kasaitis, (410) 786-0477, for issues related to Part B drug payment and Food Drug & Cosmetic Act section 505(b)(2) drug products.

Elizabeth Holland, (410) 786-1309, for issues related to updates to certified electronic health record technology due to the 21st Century Cures Act.

Julia Venanzi, (410) 786-1471, for issues related to the Hospital Inpatient Quality Reporting (IQR) Program

Irina Akelaitis, (410) 786-4602, for issues related to HCPCS Level II codes.

Amanda Rhee, (410) 786-3888, for the Medicare Diabetes Prevention Program (MDPP) expanded model emergency policy.

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

Brittany LaCouture, (410) 786-0481, for inquiries related to Alternative Payment Models (APMs).

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following website as soon as possible after they have been received:
http://regulations.gov.
Follow the search instructions on that website to view public comments.

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
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/index.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 2021 PFS proposed rule, refer to item CMS-1734-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 makes 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. In addition, this proposed rule includes provisions related to other payment policy changes that are addressed in section III. of 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 2021 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 provisions regarding several other Medicare Part B payment policies.

Specifically, this proposed rule addresses:

• Practice Expense RVUs (section II.B.)

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

• Telehealth and Other Services Involving Communications Technology (section II.D.)

• Care Management Services and Remote Physiologic Monitoring Services (section II.E.)

• Refinements to Values for Certain Services to Reflect Revisions to Payment for Office/Outpatient Evaluation and Management (E/M) Visits and Promote Payment Stability during the COVID-19 Pandemic (section II.F.)

• Scopes of Practice and Related Issues (section II.G.)

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

• Modifications related to Medicare Coverage for Opioid Use Disorder (OUD) Services Furnished by Opioid Treatment Programs (OTPs) (section II.I.)

• Clinical Laboratory Fee Schedule: Revised Data Reporting Period and Phase-in of Payment Reductions, and a Comment Solicitation on Payment for Specimen Collection for Covid-19 Tests (section III.A.)

• Opioid Treatment Program Provider Enrollment Regulation Updates for Institutional Claim Submissions (section III.B.)

• Payment for Primary Care Management Services in RHCs and FQHCs (section III.C.)

• Changes to the Federally Qualified Health Center Prospective Payment System (FQHC PPS) for CY 2021: Proposed Rebasing and Revising of the FQHC Market Basket (section III.D.)

• Comprehensive Screenings for Seniors: Section 2002 of the Substance Use-Disorder Prevention that Promote Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act) (section III.E.)

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

• Medicare Shared Savings Program (section III.G.)

• Notification of Infusion Therapy Options Available Prior to Furnishing Home Infusion Therapy Services (section III.H.)

• Modifications to Quality Reporting Requirements and Comment Solicitation on Modifications to the Extreme and Uncontrollable Circumstances Policy for Performance Year 2020 (section III.I.)

• Proposal to Remove Selected National Coverage Determinations (section III.J.)

• Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D drug under a prescription drug plan or an MA-PD plan (section III.K.)

• Medicare Part B Drug Payment for Drugs Approved Through the Pathway Established Under Section 505(b)(2) of the Food, Drug, and Cosmetic Act (section III.L.)

• Updates to Certified Electronic Health Record Technology due to the 21st Century Cures Act Final Rule (section III.M.)

• Proposal to Establish New Code Categories (section III.N.)

• Medicare Diabetes Prevention Program (MDPP) expanded model Emergency Policy (section III.O.)

• CY 2021 Updates to the Quality Payment Program (section IV.)

• Planned 30-day Delayed Effective Date for the Final Rule (section V.)

• Collection of Information Requirements (section VI.)

• Response to Comments (section VII.)

• Regulatory Impact Analysis (section VIII.)

2. Summary of Costs and Benefits

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

3. Waiver of the 60-Day Delayed Effective Date for the Final Rule

The United States is responding to an outbreak of respiratory disease caused by a novel (new) coronavirus that has now been detected in more than 190 locations internationally, including in all 50 States and the District of Columbia. The virus has been named “SARS CoV 2” and the disease it causes has been named “Coronavirus disease 2019” (abbreviated “COVID-19”).

Due to the significant devotion of resources to the COVID-19 response, as discussed in section V. of the preamble of this proposed rule, we are hereby waiving the 60-day delay in the effective date of the final rule, and replacing it with a 30-day delay in the effective date of the final 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 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 by 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 ’97) delayed implementation of the resource-based PE RVU system until January 1, 1999. In addition, section 4505(b) of the BBA ’97 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 ’97 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.

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 VII. 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 2020 PFS final rule for a discussion of the last GPCI update (84 FR 62615 through 62623).

RVUs are converted to dollar amounts through the application of a CF, which is calculated based on a statutory formula by CMS' 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 PE 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 titled “CY 2021 PFS Proposed Rule PE/HR” on the CMS website under downloads for the CY 2021 PFS proposed rule at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

As noted above, we have established PE/HR values for various specialties without SMS or PPIS survey data by crosswalking them to other similar specialties to estimate a proxy PE/HR. On this note, stakeholders have raised concerns regarding the appropriate specialty crosswalk used for home PT/INR monitoring services. These services are currently classified under the independent diagnostic testing facilities specialty for PE/HR purposes, due to a lack of survey data for these services, and stakeholders have suggested to CMS that this specialty does not reflect the indirect costs associated with furnishing these services. Stakeholders have raised concerns that the practice pattern of PT/INR monitoring services are markedly different from that of the dominant parent specialty as most of the services are furnished remotely and require long-term relationship with beneficiaries similar to chronic therapy. Stakeholders also stated that this is a unique request due to the lack of home PT/INR monitoring supplier involvement in the last PPIS, and that payments for these services are derived from previously used supplemental survey data from the Association for Quality Imaging (AQI), blended with supplementary survey data from the American College of Radiology (ACR)—neither of which reflect indirect cost inputs for home PT/INR monitoring.

Therefore, we are soliciting comment from the public regarding the most accurate specialty crosswalk to use for indirect PE when it comes to home PT/INR monitoring services. We are seeking information on any additional costs associated with these services that are not reflected in our currently assigned PE/HR for independent diagnostic testing facilities, as well as which specialties would best capture these costs through the use of a crosswalk.

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.

• Then, 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 titled “Calculation of PE RVUs under Methodology for Selected Codes” which is available on our website under downloads for the CY 2021 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.

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 titled “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 1.

BILLING CODE 4120-01-P

EP17AU20.001

BILLING CODE 4120-01-C

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

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

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

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

EP17AU20.002

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.

Useful Life:
In the CY 2005 PFS final rule we stated that we updated the useful life for equipment items primarily based on the AHA's “Estimated Useful Lives of Depreciable Hospital Assets” guidelines (69 FR 66246). The most recent edition of these guidelines was published in 2018. This reference material provides an estimated useful life for hundreds of different types of equipment, the vast majority of which fall in the range of 5 to 10 years, and none of which are lower than 2 years in duration. We believe that the updated editions of this reference material remain the most accurate source for estimating the useful life of depreciable medical equipment.

We note that stakeholders including the RUC, specialty societies, and other commenters suggested a useful life of less than 1 year for several of the new equipment items for CY 2021, and as low as three months in one case. We have rarely, if ever, received requests for equipment useful life of less than one year in duration and note that these very short useful life durations are significantly lower than anything in our current equipment database, and if finalized would represent major outliers when compared to the rest of the equipment. Table 3 details the distribution of useful life durations of the equipment currently in our database:

EP17AU20.003

As Table 3 demonstrates, the vast majority of equipment items have a useful life duration of 5 to 10 years, and only 4 out of the 777 equipment codes have a useful life duration of less than 3 years. We also note that due to the formula used to calculate the equipment cost per minute, decreasing the useful life of any equipment item from 5 years to 3 months has the same effect as increasing the price of the equipment 20 times over. In other words, decreasing the useful life from 5 years to 0.25 years has the same multiplicative effect as increasing the price of the equipment from $5,000 to 100,000 due to the formula listed above. Since we currently do not have any equipment items in our database with a useful life of less than one year, we are proposing a clarification on how to address these cases.

We disagree that assigning a useful life at these very short durations would be typical for new equipment, especially in light of the data provided by the AHA's “Estimated Useful Lives of Depreciable Hospital Assets” reference. The equipment life durations listed in Table 3 were finalized over the last 15 years through the use of this reference material. We have concerns that assigning very low useful life durations to equipment items would fail to maintain relativity with other equipment on the PFS, effectively assigning a much higher price than other equipment items with more typical useful life durations. We believe that equipment items with very low useful life durations represent outlier cases that are not handled appropriately by the current equipment methodology and which we seek to clarify through this rulemaking. We also note that the equipment cost per minute formula was designed under the assumption that each equipment item would remain in use for a period of several years and depreciate over that span of time. Our current equipment formula is not designed to address cases in which equipment is replaced multiple times per year, and we believe that applying a multi-year depreciation in these situations would not be reflective of market pricing. We do not believe that items which are replaced on a monthly basis can be accurately priced using a formula which assumes they will be in use for years at a time, and that the use of such a formula would distort relativity with the overwhelming majority of equipment items which are in use for 5-10 years.

Therefore, we proposing to treat equipment life durations of less than 1 year as having a duration of 1 year for the purpose of our equipment price per minute formula. We believe that this is the most accurate way to incorporate these short equipment life durations within the framework of our current methodology. In the rare cases where items are replaced every few months, we believe that it is more accurate to treat these items as disposable supplies with a fractional supply quantity as opposed to equipment items with very short equipment life durations. For example, we are proposing to establish the EECP compression equipment package (SD341) and the EECP electrical equipment package (SD342) as disposable supplies instead of equipment items as described in the Valuation of Specific Codes (section II.H. of this proposed rule) portion of the preamble. We expect these situations to occur only rarely, and we will evaluate them on an individual case-by-case basis. Our criteria will be based on whether or not the item in question could be more accurately classified as a disposable supply while maintaining overall relativity within our PE methodology. We welcome additional comments from stakeholders regarding the subject of useful life durations for new equipment items with unique useful life durations as described above and any additional suggestions on alternative ways to incorporate these items into our methodology or potential wider changes to the equipment cost per minute formula more broadly.

•
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 are not proposing a variable maintenance factor for equipment cost per minute pricing as we do not believe that we have sufficient information at present. 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). The Interest rates are listed in Table 4.

EP17AU20.004

We are not proposing any changes to the equipment interest rates for CY 2021.

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 final 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 through 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 post service 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” and “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 a series of clinical labor tasks associated with pathology services in the CY 2016 PFS final rule with comment period (80 FR 70902). We do not believe these activities would be dependent on number of blocks or batch size, and we believe that the finalized standard 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 and 59464).

Following the publication of the CY 2020 PFS proposed rule, a commenter expressed concern with the published list of common refinements to equipment time. The commenter stated that these refinements were the formulaic result of the applying refinements to the clinical labor time and did not constitute separate refinements; the commenter requested that CMS no longer include these refinements in the table published each year. In the CY 2020 PFS final rule, we agreed with the commenter that that these equipment time refinements did not reflect errors in the equipment recommendations or policy discrepancies with the RUC's equipment time recommendations. However, we believed that it was important to publish the specific equipment times that we were proposing (or finalizing in the case of the final rule) when they differed from the recommended values due to the effect that these changes can have on the direct costs associated with equipment time. Therefore, we finalized the separation of the equipment time refinements associated with changes in clinical labor into a separate table of refinements. For additional details, we direct readers to the discussion in the CY 2020 PFS final rule (84 FR 62584).

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 2021, 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 2021 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 noted 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. Based on the recommendations from the workgroup, we proposed to establish 23 new scope equipment codes. For the eight new scope equipment items where we received submitted invoices for pricing, we proposed to replace the existing scopes with the new scope equipment at the same amount of equipment time. This scope replacement involved approximately 100 HCPCS codes in total and was detailed in a table published in the CY 2020 proposed rule (84 FR 40495 through 40498). We noted that we did not receive pricing information along with the workgroup recommendations for the other 15 new scope equipment items. Therefore, although we proposed to establish new equipment codes for these scopes, we did not propose to replace existing scope equipment with the new equipment items as we did for the other eight new scope equipment items for CY 2020.

Following the publication of the CY 2020 PFS proposed rule, commenters provided additional information regarding pricing for the new scope equipment and their associated HCPCS codes. Based on this information provided by the commenters, we finalized a price for eight additional new scope equipment items and finalized the replacement of the existing scopes with the new scope equipment at the same amount of equipment time for approximately two dozen additional HCPCS codes (84 FR 62593 through 62595). Table 5 lists the CY 2020 finalized price for the new scope equipment codes:

EP17AU20.005

We noted that although we updated the scope equipment pricing for CY 2020 such that the ES087 and ES089 scopes shared the same price with the ES088 scope, and the ES090 scope shared the same price with the ES085 scope, we did not mean to suggest that these scopes that shared pricing were identical with one another. We assigned the same price to these scopes because they replaced the same current scope equipment codes, and because we did not have individual pricing information for them. We remain open to the submission of additional invoices to establish individual pricing for these scopes, and we continue to welcome more data to help identify pricing for the remaining seven scope equipment codes that still lack invoices.

(5) Scope Proposals for CY 2021

We did not receive further recommendations from the Scope Equipment Reorganization Workgroup organized by the RUC following the publication of the CY 2020 final rule. However, we did receive invoices associated with the pricing of the scope video system (monitor, processor, digital capture, cart, printer, LED light) (ES031) equipment item as part of the review of the Esophagogastroduodenoscopy (EGD) with Biopsy and the Colonoscopy code families. We previously finalized a price of $36,306 for the ES031 equipment based on the sum of 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, $1,750 for the cart, $1,915 for the LED light, and $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.) We received 37 invoices associated with the components of the ES031 scope video system, which averaged out to prices of $21,988.89 for the processor, $16,175.87 for the digital capture device, $6,987.56 for the monitor, $7,922.80 for the printer, $4,945.45 for the cart, and $12,652.82 for the LED light. Based on the sum of these component prices, we are proposing to update the price the ES031 scope video system equipment to $70,673.38. We are not proposing to include an additional $1,000 to cover the expense of miscellaneous small equipment as the products listed on the component invoices indicated that cost of cables were already included in this significantly higher equipment pricing. We are soliciting additional comments from stakeholders regarding the pricing of the full ES031 scope equipment system as well as its components.

As part of our market-based supply and equipment pricing transition, we finalized a policy in CY 2019 to phase in any updated pricing established during the 4-year transition period for very commonly used supplies and equipment that are included in 100 or more codes, even if invoices are provided as part of the formal review of a code family (83 FR 59473 through 59475). Because the ES031 scope equipment system is utilized by more than 250 HCPCS codes, we are proposing to transition this pricing increase over the remaining two years of the pricing update, such that the CY 2021 equipment price will be $53,489.69 before moving to its destination price of $70,673.38 in CY 2022. We note that this transition policy also applies to the price of the suction machine (Gomco) (EQ235) equipment, which, although it is not a scope, is utilized by approximately 360 HCPCS codes, and therefore, is another example of this pricing transition policy. We are proposing to transition the EQ235 pricing increase over the remaining 2 years of the pricing update, such that the CY 2021 equipment price will be $1,981.66 before moving to its destination price of $ $3,195.85 in CY 2022. As we stated previously, this

policy is intended to minimize any potential disruptive effects during the pricing transition period due to the high number of services that make use of these very common supply and equipment items included in 100 or more HCPCS codes.

We also received invoices for the colonoscopy videoscope (ES033) and gastroscopy videoscopy (ES034) as part of the review of the Esophagogastroduodenoscopy (EGD) with Biopsy and the Colonoscopy code families. We finalized the replacement of both of these scope equipment items in the CY 2020 final rule (84 FR 62588 through 62590), replacing the colonoscopy videoscope (ES033) with the multi-channeled flexible digital scope, colonoscopy (ES086) equipment item and the gastroscopy videoscopy (ES034) with the multi-channeled flexible digital scope, esophagoscopy gastroscopy duodenoscopy (EGD) (ES087) equipment item. In both cases, the submitted invoices were nearly identical to the finalized prices for the ES086 ($38,058.81) and ES087 ($34,585.35) equipment. We believe that these invoices reinforce the prices finalized through rulemaking last year, and therefore, we are not proposing to further update the prices of these scopes.

We remain open to further comments regarding the pricing of the remaining seven scope equipment codes that still lack invoices, as well as additional data regarding the pricing of the scope equipment codes that currently share the same price.

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

For CY 2021, we are proposing to address the following inconsistencies:

• Following the publication of the CY 2020 PFS final rule, stakeholders contacted CMS and clarified that CPT code 0466T (Insertion of chest wall respiratory sensor electrode or electrode array, including connection to pulse generator) is always performed on an add-on basis and would never be used as a standalone code. Therefore, we are proposing to update the global period for CPT code 0466T to add-on status (ZZZ) to more accurately reflect the way in which this service is performed.

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 2021, we are proposing to update the price of one supply and four equipment items 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 2021 for these items instead of being phased in over 4 years. These supply and equipment items with updated prices associated with the formal review of a code family are listed in the valuation of specific codes section of the preamble under Table 27: CY 2021 Invoices Received for Existing Direct PE Inputs.

(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, enacted April 1, 2014) 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).

• The
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 we 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 6.

EP17AU20.006

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 timeframe 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 through 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 through 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 2021, we received invoice submissions for approximately a dozen supply and equipment codes from stakeholders as part of the third year of the market-based supply and equipment pricing update. The submitted invoices were used in many cases to supplement the pricing originally proposed for the CY 2019 PFS rule cycle. We 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 supply and equipment items listed in Table 7 of the CY 2021 PFS proposed rule.

We finalized a policy in CY 2019 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 6. For CY 2021, one half of the difference between the CY 2020 price and the final price will be implemented as per the previously finalized policy. Table 7 contains the list of proposed CY 2021 market-based supply and equipment pricing updates:

EP17AU20.007

The proposed prices for the supply and equipment items listed in Table 7 were calculated based on averaging together the prices on the submitted invoices. In the case of the vascular sheath (SD136) and RF endovenous occlusion catheter (SD155) supplies, the proposed price was determined by removing the sheath or catheter from the eight submitted kit invoices and then averaging the resulting price together with the single standalone sheath/catheter invoice.

In addition to submitting invoices with information updating the price of

the “Vmax 22d and 62j (PFT equip, autobox, computer system)” (EQ041) equipment, stakeholders also clarified that the “Vmax 229 (spirometry testing equip, computer system)” (EQ040) and “Vmax 29s (spirometry testing equip, computer system)” (EQ043) equipment items have become obsolete and are no longer typically used in any HCPCS codes. Based on the information supplied by the stakeholders, we are proposing to remove the EQ040 and EQ043 equipment items, replacing them with the EQ041 equipment at the same number of minutes in the six HCPCS codes where they are utilized.

We are not proposing to update the price of additional supply and equipment items for which invoices were submitted following the publication of the CY 2020 PFS final rule. We are not proposing to update the price for the “pipette, transfer 23ml” (SL109), “slide specimen mailer (1-5 microscope slides)” (SL121), “stain, hematoxylin” (SL135), “stain, eosin” (SL201), and “stain, PAP OG-6” (SL491) supplies. In each case we received a single invoice for these five supplies detailing price increases ranging from 82 percent to 160 percent above the current pricing. These supplies are commonly used in cytopathology procedures and we disagree that the typical price for these supplies has more than doubled since being reviewed by the StrategyGen contractor two years ago for CY 2019.

We are also not proposing to update the price for the “embedding mold” (SL060) supply or the “microscope, compound” (EP060) equipment based on the same rationale. The submitted invoices represent pricing increases of 339 percent for the compound microscope and 7800 percent for the embedding mold and, based on the recent review of the pricing of these items by our contractor, we do not believe that the submitted invoices reflect typical market-based pricing. The same stakeholder also submitted an invoice to update the price of the surgical mask (SB033) supply by 617 percent over the current price. However, the invoice in question contains the price for a surgical mask with face shield, which is described by the SB034 supply code, not the SB033 supply code. Therefore, we are not proposing to update the price of the surgical mask (SB033) supply based on this invoice. Finally, we received an invoice for a ClosureFast Procedure Pack (CFP) but it was unclear what supply or equipment item this invoice was intended to update. As a result, we were unable to use this invoice to make a pricing proposal.

(2) Invoice Submission

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 2021 PFS proposed rule at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

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. 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 will 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. Stakeholders are encouraged to submit invoices as part of their public comments or, if outside the public comment process, via email at
PE_Price_Input_Update@cms.hhs.gov.

(3) Updated Supply Pricing for Venous and Arterial Stenting Services

Following the publication of the CY 2020 PFS final rule, stakeholders contacted CMS and presented additional information regarding supply pricing for certain venous and arterial stenting services. These stakeholders stated that the use of the “stent, vascular, deployment system, Cordis SMART” (SA103) supply was no longer typical in CPT codes 37238 (Transcatheter placement of an intravascular stent(s), open or percutaneous, including radiological supervision and interpretation and including angioplasty within the same vessel, when performed; initial vein) and 37239 (Transcatheter placement of an intravascular stent(s), open or percutaneous, including radiological supervision and interpretation and including angioplasty within the same vessel, when performed; each additional vein). The stakeholders stated that a new venous stent system had become the typical standard of care for these services, and they supplied ten invoices for use in pricing this supply.

The stakeholders also requested additional information regarding the nature of the “stent, balloon, implantable” (SD299) supply included in CPT codes 37236 (Transcatheter placement of an intravascular stent(s) (except lower extremity artery(s) for occlusive disease, cervical carotid, extracranial vertebral or intrathoracic carotid, intracranial, or coronary), open or percutaneous, including radiological supervision and interpretation and including all angioplasty within the same vessel, when performed; initial artery) and 37237 (Transcatheter placement of an intravascular stent(s) (except lower extremity artery(s) for occlusive disease, cervical carotid, extracranial vertebral or intrathoracic carotid, intracranial, or coronary), open or percutaneous, including radiological supervision and interpretation and including all angioplasty within the same vessel, when performed; each additional artery). The stakeholders specifically were unclear what the implantable stent balloon represented and sought guidance on whether pricing involved a stent, a balloon, or a combination of both.

In response to the additional information provided by the stakeholders, we are proposing to remove the SA103 supply item from CPT codes 37238 and 37239. We are proposing to replace it with a newly created “venous stent system” (SD340) supply at the same supply quantity. We are proposing a price of $1,750.00 for the venous stent system based on the median price of the ten invoices supplied by the stakeholders. We are proposing the use of the median price due to the presence of several invoices that appear to be outliers which are not reflective of market pricing for the venous stent system. With regards to the request for additional information regarding the nature of the “stent, balloon, implantable” (SD299) supply, the original invoice used to price this supply during the CY 2015 rule cycle listed an item named “Renal and Biliary Stent System 7.0 mm x 15 mm x 135 cm”. We welcome additional information from stakeholders regarding the nature and pricing of this supply item.

(4) Myocardial PET Equipment Inputs

Following the publication of the CY 2020 PFS final rule, stakeholders contacted CMS and presented additional information regarding the direct PE inputs for several codes associated with Myocardial PET services. The stakeholders stated that the nuclide rod source set (ER044) equipment was inadvertently excluded

from the direct PE recommendations for CPT codes 78432 (Myocardial imaging, positron emission tomography (PET), combined perfusion with metabolic evaluation study (including ventricular wall motion[s] and/or ejection fraction[s], when performed), dual radiotracer (
e.g.,
myocardial viability);), 78459 (Myocardial imaging, positron emission tomography (PET), metabolic evaluation study (including ventricular wall motion[s] and/or ejection fraction[s], when performed), single study;), 78491 (Myocardial imaging, positron emission tomography (PET), perfusion study (including ventricular wall motion[s] and/or ejection fraction[s], when performed); single study, at rest or stress (exercise or pharmacologic)), and 78492 (Myocardial imaging, positron emission tomography (PET), perfusion study (including ventricular wall motion[s] and/or ejection fraction[s], when performed); multiple studies at rest and stress (exercise or pharmacologic)), and requested that CMS add this equipment to the direct inputs for this group of CPT codes. The stakeholders also stated that the current useful life of 5 years for the ER044 equipment was incorrect as these sources are replaced every 9 months to 1 year. The stakeholders requested that CMS update the useful life of ER044 to 0.75 years. Finally, the stakeholders stated that the costs for the purchase of the Rubidium PET Generator (ER114) equipment are captured elsewhere through the billing of HCPCS supply code A9555, and the stakeholders recommended that we remove equipment item ER114 to avoid incorrect billing duplication.

We appreciate the additional information submitted by the stakeholders regarding the direct PE inputs for these Myocardial PET services. In response to this new information, we are proposing to update the price for the nuclide rod source set (ER044) equipment to $2,081.17 based on averaging together the price of the three submitted invoices after removing the shipping and delivery costs according to our standard pricing methodology. We are also proposing to add the ER044 equipment to CPT codes 78432, 78459, 78491, and 78492 as requested, assigning the same equipment time utilized by the “PET Refurbished Imaging Cardiac Configuration” (ER110) equipment in each service. We are proposing to update the useful life of the ER044 equipment to one year in accordance with our proposed policy to treat equipment useful life durations of less than 1 year as having a duration of one year. As we stated previously in section II.B we have concerns that assigning very low useful life durations of less than 1 year would fail to maintain relativity with other equipment on the PFS, and the equipment cost per minute formula was designed under the assumption that each equipment item would remain in use for a period of several years and depreciate over that span of time. We direct readers to the previous discussion regarding equipment cost per minute methodology earlier in section II.B. of this proposed rule. Finally, we are removing the “PET Generator (Rubidium)” (ER114) equipment from our database as requested by the stakeholders. We note that since the technical components for CPT codes 78432, 78459, 78491, and 78492 are all contractor-priced, there will be no change to the national pricing of these codes.

(5) 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 2021, we are proposing to continue with the fourth and final year of the transition of this adjustment to the standard process for allocating indirect PE.

e. Update on Technical Expert Panel Related to Practice Expense

The RAND Corporation is currently studying potential improvements to CMS' PE allocation methodology and the data that underlie it. As we noted earlier in this section, our current system for setting PE RVUs relies in part on data collected in the Physician Practice Information Survey (PPIS), which was administered by the AMA in CY 2007 and 2008.

RAND, in its first phase of research, available at
https://www.rand.org/pubs/research_reports/RR2166.html,
found that the PPIS data are outdated and may no longer reflect the resource allocation, staffing arrangements, and cost structures that describe practitioners' resource requirements in furnishing services to Medicare beneficiaries, and consequently may not accurately capture the indirect PE resources required to furnish services to Medicare FFS beneficiaries. For example, the PPIS preceded the widespread adoption of electronic health records, quality reporting programs, billing codes that promote team-based care, and hospital acquisition of physician practices. Notably, RAND found that practice ownership was strongly associated with indirect PE, with physician-owned practices requiring 190% higher indirect PE compared to facility-owned practices, suggesting a need to potentially update demographic information. Additionally, RAND found that aggregating Medicare provider specialties into broader categories resulted in small specialty-level impacts relative to the current system, suggesting that specialty-specific inputs may not be required to accurately reflect resource costs.

To follow up on these and other issues raised in the first phase of RAND's research, in the CY 2020 PFS, we announced that RAND was convening a technical expert panel (TEP) to obtain input from stakeholders including physicians, practice and health system managers, health care accountants, and health policy experts. The TEP occurred on January 10, 2020 and its report is available at
https://www.rand.org/pubs/working_papers/WR1334.html.
Topics discussed included identifying issues with the current system; changes in medicine that have affected PE; how PE inputs could be updated, including through a potential new survey instrument; how best to aggregate PE categories if there were to be new survey instrument; ways to maximize response rates in a potential new survey; and using existing data to inform PFS PE rates. In addition, RAND has issued the results of its subsequent phase of research, available at
www.rand.org/t/RR3248.
This report is also available as a public use file displayed on the CMS website under downloads for the CY 2021 PFS proposed rule at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

Based on the results of the TEP and RAND's other ongoing research, we are interested in potentially refining the PE methodology and updating the data used to make payments under the PFS. We believe that potential refinements could improve payment accuracy and strengthen Medicare. Our goals are to balance obtaining the data as soon as practicable and in a way that would allow stakeholders and CMS to collectively examine many of the issues the TEP and RAND's research identified. We are thinking through several questions, including how to best incorporate market-based information, which could be similar to the market research that we recently conducted to update supply and equipment pricing used to determine direct PE inputs under the PFS payment methodology. For example, stakeholders have expressed an interest in updating the clinical labor data that we use for direct PE inputs based on current salaries and compensation for the health care workforce. We are soliciting comment regarding how we might update the clinical labor data. Historically, we have used data from the Bureau of Labor Statistics and are seeking comment to determine if this is the best data source or if there is an alternative. We are also interested in hosting a Town Hall meeting at a date to be determined to provide an open forum for discussion with stakeholders on our ongoing research to potentially update the PE methodology and the underlying inputs. Finally, we welcome feedback from all interested parties regarding RAND's report and we are not making any proposals based on this report at this time. Stakeholders are encouraged to submit feedback as part of their public comments or, if outside the public comment process, via email at
PE_Price_Input_Update@cms.hhs.gov.

C. Potentially Misvalued Services Under the PFS

1. Background

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

As discussed in section II.H. of this proposed rule, Valuation of Specific Codes, each year we develop appropriate adjustments to the RVUs taking into account recommendations provided by the American Medical Association Resource-Based Relative Value Scale (RVS) Update Committee (RUC), Medicare Payment Advisory Commission (MedPAC), and other stakeholders. For many years, the RUC has provided us with recommendations on the appropriate relative values for new, revised, and potentially misvalued PFS services. We review these recommendations on a code-by-code basis and consider these recommendations in conjunction with analyses of other data, such as claims data, to inform the decision-making process as authorized by law. We may also consider analyses of work time, work RVUs, or direct PE inputs using other data sources, such as Department of Veteran Affairs (VA), National Surgical Quality Improvement Program (NSQIP), the Society for Thoracic Surgeons (STS), and the Merit-based Incentive Payment System (MIPS) data. In addition to considering the most recently available data, we assess the results of physician surveys and specialt

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-17127. Public record. Not legal advice.