# Medicare and Medicaid Programs; CY 2023 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment Policies; Medicare Shared Savings Program Requirements; Medicare and Medicaid Provider Enrollment Policies, Including for Skilled Nursing Facilities; Conditions of Payment for Suppliers of Durable Medicaid Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS); and Implementing Requirements for Manufacturers of Certain Single-Dose Container or Single-Use Package Drugs To Provide Refunds With Respect to Discarded Amounts

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2022-14562

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** July 29, 2022
- **Citation:** 87 FR 45860

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 405, 410, 411, 414, 415, 423, 424, 425, and 455
[CMS-1770-P]
RIN 0938-AU81
Medicare and Medicaid Programs; CY 2023 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment Policies; Medicare Shared Savings Program Requirements; Medicare and Medicaid Provider Enrollment Policies, Including for Skilled Nursing Facilities; Conditions of Payment for Suppliers of Durable Medicaid Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS); and Implementing Requirements for Manufacturers of Certain Single-Dose Container or Single-Use Package Drugs To Provide Refunds With Respect to Discarded Amounts

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Health and Human Services (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; updates to the Quality Payment Program; Medicare coverage of opioid use disorder services furnished by opioid treatment programs; updates to certain Medicare and Medicaid provider enrollment policies, including for skilled nursing facilities; updates to conditions of payment for DMEPOS suppliers; HCPCS Level II coding and payment for wound care management products; electronic prescribing for controlled substances for a covered Part D drug under a prescription drug plan or an MA-PD plan under the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (SUPPORT Act); updates to the Medicare Ground Ambulance Data Collection System; and provisions under the Infrastructure Investment and Jobs Act.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on September 6, 2022.

ADDRESSES:

In commenting, please refer to file code CMS-1770-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-1770-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-1770-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT:

MedicarePhysicianFeeSchedule@cms.hhs.gov,
for any issues not identified below. Please indicate the specific issue in the subject line of the email.

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

Kris Corwin, (410) 786-8864, for issues related to the comment solicitation on strategies for updates to practice expense data collection and methodology.

Sarah Leipnik, (410) 786-3933, and Anne Blackfield, (410) 786-8518, for issues related to the comment solicitation on strategies for improving global surgical package valuation.

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

Kris Corwin, (410) 786-8864, Patrick Sartini, (410) 786-9252, and Larry Chan, (410) 786-6864, for issues related to telehealth services and other services involving communications technology.

Regina Walker-Wren, (410) 786-9160, for issues related to nurse practitioner and clinical nurse specialist certification by the Nurse Portfolio Credentialing Center (NPCC).

Lindsey Baldwin, (410) 786-1694, or
MedicarePhysicianFeeSchedule@cms.hhs.gov,
for issues related to PFS payment for behavioral health services.
MedicarePhysicianFeeSchedule@cms.hhs.gov,
for issues related to PFS payment for evaluation and management services.

Geri Mondowney, (410) 786-1172, Morgan Kitzmiller, (410) 786-1623, Julie Rauch, (410) 786-8932, and Tamika Brock, (312) 886-7904, for issues related to malpractice RVUs and geographic practice cost indices (GPCIs).

MedicarePhysicianFeeSchedule@cms.hhs.gov,
for issues related to non-face-to-face nonphysician services/remote therapeutic monitoring services (RTM).

Zehra Hussain, (214) 767-4463, or
MedicarePhysicianFeeSchedule@cms.hhs.gov,
for issues related to payment of skin substitutes.

Pamela West, (410) 786-2302, for issues related to revisions to regulations to allow audiologists to furnish diagnostic Tests, as appropriate without a physician order.

Emily Forrest, (202) 205-1922, Laura Ashbaugh, (410) 786-1113, and Erick Carrera, (410) 786-8949, for issues related to PFS payment for dental services.

Heidi Oumarou, (410) 786-7942, for issues related to the rebasing and revising of the Medicare Economic Index (MEI).

Laura Kennedy, (410) 786-3377, and Rachel Radzyner, (410) 786-8215, for issues related to requiring manufacturers of certain single-dose container or single-use package drugs payable under Medicare Part B to provide refunds with respect to discarded amounts.

Laura Ashbaugh, (410) 786-1113, and Rasheeda Arthur, (410) 786-3434, for issues related to Clinical Laboratory Fee Schedule.

Lisa Parker, (410) 786-4949, or
FQHC-PPS@cms.hhs.gov,
for issues related to FQHCs.

Michele Franklin, (410) 786-9226, or
RHC@cms.hhs.gov,
for issues related to RHCs.

Daniel Feller, (410) 786-6913, and Elizabeth Truong (410) 786-6005, for issues related to coverage of colorectal cancer screening.

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

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

Kathleen Johnson, (410) 786-3295, and Sabrina Ahmed, (410) 786-7499, for issues related to the Medicare Shared Savings Program (Shared Savings Program) Quality performance standard and quality reporting requirements.

Sabrina Ahmed, (410) 786-7499, for issues related to the Medicare Shared

Savings Program burden reduction proposal on OHCAs.

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 financial methodology.

Naseem Tarmohamed, (410) 786-0814, or
SharedSavingsProgram@cms.hhs.gov,
for inquiries related to Shared Savings Program application, compliance and beneficiary notification requirements.

Rachel Radzyner, (410) 786-8215, and Michelle Cruse, (443) 478-6390, for issues related to vaccine administration services.

Katie Parker, (410) 786-0537, for issues related to medical necessity and documentation requirements for nonemergency, scheduled, repetitive ambulance services.

Frank Whelan, (410) 786-1302, for issues related to Medicare provider enrollment regulation updates (including for skilled nursing facilities), State options for implementing Medicaid provider enrollment affiliation provisions, and conditions of payment for DMEPOS suppliers.

Mei Zhang, (410) 786-7837, and Daniel Standridge, (410) 786-2419, 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 (section 2003 of the SUPPORT Act).

Amy Gruber, (410) 786-1542, or
AmbulanceDataCollection@cms.hhs.gov,
for issues related to the Medicare Ground Ambulance Data Collection System.

Sundus Ashar,
Sundus.ashar1@cms.hhs.gov,
for issues related to HCPCS Level II Coding for skin substitutes.

Renee O'Neill, (410) 786-8821, or Kati Moore, (410) 786-5471, for inquiries related to Merit-based Incentive Payment System (MIPS).

Richard Jensen, (410) 786-6126, 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://www.regulations.gov.
Follow the search instructions on that website to view public comments. CMS will not post on
Regulations.gov
public comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other 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 2023 PFS proposed rule, refer to item CMS-1770-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
MedicarePhysicianFeeSchedule@cms.hhs.gov.

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 a copyright of 2020 American Medical Association (AMA); all rights reserved; and CPT is a registered trademark of the AMA. Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

I. Executive Summary

This major annual rule proposes to revise payment polices under the Medicare PFS and makes other policy changes, including proposals to implement certain provisions of the Protecting Medicare and American Farmers from Sequester Cuts Act (PMAFSCA) (Pub. L. 117-71, December 10, 2021), Infrastructure Investment and Jobs Act (Pub. L. 117-58, November 15, 2021), Consolidated Appropriations Act, 2021 (CAA, 2021) (Pub. L. 116-260, December 27, 2020), 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 major proposed rule includes proposals regarding other Medicare payment policies described in sections III. and IV.

B. 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 each year by regulation the payment amounts for physicians' services paid under the PFS, including 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 2023 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:

• Determination of PE RVUs (section II.B.)

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

• Payment for Medicare Telehealth Services Under Section 1834(m) of the Act (section II.D.)

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

• Evaluation and Management (E/M) Visits (section II.F.)

• Geographic Practice Cost Indices (GPCI) (section II.G.)

• Determination of Malpractice Relative Value Units (RVUs) (section II.H.)

• Non-Face-to-Face/Remote Therapeutic Monitoring (RTM) Services (section II.I.)

• Payment for Skin Substitutes (section II.J.)

• Proposal to Allow Audiologists to Furnish Certain Diagnostic Tests Without a Physician Order (section II.K.)

• Proposals and Request for Information on Medicare Parts A and B Payment for Dental Services (section II.L.)

• Rebasing and Revising the Medicare Economic Index (MEI) (section II.M.)

• Requiring Manufacturers of Certain Single-dose Container or Single-use Package Drugs to Provide Refunds with Respect to Discarded Amounts (§§ 414.902 and 414.940) (section III.A.)

• Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) (section III.B.)

• Clinical Laboratory Fee Schedule: Revised Data Reporting Period and Phase-in of Payment Reductions, and Proposals for Specimen Collection Fees and Travel Allowance for Clinical Diagnostic Laboratory Tests (section III.C.)

• Expansion of Coverage for Colorectal Cancer Screening and Reducing Barriers (section III.D.)

• Removal of Selected National Coverage Determinations (section III.E.)

• Modifications Related to Medicare Coverage for Opioid Use Disorder (OUD) Treatment Services Furnished by Opioid Treatment Programs (OTPs) (section III.F.)

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

• Medicare Part B Payment for Preventive Vaccine Administration Services (section III.H.)

• Medical Necessity and Documentation Requirements for Nonemergency, Scheduled, Repetitive Ambulance Services (section III.I.)

• Medicare Provider and Supplier Enrollment and Conditions of DMEPOS Payment (section III.J.)

• State Options for Implementing Medicaid Provider Enrollment Affiliation Provision (section III.K.)

• Requirement for Electronic Prescribing for Controlled Substances for a Covered Part D Drug under a Prescription Drug Plan or an MA-PD Plan (section 2003 of the SUPPORT Act) (section III.L.)

• Medicare Ground Ambulance Data Collection System (GADCS) (section III.M.)

• Proposal to Revise HCPCS Level II Coding Procedures for Wound Care Management Products (section III.N.)

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

• Collection of Information Requirements (section V.)

• Response to Comments (section VI.)

• Regulatory Impact Analysis (section VII.)

3. 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 VII., Regulatory Impact Analysis, of this proposed rule.

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 malpractice (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 Physician Fee Schedule (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 RVUs 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 2023 PFS proposed rule PE/HR” on the CMS website under downloads for the CY 2023 PFS proposed rule at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

c. Allocation of PE to Services

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

(1) Direct Costs

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

(2) Indirect Costs

We allocate the indirect costs at the code level based on 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 2023 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 an RVU scale for each service. To do this, divide the results of Step 4 by the CF. Note that the actual value of the CF used in this calculation does not influence the final direct cost PE RVUs as long as the same CF is used in Step 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 use the expected specialty that we identify on a list developed based on medical review and input from expert interested parties. 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 interested parties 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 52983) 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 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 BN. (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

EP29JY22.000

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.

EP29JY22.001

We also adjust 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.

Beginning in CY 2022, section 1834(v)(1) of the Act required that we apply a 15 percent payment reduction for outpatient occupational therapy services and outpatient physical therapy services that are provided, in whole or in part, by a physical therapist assistant (PTA) or occupational therapy assistant (OTA). Section 1834(v)(2)(A) of the Act required CMS to establish modifiers to identify these services, which we did in the CY 2019 PFS final rule (83 FR 59654 through 59661), creating the CQ and CO payment modifiers for services provided in whole or in part by PTAs and OTAs, respectively. These payment modifiers are required to be used on claims for services with dates of service beginning January 1, 2020, as specified in the CY 2020 PFS final rule (84 FR 62702 through 62708). We applied the 15 percent payment reduction to therapy services provided by PTAs (using the CQ modifier) or OTAs (using the CO modifier), as required by statute. Under sections 1834(k) and 1848 of the Act, payment is made for outpatient therapy services at 80 percent of the lesser of the actual charge or applicable fee schedule amount (the allowed charge). The remaining 20 percent is the beneficiary copayment. For therapy services to which the new discount applies, payment will be made at 85 percent of the 80 percent of allowed charges. Therefore, the volume discount factor for therapy services to which the CQ and CO modifiers apply is: (0.20 + (0.80* 0.85), which equals 88 percent.

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 final 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.

In the CY 2021 PFS final rule, we finalized a proposal 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. In the rare cases where items are replaced every few months, we noted that we believe 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 a more detailed discussion of the methodology associated with very short equipment life durations, we refer readers to the CY 2021 PFS final rule (85 FR 84482 through 84483).

•
Maintenance:
We finalized the 5 percent factor for annual maintenance 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 noted that we 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 noted that we did not believe 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 did not propose a variable maintenance factor for equipment cost per minute pricing as we did not believe that we have sufficient information at present. We noted that we would 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 3.

EP29JY22.002

We are not proposing any changes to the equipment interest rates for CY 2023.

3. Adjusting RVUs To Match PE Share of the Medicare Economic Index (MEI)

For CY 2023, as explained in detail in section II.M. of this proposed rule, we are proposing to rebase and revise the Medicare Economic Index (MEI) to reflect more current market conditions faced by physicians in furnishing physicians' services. The MEI is an index that measures changes in the market price of the inputs used to furnish physician services. This index measure was authorized by statute and is developed by the CMS Office of the Actuary. We believe that the MEI is the best measure available of the relative weights of the three components in payments under the PFS—work, PE and malpractice. Accordingly, we believe that to assure that the PFS payments reflect the relative resources in each of these components as required by section 1848(c)(3) of the Act, the RVUs used in developing rates should reflect the same weights in each component as the MEI. In the past, we have proposed (and subsequently, finalized) to accomplish this by holding the work RVUs constant and adjusting the PE RVUs, the MP RVUs and the CF to produce the appropriate balance in RVUs among the PFS components and payment rates for individual services. The most recent adjustments to reflect changes in the MEI weights were made for the CY 2014 RVUs, when the MEI was last updated. In the CY 2014 PFS proposed rule (78 FR 43287 through 43288) and final rule (78 FR 74236 through 74237), we detailed the steps necessary to accomplish this result (see steps 3, 10, and 18). The CY 2014 proposed and finalized adjustments were consistent with our longstanding practice to make adjustments to match the RVUs for the PFS components with the MEI cost share weights for the components, including the adjustments described in the CY 1999 PFS final rule (63 FR 58829), CY 2004 PFS final rule (68 FR 63246 and 63247), and CY 2011 PFS final rule (75 FR 73275).

In the past when we have proposed a rebasing and/or revision of the MEI, as we do in section II.M. of this proposed rule, we typically have also proposed to modify steps 3 and 10 to adjust the aggregate pools of PE costs (direct PE in step 3 and indirect PE in step 10) in proportion to the change in the PE share in the rebased and revised MEI cost share weights, as previously described in the CY 2014 PFS final rule (78 FR 74236 and 74237), and to recalibrate the relativity adjustment that we apply in step 18 as described in the CY 2014 PFS final rule. Instead, we are proposing to delay the adjustments to the PE pools in steps 3 and 10 and the recalibration of the relativity adjustment in step 18 until the public has an opportunity to comment on the proposed rebased and revised MEI, as discussed in section II.M. of this proposed rule. Because there are significant proposed methodological and data source changes to the MEI for CY 2023 and significant time has elapsed since the last rebasing and revision of the MEI, we believe it is important to allow public comment and

finalization of the proposed MEI changes based on the review of public comment before we incorporate the updated MEI into PFS ratesetting, and we believe this is consistent with our efforts to balance payment stability and predictability with incorporating new data through more routine updates. We refer readers to the comment solicitation in section II.B. of this proposed rule, where we discuss our ongoing efforts to update data inputs for PE to aid stability, transparency, efficiency, and data adequacy. Similarly, we are delaying the implementation of the proposed rebased and revised MEI for use in the PE geographic practice cost index (GPCI) and soliciting comment on appropriate timing for implementation for potential future rulemaking, discussed in detail in section II.G. and section VII. of this proposed rule.

In light of the proposed delay in using the proposed update to the MEI to make the adjustments to the PE pools in steps 3 and 10 and the relativity adjustment in step 18, we are soliciting comment on when and how to best incorporate the proposed rebased and revised MEI discussed in section II.M. of this proposed rule into PFS ratesetting, and whether it would be appropriate to consider a transition to full implementation for potential future rulemaking. In section VII. of this proposed rule, we present the impacts of implementing the proposed rebased and revised MEI in PFS ratesetting through a 4-year transition and through full immediate implementation, that is, with no transition period. Given the significance of the impacts that result from a full implementation and the interaction with other CY 2023 proposals, we did not consider proposing to fully implement a rebased and revised MEI in PFS ratesetting for CY 2023. We are seeking comment on other implementation strategies for potential future rulemaking that are not outlined in section VII. of this proposed rule.

4. Changes to Direct PE Inputs for Specific Services

This section focuses on specific PE inputs. The direct PE inputs are included in the CY 2023 direct PE input public use files, which are available on the CMS website under downloads for the CY 2023 PFS proposed rule at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

a. Standardization of Clinical Labor Tasks

As we noted in the CY 2015 PFS final rule with comment period (79 FR 67640 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, one 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 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 2023, 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 2023 PFS proposed rule at
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

b. 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. Beginning in CY 2019 and continuing through CY 2022, we conducted a market-based supply and equipment pricing update, using information developed by our contractor, StrategyGen, which updated pricing recommendations for approximately 1300 supplies and 750 equipment items currently used as direct PE inputs. Given the potentially significant changes in payment that would occur, in the CY 2019 PFS final rule we finalized a policy 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. We believed that implementing the proposed updated prices with a 4-year phase-in would improve payment accuracy, while maintaining stability and allowing interested parties the opportunity to address potential concerns about changes in payment for particular items. This 4-year transition period to update supply and equipment pricing concluded in CY 2022; for a more detailed discussion, we refer readers to the CY 2019 PFS final rule with comment period (83 FR 59473 through 59480).

For CY 2023, we are proposing to update the price of eight supplies and two equipment items in response to the public submission of invoices following the publication of the CY 2022 PFS final rule. The eight supply and equipment items with proposed updated prices are listed in the valuation of specific codes section of the preamble under Table 15, CY 2023 Invoices Received for Existing Direct PE Inputs.

We are not proposing to update the price of another eight supplies and two equipment items which were the subject of public submission of invoices. Our rationale for not updating these prices is detailed below:

• Acetic acid 5% (SH001): We received an invoice submission for an increase in price from 3 cents per ml to 9.5 cents per ml for the SH001 supply. However, the invoice stated that this price was for an “Alcian Blue 1% in 3% Acetic Acid pH 2.5” supply and it is not clear that this represents the same supply as the “Acetic acid 5%” described by the SH001 supply item. We also do not believe that the typical price for this supply has increased 200 percent in the 3 years since StrategyGen researched its pricing, especially given that the price for the SH001 supply previously increased from 1.2 cents in CY 2019 to its current price of 3 cents for CY 2022.

• Cytology, lysing soln (CytoLyt) (SL039): We received an invoice submission for an increase in price from 6 cents per ml to 80 cents per ml for the SL039 supply. We do not believe that the typical price for this supply has increased 1200% in the 3 years since StrategyGen researched its pricing, especially given that the price for the SL039 supply previously increased from 3.4 cents in CY 2019 to its current price of 6 cents for CY 2022.

• Fixative (for tissue specimen) (SL068): We received an invoice submission for an increase in price from 1.3 cents per ml to $4.87 for the SL068 supply. We believe that this was the result of confusion on the part of the interested party regarding the unit quantity for the SL068 supply. This item is paid on a per ml basis and not a per unit basis; there was not enough information on the submitted invoice to determine the price for the SL068 supply on a per ml basis.

• Ethanol, 100% (SL189): We received an invoice submission for an increase in price from 0.33 cents per ml to 1.2 cents per ml for the SL189 supply. However, we noted that the invoice was

based on the price for a single gallon of 100% ethanol which is typically sold in much larger quantities than a single gallon. We found that 100% ethanol was readily available for sale online in larger unit sizes and the current price of 0.33 cents per ml (based on the past StrategyGen market research) appears to be accurate based on online bulk pricing. We also found that the submitted invoices for the ethanol, 70% (SL190), ethanol, 95% (SL248), and stain, PAP OG-6 (SL491) supplies were also based on pricing for a single gallon. Each of these supply items was also available for purchase in larger unit quantities which indicated that the current pricing remained typical for these supplies. Therefore, we are not proposing to update the prices for the SL189, SL190, SL248 or SL491 supply, as we do not believe that the higher prices paid for smaller quantities of these supplies would be typical.

• Biohazard specimen transport bag (SM008): We received an invoice submission for an increase in price from 8 cents to 45 cents for the SM008 supply. However, it is not clear that the item described on the invoice is the same item as the SM008 supply. The invoice states only that the price is for “Supplied Case Red Bags” which was not enough information to determine if this would be typical for the SM008 supply. We also do not believe that the typical price for this supply has increased 460 percent in the 3 years since StrategyGen researched its pricing, especially given that the price for the SM008 supply previously increased from 3.5 cents in CY 2019 to its current price of 8 cents for CY 2022.

• International Normalized Ratio (INR) analysis and reporting system w-software (EQ312): We did not receive an invoice for this equipment item, only a letter stating that the cost of the EQ312 equipment should be increased from the current price of $19,325 to $1,600,000. We previously finalized a policy in the CY 2011 PFS final rule (75 FR 73205) to update supply and equipment prices through an invoice submission process. We require pricing data indicative of the typical market price of the supply or equipment item in question to update the price. It is not sufficient to state a different price without providing information to support this new valuation. Since we did not receive an invoice to support the higher costs asserted in the letter, we are not proposing a new price for the EQ312 equipment item. Interested parties are encouraged to submit invoices with their public comments or, if outside the notice and comment rulemaking process, via email at
PE_Price_Input_Update@cms.hhs.gov.
We also note that in order to be considered a direct PE input, an equipment item must be individually allocable to a particular patient for a particular service. Costs associated with the implementation, maintenance, and upgrade of equipment that is not individually allocable to a particular patient for a particular service, or other costs associated with running a practice, would typically be classified as forms of indirect PE under our methodology.

The same interested parties that addressed the pricing of the EQ312 equipment item questioned the assignment of the General Practice specialty crosswalk for indirect PE for home Prothrombin Time (PT)/INR monitoring services. These individuals stated that the predominant code used for PT/INR monitoring (HCPCS code G0249) will be significantly and negatively impacted by the continuing implementation over a 4-year period of changes in the clinical labor rates finalized in the CY 2022 PFS final rule (86 FR 65024). The individuals requested that CMS change the crosswalk for home PT/INR monitoring services to All Physicians or Pathology which would partially offset the reduction that HCPCS code G0249 is facing due to changes in the clinical labor rates.

We note for these interested parties that we finalized a crosswalk to the General Practice specialty for home PT/INR monitoring services (HCPCS codes G0248, G0249, and G0250) in the CY 2021 PFS final rule (85 FR 84477 and 84478). The data submitted by the commenters at the time indicated that the direct-to-indirect cost percentages to furnish home PT/INR monitoring are in the range of 31:69, similar to the ratio associated with the General Practice specialty. We disagree, as we did in response to comments in the CY 2021 PFS final rule, that these home PT/INR monitoring services should be reassigned to a different specialty that is less reflective of the cost structure for these services to offset reductions in payment for the services that result from an unrelated policy proposal (the clinical labor pricing update). We also note that we have not received any new information about PT/INR monitoring services since CY 2021 to indicate that All Physicians or Pathology would be more accurate choices for use in indirect PE allocation but are open to receiving new relevant information that CMS could consider in future rulemaking. As such, we are not proposing to change the assigned specialty for PT/INR services; we direct interested parties to the previous discussion of this topic in the CY 2021 PFS final rule (85 FR 84477 and 84478) and again in the CY 2022 PFS final rule (86 FR 65000). Interested parties are encouraged to submit new information to support the most accurate specialty choice to use in indirect PE allocation for PT/INR monitoring services distinct from what has previously been reviewed during the last two rule cycles.

• Remote musculoskeletal therapy system (EQ402): We received an invoice submission for a price of $1,000 for the EQ402 equipment item. Since this equipment already has a price of $1,000 we are not proposing to make any changes in the pricing; we thank the interested party for their invoice submission confirming the current price.

(1) Invoice Submission

We routinely accept public submission of invoices as part of our process for developing payment rates for new, revised, and potentially misvalued codes. Often these invoices are submitted in conjunction with the RUC-recommended values for the codes. 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. Interested parties are encouraged to submit invoices with their public comments or, if outside the notice and comment rulemaking process, via email at
PE_Price_Input_Update@cms.hhs.gov.

c. Clinical Labor Pricing Update

Section 220(a) of the PAMA 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.

Beginning in CY 2019, we updated the supply and equipment prices used for PE as part of a market-based pricing transition; CY 2022 was the final year of this 4-year transition. We initiated a market research contract with StrategyGen to conduct an in-depth and robust market research study to update the supply and equipment pricing for CY 2019, and we finalized a policy in CY 2019 to phase in the new pricing over a period of 4 years. However, we did not propose to update the clinical labor pricing, and the pricing for clinical labor has remained unchanged during this pricing transition. Clinical labor rates were last updated for CY 2002 using Bureau of Labor Statistics (BLS) data and other supplementary sources where BLS data were not available; we refer readers to the full discussion in the CY 2002 PFS final rule for additional details (66 FR 55257 through 55262).

Interested parties raised concerns that the long delay since clinical labor pricing was last updated created a significant disparity between CMS' clinical wage data and the market average for clinical labor. In recent years, a number of interested parties suggested that certain wage rates were inadequate because they did not reflect current labor rate information. Some interested parties also stated that updating the supply and equipment pricing without updating the clinical labor pricing could create distortions in the allocation of direct PE. They argued that since the pool of aggregated direct PE inputs is budget neutral, if these rates are not routinely updated, clinical labor may become undervalued over time relative to equipment and supplies, especially since the supply and equipment prices are in the process of being updated. There was considerable interest among interested parties in updating the clinical labor rates, and when we solicited comment on this topic in past rules, such as in the CY 2019 PFS final rule (83 FR 59480), interested parties supported the idea.

Therefore, we proposed to update the clinical labor pricing for CY 2022, in conjunction with the final year of the supply and equipment pricing update (86 FR 39118 through 39123). We believed it was important to update the clinical labor pricing to maintain relativity with the recent supply and equipment pricing updates. We proposed to use the methodology outlined in the CY 2002 PFS final rule (66 FR 55257), which draws primarily from BLS wage data, to calculate updated clinical labor pricing. As we stated in the CY 2002 PFS final rule, the BLS' reputation for publishing valid estimates that are nationally representative led to the choice to use the BLS data as the main source. We believe that the BLS wage data continues to be the most accurate source to use as a basis for clinical labor pricing and this data will appropriately reflect changes in clinical labor resource inputs for purposes of setting PE RVUs under the PFS. We used the most current BLS survey data (2019) as the main source of wage data for our CY 2022 clinical labor proposal.

We recognized that the BLS survey of wage data does not cover all the staff types contained in our direct PE database. Therefore, we crosswalked or extrapolated the wages for several staff types using supplementary data sources for verification whenever possible. In situations where the price wages of clinical labor types were not referenced in the BLS data, we used the national salary data from the Salary Expert, an online project of the Economic Research Institute that surveys national and local salary ranges and averages for thousands of job titles using mainly government sources. (A detailed explanation of the methodology used by Salary Expert to estimate specific job salaries can be found at
www.salaryexpert.com
). We previously used Salary Expert information as the primary backup source of wage data during the last update of clinical labor pricing in CY 2002. If we did not have direct BLS wage data available for a clinical labor type, we used the wage data from Salary Expert as a reference for pricing, then crosswalked these clinical labor types to a proxy BLS labor category rate that most closely matched the reference wage data, similar to the crosswalks used in our PE/HR allocation. For example, there is no direct BLS wage data for the Mammography Technologist (L043) clinical labor type; we used the wage data from Salary Expert as a reference and identified the BLS wage data for Respiratory Therapists as the best proxy category. We calculated rates for the “blend” clinical labor categories by combining the rates for each labor type in the blend and then dividing by the total number of labor types in the blend.

As in the CY 2002 clinical labor pricing update, the proposed cost per minute for each clinical staff type was derived by dividing the average hourly wage rate by 60 to arrive at the per minute cost. In cases where an hourly wage rate was not available for a clinical staff type, the proposed cost per minute for the clinical staff type was derived by dividing the annual salary (converted to 2021 dollars using the Medicare Economic Index) by 2080 (the number of hours in a typical work year) to arrive at the hourly wage rate and then again by 60 to arrive at the per minute cost. We ultimately finalized the use of median BLS wage data, as opposed to mean BLS wage data, in response to comments in the CY 2022 PFS final rule. To account for the employers' cost of providing fringe benefits, such as sick leave, we finalized the use of a benefits multiplier of 1.296 based on a BLS release from June 17, 2021 (USDL-21-1094). As an example of this process, for the Physical Therapy Aide (L023A) clinical labor type, the BLS data reflected a median hourly wage rate of $12.98, which we multiplied by the 1.296 benefits modifier and then divided by 60 minutes to arrive at the finalized per-minute rate of $0.28.

After considering the comments on our CY 2022 proposals, we agreed with commenters that the use of a multi-year transition would help smooth out the changes in payment resulting from the clinical labor pricing update, avoiding potentially disruptive changes in payment for affected interested parties, and promoting payment stability from year-to-year. We believed it would be appropriate to use a 4-year transition, as we have for several other broad-based updates or methodological changes. While we recognized that using a 4-year transition to implement the update means that we will continue to rely in part on outdated data for clinical labor pricing until the change is fully completed in CY 2025, we agreed with the commenters that these significant updates to PE valuation should be implemented in the same way, and for the same reasons, as for other major updates to pricing such as the recent supply and equipment update. Therefore, we finalized the implementation of the clinical labor pricing update over 4 years to transition from current prices to the final updated prices in CY 2025. We finalized the implementation of this pricing transition over 4 years, such that one quarter of the difference between the current price and the fully phased-in price is implemented for CY 2022, one third of the difference between the CY 2022 price and the final price is implemented for CY 2023, and one half of the difference between the CY 2023 price and the final price is implemented for CY 2024, with the new direct PE prices fully implemented for CY 2025. An example of the transition from the current to the fully-implemented new pricing that we finalized in the CY 2022 PFS final rule is provided in Table 4.

BILLING CODE 4120-01-P

EP29JY22.003

(1) CY 2023 Clinical Labor Pricing Update Proposals

For CY 2023, we received information from one interested party regarding the pricing of the Histotechnologist (L037B) clinical labor type. The interested party provided data from the 2019 Wage Survey of Medical Laboratories which supported an increase in the per-minute rate from the $0.55 finalized in the CY 2022 PFS final rule to $0.64. This rate of $0.64 for the L037B clinical labor type is a close match to the online salary data that we had for the Histotechnologist and matches the $0.64 rate that we initially proposed for L037B in the CY 2022 PFS proposed rule. Based on the wage data provided by the commenter, we are proposing this $0.64 rate for the L037B clinical labor type for CY 2023; we are also proposing a slight increase in the pricing for the Lab Tech/Histotechnologist (L035A) clinical labor type from $0.55 to $0.60 as it is a blend of the wage rate for the Lab Technician (L033A) and Histotechnologist clinical labor types. We are also proposing the same increase to $0.60 for the Angio Technician (L041A) clinical labor type, as we previously established a policy in the CY 2022 PFS final rule that the pricing for the L041A clinical labor type would match the rate for the L035A clinical labor type (86 FR 65032). The proposed pricing increase for these three clinical labor types is included in Table 5; the CY 2023 pricing for all other clinical labor types would remain unchanged from the pricing finalized in the CY 2022 PFS final rule.

EP29JY22.004

BILLING CODE 4120-01-C

As was the case for the market-based supply and equipment pricing update, the clinical labor rates will remain open for public comment over the course of

the 4-year transition period. We updated the pricing of a number of clinical labor types in the CY 2022 PFS final rule in response to information provided by commenters. We welcome additional feedback on clinical labor pricing from commenters in response to this proposed rule, especially any data that will continue to improve the accuracy of our final pricing. For the full discussion of the clinical labor pricing update, we direct readers to the CY 2022 PFS final rule (86 FR 65020 through 65037).

5. Soliciting Public Comment on Strategies for Updates to Practice Expense Data Collection and Methodology

The PE inputs used in setting PFS rates, including both the development of PE RVUs and, historically, the relative shares among work, PE, and malpractice RVUs across the PFS, are central in developing accurate rates and maintaining appropriate relativity among PFS services and overall payment among the professionals and suppliers paid under the PFS. Consequently, the underlying PE data inputs are a consistent point of interest among interested parties. However, unlike other payment systems with cost reporting systems, PFS data inputs are primarily based on exogenous proprietary data that become available as the data are collected. Specifically, we rely on historical survey data (almost all of which is over a decade old), some publicly available data collected for other purposes (for example, Bureau of Labor Statistics (BLS) wage data), recommendations from the American Medical Association and other provider groups, and annual Medicare claims data.

a. History of Updates to PE Inputs

Each year we continue to improve accuracy, predictability, and sustainability of updates to the PE valuation methodology to reduce the risks of possible misvaluation and other unintended outcomes. We have continued to develop policies geared toward providing more consistent updates to the direct PE inputs used in PFS ratesetting, including supply/equipment pricing and clinical labor rates. These efforts to develop these policies should contribute to improved standardization and transparency for all PE inputs used to update the PFS. As we continue our work to improve the information we use in our PE methodology, we are issuing a general comment solicitation to better understand how we might improve the collection of PE data inputs and refine the PE methodology.

In recent years, we have refined specific PE data inputs using a combination of market research and publicly available data (for example, market research on medical supply and equipment items and BLS data to update clinical labor wages) to update the direct PE data inputs used in the PFS ratesetting process. Last year, we implemented a final transition year for supply and equipment pricing updates and started the first year of a 4-year phase-in update to the clinical labor rates. However, the indirect PE data inputs remain tied to legacy information that is well over a decade old. To build on much needed progress, we now believe indirect PE would also benefit from a refresh that implements similar standard and routine updates. We believe that a data refresh, and use of data sources that receive routine refreshes, would reduce the likelihood of unpredictable shifts in payment, especially when such shifts could be driven by the age of data available rather than comprehensive information about changes in actual costs.

b. Data Collection, Analysis and Findings

In light of feedback from interested parties, CMS has prioritized stability and predictability over ongoing updates, and has taken a measured approach to updating PE data inputs. We have worked with interested parties and CMS contractors over a period of years to study the landscape and identify possible strategies to reshape the PE portion of physician payments. The fundamental issues are clear, but thought leaders and subject matter experts have advocated for more than one tenable approach to updating our PE methodology. Thus, we must balance the various interests of the public, and any path forward should allow for ongoing and routine cycles of PE updates.

Of the various PE data inputs, we believe that indirect PE data inputs, which reflect costs such as office rent, IT costs, and other non-clinical expenses, present the opportunity to build consistency, transparency, and predictability into our methodology to update PE data inputs. The primary source for indirect PE information is the Physician Practice Information Survey (PPIS), fielded by the AMA. The survey was most recently conducted in 2007 and 2008 (reflecting 2006 data). The survey respondents were self-employed physicians and selected nonphysician practitioners.

In general, interested parties have expressed the following concerns regarding CMS's approach to indirect PE allocation:

• CMS seems to rely on increasingly out-of-date data sources, and there is a dearth of mechanisms to update empirical inputs.

• The approach exacerbates payment differentials that possibly create inappropriate variation of reimbursement across ambulatory places of service (for example, significantly higher payments for the same service provided in a hospital outpatient department versus a physician office).

• CMS's method of indirect PE allocation may not accurately reflect variation in PE across different types of services, different practice characteristics, or evolving business models.

Beyond these issues, we have also explored other concerns with our indirect PE allocation method in depth in previous rulemaking. For example, refer to our previous comment solicitation and discussion of resource costs for services involving the use of innovative technologies in our CY 2022 PFS proposed rule (86 FR 39125). PE data inputs, and the methodological and evidence-based principles that shape use of such information in the context of reimbursement, are discussed in depth in a RAND Corporation (“RAND”) report prepared for CMS, entitled
Practice Expense Methodology and Data Collection Research and Analysis,
available at
https://www.rand.org/pubs/research_reports/RR2166.html.
1

1
Burgette, Lane F., Jodi L. Liu, Benjamin M. Miller, Barbara O. Wynn, Stephanie Dellva, Rosalie Malsberger, Katie Merrell, et al. “Practice Expense Methodology and Data Collection Research and Analysis.” RAND Corporation, April 11, 2018.
https://www.rand.org/pubs/research_reports/RR2166.html.

Various interested parties have taken issue with the use of certain costs in our current PE allocation methodology that they do not believe are associated with increased indirect PE. Some interested parties argue that the costs of disposable supplies, especially expensive supplies, and equipment are not relevant to allocating indirect PE; or that similarly, work in the facility setting (for example, work RVUs for surgical procedures) is not relevant to allocating indirect PE, though they agree that work in the office setting may be relevant to allocating indirect PE.
2

However, we do not believe that there is sufficient, if any,

data or peer-reviewed evidence available to definitively show that shifting indirect PE allocations based on the setting of care, or based on specialty, would result in improved allocations of PE that reflect true costs. Further, varying indirect PE allocations based on setting of care or based on specialty might create unintended consequences such as reduced access to care for beneficiaries, or reduced competition and autonomy of small group practices or individual clinicians whose revenue is based in part on services furnished under contract in the facility setting.

2
Kazungu, Jacob S., Edwine W. Barasa, Melvin Obadha, and Jane Chuma. “What Characteristics of Provider Payment Mechanisms Influence Health Care Providers' Behaviour? A Literature Review.”
The International Journal of Health Planning and Management
33, no. 4 (October 2018): e892-905.
https://doi.org/10.1002/hpm.2565.

We believe it is necessary to establish a roadmap toward more routine PE updates, especially because potentially improper or outdated allocation of PE across services may affect access to certain services, which could exacerbate disparities in care and outcomes. Establishing payments that better reflect current practice costs would mitigate possible unintended consequences, such as labor market distortions due to indirect cost allocations that do not reflect the current evolution of health care practice.
3

Interested parties have reiterated their desire for CMS to move away from the current PE allocation approach and continued to raise concerns with CMS's methodology and the underlying PE data inputs. In response to these and other concerns, we continue to review the methodology we use to establish the PE RVUs and to identify refinements. As part of this effort, we have contracted with RAND to develop and assess potential improvements in the current methodology used to allocate indirect practice costs in determining PE RVUs for a service, model alternative methodologies for determining PE RVUs, and identify and assess alternative data sources that CMS could use to regularly update indirect practice cost estimates.
4

3
Laugesen, Miriam J. “Regarding `Committee Representation and Medicare Reimbursements: An Examination of the Resource-Based Relative Value Scale.' ”
Health Services Research
53, no. 6 (December 2018): 4123-31.
https://doi.org/10.1111/1475-6773.13084.

4
Burgette, Lane F., Jodi L. Liu, Benjamin M. Miller, Barbara O. Wynn, Stephanie Dellva, Rosalie Malsberger, Katie Merrell, et al. “Practice Expense Methodology and Data Collection Research and Analysis.” RAND Corporation, April 11, 2018.
https://www.rand.org/pubs/research_reports/RR2166.html.

In this proposed rule, we are signaling our intent to move to a standardized and routine approach to valuation of indirect PE and we welcome feedback from interested parties on what this might entail, given our discussion above. We would propose the new approach to valuation of indirect PE in future rulemaking.

We seek comment on the following topics related to identification of the appropriate instrument, methods, and timing for updating specialty-specific PE data:

• Potential approaches to design, revision, and fielding of a PE survey that foster transparency (for example, transparency in terms of the methods of survey design, the content of the survey instrument, and access to raw results for informing PFS ratesetting); and

• Mechanisms to ensure that data collection and response sampling adequately represent physicians and non-physician practitioners across various practice ownership types, specialties, geographies, and affiliations.

We also seek comment on any alternatives to the above that would result in more predictable results, increased efficiencies, or reduced burdens. For example:

• Use of statistical clustering or other methods that would facilitate a shift away from specialty-specific inputs to inputs that relate to homogenous groups of specialties without a large change in valuation relative to the current PE allocations.

• Avenues by which indirect PE can be moved for facility to non-facility payments, based on data reflecting site of service cost differences.

• Methods to adjust PE to avoid the unintended effects of undervaluing cognitive services due to low indirect PE.

• A standardized mechanism and publicly available means to track and submit structured data and supporting documentation that informs pricing of supplies or equipment.

• Sound methodological approaches to offset circularity distortions, where variable costs are higher than necessary costs for practices with higher revenue.

We also seek comment on the cadence, frequency, and phase-in of adjustments for each major area of prices associated with direct PE inputs (Clinical Labor, Supplies/Equipment). We ask that commenters address the following:

• Whether CMS should stagger updates year-to-year for each update, or establish “milestone” years at regular intervals during which all direct PE inputs would be updated in the same year.

• The optimal method of phasing in the aggregate effect of adjustments, such that the impacts of updates gradually ramp up to a full 100 percent over the course of a few years (for example, 25 percent of the aggregate adjustment in Year 1, then 50 percent of the aggregate adjustment in Year 2, etc.).

• How often CMS should repeat the cycle to ensure that direct PE inputs are based on the most up-to-date information, considering the burden of data collection on both respondents and researchers fielding instruments or maintaining datasets that generate data.

c. Changes to Health Care Delivery and Practice Ownership Structures, and Business Relationships Among Clinicians and Health Care Organizations

Market consolidation, and shifts in workforce alignment, as well as an evolution in the type of business entities predominant in health care markets, all suggest significant transformation in the composition and proportions of practice expenses required to furnish care. These evolving conditions collectively highlight the need for a comprehensive update to PE data inputs, and possibly the PE methodology as a whole.
5

Ideally, more comprehensive PE data inputs and a different PE calculation methodology would better account for indirect/overhead costs, current trends in the delivery of health care, the use of machine learning technology, and EHRs, and the cost differentials in independent versus facility-based practices.

5
Burgette, Lane F., Jodi L. Liu, Benjamin M. Miller, Barbara O. Wynn, Stephanie Dellva, Rosalie Malsberger, Katie Merrell, et al. “Practice Expense Methodology and Data Collection Research and Analysis.” RAND Corporation, April 11, 2018.
https://www.rand.org/pubs/research_reports/RR2166.html.

We seek comment on current and evolving trends in health care business arrangements, use of technology, or similar topics that might affect or factor into indirect PE calculations. We are interested in learning whether any PE data inputs may be obsolete, unnecessary, or misrepresentative of the actual costs involved in operating a medical practice.

d. Unintended Consequences and Missing Information

We request comment on additional information that we may have not considered or discussed above about updating and maintaining PE data inputs, as well as any unintended impacts (or positive outcomes) that could result from changes to the overall strategy. We are especially interested in public comment on any concerns about beneficiaries' access to care, possible consolidation of group practices, or burden on small group or solo practitioners. We are also interested in public comments on any collateral

program integrity or quality issues that could arise from potential updates. We request that any respondents who provide feedback ensure that the response includes discussion of any possible health equity impacts.

6. Soliciting Public Comment on Strategies for Improving Global Surgical Package Valuation

In preparation for future rulemaking, we are seeking public comment on strategies to improve the accuracy of payment for the global surgical packages (herein referred to as “global packages') under the PFS. Currently, there are over 4,000 physicians' services paid as global packages under the PFS. Global packages generally include the surgical procedure and any services typically provided during the pre- and postoperative periods (including evaluation and management (E/M) services and hospital discharge services). There are three types of global packages:

• The 0-day global package, which includes the procedure and the preoperative and postoperative physicians' services on the day of the procedure.

• The 10-day global package, which includes services on the day of, and 10 days after, the procedure.

• The 90-day global package, which includes services furnished one day prior to the procedure, and on the day of, and 90 days immediately following the day of the procedure.

More detail about how global packages are billed and what activities are included may be found in Chapter 12, Section 40, of the Medicare Claims Processing Manual (Pub. 100-04).

We have applied the concept of global payment for some procedures since the inception of the PFS on January 1, 1992 (54 FR 59502). However, in the past decade we have engaged with interested parties regarding numerous concerns about the accuracy and validity of the valuation of global packages, with particular attention paid to the E/M visits included in the services. We have made previous requests for public feedback on global packages, including solicitations for information or data that could be used to help support more accurate valuations. We now wish to expand on our conversations with the public, considering the current status of a multi-year data collection and analysis project, as well as ongoing changes we have made to payments for other types of patient care that may impact the global packages.

a. History of Global Valuation Discussion

In the CY 2013 PFS proposed rule (77 FR 44737 through 44738), we discussed two reports released by the HHS Office of the Inspector General in 2005 and 2012 with findings that practitioners were performing fewer E/M postoperative visits than had been included in the valuation for these global packages, suggesting that Medicare was paying for care that was not being delivered. In response to the concerns raised by the OIG reports, we solicited public feedback on methods of obtaining accurate and current data on E/M services furnished as part of a global package. We summarized public comment in the CY 2013 PFS final rule (77 FR 68911 through 68913).

In the CY 2015 PFS proposed rule (79 FR 40341), we delved into barriers to accurate valuation of global packages, especially as compared to other forms of bundled payments made under the inpatient or outpatient prospective payment systems. In addition to the ongoing concerns about whether E/M visits presumed to be furnished in connection with global packages were actually being performed by the physician receiving the global package payment, we noted issues such as:

• E/M services in the global period that occur post-discharge are valued with practice expense values associated with follow-up visits in the physician's office. Many of these follow-up visits may occur in a hospital outpatient department where the physician may not incur many PE costs.

• The direct PE inputs often differ slightly between an E/M service furnished in a global period and a stand-alone E/M service. For example, follow-up visits for certain surgeries may include specialized clinical labor such as an RN rather than a general nurse blend.

• The types of physicians furnishing a specific service dictate the direct and indirect percentages, as well as the indirect practice cost index, in the PE methodology. Most surgical specialties have a lower direct percentage mix, resulting in higher indirect costs that extend to the E/M visits in the global periods.

• Because the E/M visits embedded in the global package are not reported separately and do not appear in claims data, it is difficult to quantify the number and level of E/M services furnished in connection with global packages under the fee-for-service system.

• In some cases we have limited billing of the 10- and 90-day global packages in conjunction with some of the payment policies intended to encourage coordination of care through payments for non-face-to-face services, such as transitional care management and chronic care management, because of presumed overlap between these services.

To address these concerns, we solicited comment and finalized a policy in the CY 2015 PFS final rule (79 FR 67586) intended to, over a period of several years, transition all services with 10-day and 90-day global periods to 0-day global periods. As stated in the CY 2015 PFS final rule, we believed it would be more accurate to value the surgical procedure-day services separately from postop E/M visits, and would avoid potentially duplicative or unwarranted payments. For our full discussion and rationale, refer to 79 FR 67586 through 67591. Implementation of this policy, however, was halted by the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. L.110-14). Section 523(a) of the MACRA amended section 1848(c)(8) of the Act to prohibit the Secretary from implementing the transition policy finalized in the CY 2015 PFS final rule. The amendments to section 1848(c)(8) also require CMS to collect additional data on how best to value global packages and to reassess every 4 years the continued need for this data collection. Section 1848(c)(8) of the Act directs CMS to use the information collected to improve the accuracy of valuation of these services under the PFS starting in CY 2019. (Refer to the CY 2016 PFS final rule at 80 FR 70915 for additional discussion of these requirements.)

In response to the statutory requirements as added by section 523(a) of the MACRA, we engaged in multiple discussions with interested parties about methods of data collection and analysis, including through public comment solicitation in the CY 2016 PFS proposed rule (80 FR 41707) and CY 2017 PFS proposed rule (81 FR 46191), a national listening session, and a town hall meeting. (Materials for the January 20, 2016 listening session are available at
https://www.cms.gov/Outreach-and-Education/Outreach/NPC/Downloads/2016-01-20-MCRA-Presentation.pdf.
The transcript of the town hall meeting held August 25, 2016 is available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Downloads/CY2017-PFS-FR-Townhall.pdf.
) In the CY 2017 PFS final rule (81 FR 80209 through 80213), we finalized a claims-based process to collect data from practitioners on both

the number and level of postoperative visits furnished as part of the 10- and 90-day global packages. We also contracted with RAND to support this data collection and analysis.

b. Data Collection, Analysis, and Findings

In 2019, RAND issued two reports based on its analysis of the data collected through the data collection process we established. The reports examined, using claims-based and survey-based data, the number of postoperative visits furnished during the 10- and 90-day global periods for certain high-volume procedures and the level of visits furnished for certain procedures. (Complete details about the data collected are discussed in the CY 2017 PFS final rule starting at 81 FR 80212, the CY 2020 PFS final rule at 84 FR 62857, and in the reports themselves, available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Global-Surgery-Data-Collection-.
) Notably, RAND's analysis found that, according to claims-based data, the reported number of E/M visits matched the expected number (included for purposes of PFS valuation) for only 4 percent of reviewed 10-day global packages and 38 percent of reviewed 90-day global packages. Based on these analyses, RAND released a third report that analyzed the current valuation of global packages based on the difference between the number of postoperative E/M visits observed via the claims-based data collection process and the expected number of such E/M visits. The report modeled how valuation for global packages would change by adjusting the work RVUs, physician time, and direct PE inputs to reflect the observed number of E/M visits. The report provided hypothetical valuations for the global packages based on these adjustments. These three RAND reports were made available to the public and are available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Global-Surgery-Data-Collection-.

The RAND reports were shared with the public, and we received public comment about these reports in the CY 2020 PFS final rule (84 FR 62866). Public commenters raised concerns about the findings in the reports, including questions as to whether the E/M visit data were collected from a true representative sample of practitioners, and various other challenges to the validity of the RAND methodology. Other members of the public, however, were supportive of our overall efforts to collect and analyze the data, and supplied additional data similarly suggesting that the 10- and 90-day global packages are overvalued. In 2021, RAND responded to the CY 2020 public comments that were critical of the methodologies used in the three earlier reports in a separate report entitled, “Responses to Comments on RAND Global Services Reports,” which is available at
https://www.rand.org/content/dam/rand/pubs/research_reports/RR4300/RR4314-1/RAND_RR4314-1.pdf/.

While some interested parties have challenged the methodology or conclusions of the RAND reports, we have not yet received data suggesting that postoperative E/M visits are being performed more frequently than indicated by the data collected and analyzed in the RAND reports. We continue to be concerned that our current valuations of the global packages reflect certain E/M visits that are not typically furnished in the global period, and thus, are not occurring. We also believe that RAND has adequately responded to critiques of its methodologies and findings. However, as part of our ongoing assessment of our data collection process, we continue to welcome any comments from the public on ideas for other sources of data that would help us to assess global package valuation (including the typical number and level of E/M services), as well as our data collection methodology and the RAND report findings.

c. Changes to Health Care Delivery and Payment for E/M Services

Since the inception of the PFS 30 years ago, there have been significant changes in health care, including improvements in medical and information technology, new models of health care delivery and coordination between multiple clinicians furnishing care to a single patient, and an expanding beneficiary population. (For information on Medicare service utilization, beneficiary demographics, provider characteristics, and payment models, please visit the resources at
data.cms.gov.
) We are interested in hearing from the public on whether the postoperative health care landscape has changed in ways that impact the relevance of the global packages.

We believe that changes to health care delivery may impact proper valuation of global services. We are soliciting comment on whether changes to health care delivery, including changes in coordination of care and use of medical technology over the past 3 decades, as well as during the recent PHE, have impacted: the number and level of postoperative E/M visits needed to provide effective follow-up care to patients; the timing of when postoperative care is being provided; and who is providing the follow-up care. We have formed hypotheses that some beneficiaries are not receiving the number of postoperative visits that were contemplated when valuing the global surgical packages or are not receiving any follow-up E/M visits at all during global periods either because the physician who performed the surgical procedure has determined they are unnecessary (perhaps due to improvements in medical technology or evolution in standards of care) or as the result of more comprehensive discharge planning. It has also been suggested by some interested parties that physicians are, in fact, performing the number of postoperative visits that were contemplated when valuing the global surgical packages, but the visits may, for various reasons, be scheduled outside the global period. Others have suggested that physicians are, without formally transferring follow-up care to another clinician, instructing patients to follow up with another physician or NPP (such as the patient's primary care physician or other practitioner), and that the other clinician then furnishes and bills for E/M services furnished for postoperative care (whether the care is performed during or after the global period). We would appreciate comments on these ideas, and on other factors not mentioned here that could affect the ways that postoperative E/M care is provided.

We are also soliciting comment on whether, or how, recent changes in the coding and valuation of separately billable E/M services may have impacted global packages. One change is the expansion of payment for non-face-to-face care management services. Historically, an advantage of global packages was that they compensated physicians for non-face-to-face work related to the patient's transition from the hospital to the community, or management of other health care needs following a procedure or serious illness. Over the years, we have implemented payment for many care management services to better reflect non-face-to-face time spent by physicians and clinical staff on behalf of patients with complex health care needs, including transitional care management services in CY 2013 (77 FR 68978); chronic care management in CY 2015 (78 FR 74414) and CY 2019 (83 FR 58577); complex chronic care management in CY 2017 (81 FR 80244); and principal care management in CY 2020 (84 FR 62962).

We solicit comment on whether global packages, and especially those with 10- and 90-day global periods, continue to serve a purpose when physicians could otherwise bill separately not only for the postoperative E/M visits they furnish, but also for aspects of postoperative care management they furnish for some patients. We also would like to hear generally what, if any, components of preoperative or postoperative care are currently only compensated as part of payment for global packages.

We have also heard from some interested parties who believe that recent changes to the coding and valuation of standalone office and outpatient E/M visits finalized in the CY 2021 PFS final rule have skewed the relativity between these visits and the E/M visits included in the current global package valuations (which were not modified in response to the coding and valuation changes). In the CY 2020 PFS final rule (84 FR 62851 through 84 FR 62854), we finalized new—and generally increased, RVUs for the CPT-revised office and outpatient E/M code set. Some commenters encouraged us to increase the value of the E/M visits included in the global surgical packages commensurate with the increased RVUs for the standalone E/M visits. However, we declined to do so, noting that at the time that it was unclear whether it would be appropriate to treat the E/M visits reflected in global packages as discrete components of the package (in other words, to use a building-block approach to calculating the value of the service, versus valuing the services using the more holistic magnitude estimation, or possibly another approach.) Furthermore, we cited the uncertainty as to whether the E/M services included in valuing the global packages are typically furnished as part of global surgery services, reasoning that if the number and level of E/M services for global packages is not appropriate, adopting increases in the value of E/M services in global surgery codes would exacerbate rather than ameliorate any potential relativity issues. (Refer to the CY 2020 PFS final rule at 84 FR 62856 through 62860 for a complete summary of comments and our responses on the topic of increasing the value of E/M visits included in the global packages.) We welcome additional comments on the perceived misalignment between the E/M visits included in global packages and separately billable E/M services, including thoughts on how this current tension reflects on global payment valuation and the appropriate methodology for determining appropriate values for global packages.

d. Strategies To Address Global Package Valuation

Consistent with the discussion above, we continue to believe that: (1) there is strong evidence suggesting that the current RVUs for global packages are inaccurate; (2) many interested parties agree that the current values for global packages should be reconsidered, whether they believe the values are too low or too high; and (3) it is necessary to take action to improve the valuation of the services currently valued and paid under the PFS as global surgical packages.

We would like to re-engage with the public about whether the global packages are indeed misvalued, and if so, what would be an appropriate approach to valuation. We have previously sought assistance from the public on possible methods of revaluation, such as in the CY 2015 PFS rule (at 79 FR 67586).

As noted in the “Data Collection, Analysis, and Findings” section above (section II.B.6.b.), RAND has provided a comprehensive roadmap for a possible revaluation strategy. (See specifically the RAND report, “Using Claims-Based Estimates of Postoperative Visits to Revalue Procedures with 10- and 90-Day Global Periods,” available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Global-Surgery-Data-Collection-
) We are soliciting additional input on the RAND methodology, including advantages and drawbacks of applying the RAND methodology to revaluation (in addition to previous feedback that was provided by the public in the CY 2020 final rule at 84 FR 62867). We also request input on specific alternatives, including: (1) requesting the RUC to make recommendations on new values; or (2) another method proposed by the public.

We solicit feedback from the public on possible strategies for a revaluation process for global services. We believe that the available information provided in the RAND reports (discussed in section II.B.6.b. of this proposed rule and available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Global-Surgery-Data-Collection-
) indicates that there is a mismatch between the value of the global package and work being performed. In particular, it appears that for some services, the number of postoperative visits typically furnished by the billing physician is much lower than what was reflected in the global package value, and thus we believe it may be necessary to revalue those services. (As noted in section II.B.6.b. of this proposed rule, RAND's analysis found that the reported number of E/M visits matched the expected E/M visits for only 4 percent of reviewed 10-day global packages and 38 percent of reviewed 90-day global packages. We refer specifically to the RAND report, “Claims-Based Reporting of Postoperative Visits for Procedures with 10- or 90-Day; Global Periods—Updated Results Using Calendar Year 2019 Data” available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Global-Surgery-Data-Collection-
). Because there are a large number and volume of services paid as global packages, we must consider the resources needed to revalue even a subset of the global packages, as well as the impacts across the PFS and healthcare delivery system in general if we were to change the values of a significant number of services at one time. We are considering various approaches we could pursue, such as: (1) revaluing all 10- and 90-day global packages at one time (perhaps with staggered implementation dates); (2) revaluing only the 10-day global packages (because these appear to have the lowest rate of postoperative visit performance, per RAND's analysis of claims data); (3) revaluing 10-day global packages and some 90-day global packages (such as those with demonstrated low postoperative visit performance rates as identified in RAND's analysis of these services); or (4) relying on the Potentially Misvalued Code process to identify and revalue misvalued global packages over the course of many years. (We note that regardless of whether we review particular global packages as part of a specific revaluation strategy, the public may always nominate any global packages to be reviewed through the Potentially Misvalued Code process; refer to the description of the Potentially Misvalued Code process in section II.C. of this proposed rule.) We solicit comment on any of the strategies identified in this paragraph, as well as any additional ideas members of the public may have that would address the concerns described above about valuation of global packages. We also welcome comment on ancillary considerations including timing considerations for implementation of any future strategy (such as whether to have staggered effective dates for new valuations and what criteria to use if assigning staggered effective dates.)

We also solicit comment on additional considerations affecting valuation of global services that may not have been thoroughly explored in

previous public comment opportunities. For instance, we are aware that some interested parties are concerned that not enough attention has been paid to the value of preservice work bundled into the global payment, which could affect accurate valuation of 10- and 90-day global packages, as well as the value of the service if it is transitioned to a 0-day global. We solicit additional information about this concern, as well as any other concerns about valuation not otherwise mentioned here.

e. Other Payment Structure Changes, Unintended Consequences, and Missing Information

We solicit public comment on any other aspects of the global payment structure (aside from the valuation of services) that commenters believe are noteworthy. Much of the discussion over the years has focused on whether global surgical packages are properly valued and whether they are needed at all. We encourage commenters to point out ways in which global surgical packages may continue to have a positive impact on health care delivery (such as their potential to support innovation). We also solicit suggestions on other ways that global surgical package payments could be modified (aside from changing their valuation) that could help improve accurate valuation or help address other concerns about the payments (such as the lack of transparency about what care is being provided as part of the package).

We also request comment on additional information that we may not have considered or discussed above about proper valuation of the global packages, as well as any unintended impacts (or positive outcomes) that could result from changes to how we value global services. We are especially interested in public comment on any concerns about beneficiaries' access to care, continuity of care, cost sharing, or program integrity.

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 relative value units (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.E. 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 Medica

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2022-14562. Public record. Not legal advice.