Medicare and Medicaid Programs; CY 2025 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; Medicare Prescription Drug Inflation Rebate Program; and Medicare Overpayments

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 401, 405, 410, 411, 414, 423, 424, 425, 427, 428, and 491

[CMS-1807-F and CMS-4201-F5]

RIN 0938-AV33 and 0938-AU96

Medicare and Medicaid Programs; CY 2025 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; Medicare Prescription Drug Inflation Rebate Program; and Medicare Overpayments

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

This final 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; codification of establishment of new policies for, the Medicare Prescription Drug Inflation Rebate Program under the Inflation Reduction Act of 2022; updates to the Medicare Diabetes Prevention Program expanded model; payment for dental services inextricably linked to specific covered medical services; updates to drugs and biological products paid under Part B including immunosuppressive drugs and clotting factors; 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 policies for Rural Health Clinics and Federally Qualified Health Centers; electronic prescribing for controlled substances for a covered Part D drug under a prescription drug plan or a Medicare Advantage Prescription Drug (MA-PD) plan under the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act); update to the Ambulance Fee Schedule regulations; codification of the Inflation Reduction Act and Consolidated Appropriations Act, 2023 provisions; updates to Clinical Laboratory Fee Schedule regulations; updates to the diabetes payment structure and PHE flexibilities; expansion of colorectal cancer screening and Hepatitis B vaccine coverage and payment; establishing payment for drugs covered as additional preventive services; Medicare Parts A and B Overpayment Provisions of the Affordable Care Act and Medicare Parts C and D Overpayment Provisions of the Affordable Care Act.

DATES:

These regulations are effective on January 1, 2025.

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, Morgan Kitzmiller, (410) 786-1623, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to practice expense, work RVUs, conversion factor, and PFS specialty-specific impacts.

Hannah Ahn, (814) 769-0143, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to potentially misvalued services under the PFS.

Mikayla Murphy, (667) 414-0093, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to direct supervision using two-way audio/video communication technology, telehealth, and other services involving communications technology.

Tamika Brock, (312) 886-7904, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to teaching physician billing for services involving residents in teaching settings.

Sarah Leipnik, (410) 786-3933, Mikayla Murphy, (667) 414-0093, Regina Walker-Wren, (410) 786-9160, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to payment for caregiver training services and addressing health-related social needs (community health integration, principal illness navigation, and social determinants of health risk assessment).

Erick Carrera, (410) 786-8949, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to office/outpatient evaluation and management visit inherent complexity add-on.

Sarah Irie, (410) 786-1348, Emily Parris (667) 414-0418, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to payment for advanced primary care management service.

Sarah Leipnik, (410) 786-3933, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to global surgery payment accuracy.

Pamela West, (410) 786-2302, for issues related to supervision of outpatient therapy services in private practices, certification of therapy plans of care, and KX modifier threshold.

Lindsey Baldwin, (410) 786-1694, Regina Walker-Wren, (410) 786-9160, Erick Carrera, (410) 786-8949, Mikayla Murphy, (667) 414-0093, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to advancing access to behavioral health services.

Michelle Cruse, (443) 478-6390, Erick Carrera, (410) 786-8949, Zehra Hussain, (214) 767-4463, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to dental services inextricably linked to other covered medical services.

Zehra Hussain, (214) 767-4463, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to payment of skin substitutes.

Laura Kennedy, (410) 786-3377, Adam Brooks, (202) 205-0671, Rachel Radzyner, (410) 786-8215, Rebecca Ray, (667) 414-0879, and Jae Ryu, (667) 414-0765 for issues related to Drugs and Biological Products Paid Under Medicare Part B.

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for issues related to complex drug administration.

Glenn McGuirk, (410) 786-5723, or

CLFS_Inquiries@cms.hhs.gov

for issues related to Clinical Laboratory Fee Schedule.

Lisa Parker, (410) 786-4949, or

FQHC-PPS@cms.hhs.gov

, for issues related to FQHC payments.

Heidi Oumarou, (410) 786-7942, for issues related to the FQHC market basket.

Michele Franklin, (410) 786-9226, or

RHC@cms.hhs.gov

, for issues related to RHC payments.

Kianna Banks (410) 786-3498 and Cara Meyer (667) 290-9856, for issues related to RHCs and FQHCs and Conditions for Certification or Coverage.

Colleen Barbero (667) 290-8794, for issues related to Medicare Diabetes Prevention Program.

Ariana Pitcher, (667) 290-8840, or

OTP_Medicare@cms.hhs.gov

, for issues related to Medicare coverage of opioid use disorder treatment services furnished by opioid treatment programs.

Sabrina Ahmed, (410) 786-7499, or

SharedSavingsProgram@cms.hhs.gov

, for issues related to the Medicare Shared Savings Program (Shared Savings Program) Quality performance standard and quality reporting requirements.

Janae James, (410) 786-0801, or

SharedSavingsProgram@cms.hhs.gov

, for issues related to Shared Savings Program beneficiary assignment and benchmarking methodology.

Richard (Chase) Kendall, (410) 786-1000, or

SharedSavingsProgram@cms.hhs.gov

, for issues related to reopening ACO payment determinations, and mitigating the impact of significant, anomalous, and highly suspect billing activity on Shared Savings Program financial calculations.

Lucy Bertocci, (410) 786-3776, or

SharedSavingsProgram@cms.hhs.gov

, for issues related to Shared Savings Program prepaid shared savings, advance investment payments, beneficiary notice and eligibility requirements.

Rachel Radzyner, (410) 786-8215, for issues related to payment for preventative services, including preventive vaccine administration and drugs covered as additional preventive services.

Elisabeth Daniel, (667) 290-8793, for issues related to the Medicare Prescription Drug Inflation Rebate Program.

Genevieve Kehoe,

Ambulatoryspecialtycare@cms.hhs.gov

, or 1-844-711-2664 (Option 4) for issues related to the Request for Information: Building upon the MIPS Value Pathways (MVPs) Framework to Improve Ambulatory Specialty Care.

Kimberly Long, (410) 786-5702, for issues related to expanding colorectal cancer screening.

Rachel Katonak, (410) 786-8564, for issues related to expanding Hepatitis B vaccine coverage.

Mei Zhang, (410) 786-7837, 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).

Katie Parker, (410) 786-0537, for issues related to Parts A and B overpayment provisions of the Affordable Care Act.

Alissa Stoneking, (410)786-1120, for issues related to Parts C and D overpayment provisions of the Affordable Care Act.

Amy Gruber, (410) 786-1542, for issues related to low titer O+ whole blood transfusion therapy during ground ambulance transport.

Renee O'Neill, (410) 786-8821, for inquiries related to Merit-based Incentive Payment System (MIPS) track of the Quality Payment Program.

Danielle Drayer, (516) 965-6630, for inquiries related to Alternative Payment Models (APMs).

SUPPLEMENTARY INFORMATION:

Addenda Available Only Through the internet on the CMS Website:

The PFS Addenda along with other supporting documents and tables referenced in this final 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 2025 PFS final rule, refer to item CMS-1807-F. Readers with questions related to accessing any of the Addenda or other supporting documents referenced in this final rule and posted on the CMS website identified above should contact

MedicarePhysicianFeeSchedule@cms.hhs.gov

.

CPT (Current Procedural Terminology) Copyright Notice:

Throughout this final rule, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are copyright 2020 American Medical Association. All Rights Reserved. CPT is a registered trademark of the American Medical Association (AMA). Applicable Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulations (DFAR) apply.

I. Executive Summary

A. Purpose

This final rule revises payment policies under the Medicare PFS and makes other policy changes, including the implementation of certain provisions of the Further Continuing Appropriations and Other Extensions Act of 2024 (Pub. L. 118-22, November 16, 2023), Consolidated Appropriations Act, 2023 (Pub. L. 117-328, September 29, 2022), Inflation Reduction Act of 2022 (IRA) (Pub. L. 117-169, August 16, 2022), Consolidated Appropriations Act, 2022 (Pub. L. 117-103, March 15, 2022), 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 for Patients and Communities Act (SUPPORT Act) (Pub. L. 115-271, October 24, 2018), related to Medicare Part B payment. In addition, this final rule includes provisions regarding other Medicare payment policies described in sections III. and IV.

This rulemaking also codifies policies previously established in guidance for the Medicare Prescription Drug Inflation Rebate Program at new parts 427 and 428, including clarifications to certain existing policies, consistent with sections 1847A(i) and 1860D-14B of the Social Security Act (the Act). This rulemaking establishes new policies for the Medicare Prescription Drug Inflation Rebate Program, including removal of units of drugs subject to discarded drug refunds from the Part B rebate amounts, the process for reconciliation of a Part B or Part D rebate amount to incorporate certain revised information, and procedures for imposing civil money penalties on manufacturers that do not pay Part B or Part D inflation rebate amounts within a specified period of time.

This rulemaking updates the Rural Health Clinic (RHC) and Federally Qualified Health Clinic (FQHC) Conditions for Certification and Conditions for Coverage (CfCs), respectively, by clarifying the requirements and intent of the program regarding the provision of services. These changes also aim to ensure RHCs are provided flexibility in the services they offer, including specialty and laboratory services.

This rulemaking also further advances Medicare's overall value-based care strategy of growth, alignment, and equity through the Medicare Shared Savings Program (Shared Savings Program) and the Quality Payment Program. The structure of these programs enables us to develop a set of tools for measuring and encouraging improvements in care, which may support a shift to clinician payment over time into Advanced Alternative Payment Models (APMs) and accountable care arrangements which reduce care fragmentation and unnecessary costs for patients and the health system.

This rulemaking amends our regulations regarding the standard for an “identified overpayment” under Medicare Parts A, B, C, and D to align the regulations with the statutory language in section 1128J(d)(4)(A) of the Act, which provides that the terms “knowing” and “knowingly” have the meaning given to those terms in the Federal False Claims Act. 87 FR 79559. This rulemaking also finalizes proposals regarding timeframes for reporting and returning Parts A and B overpayments that we made in the CY 2025 PFS proposed rule.

B. Summary of the Key Provisions

Section 1848 of the Act requires us to establish payments under the PFS, based on national uniform relative value units (RVUs) that account for the relative resources used in furnishing a service. The 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 each year we establish, 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 final rule, we establish RVUs for CY 2025 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 final rule also includes discussions and provisions regarding several other Medicare Part B payment policies, Medicare and Medicaid provider and supplier enrollment policies, and other policies regarding programs administered by CMS.

Specifically, this final rule addresses:

• Background (section II.A.)

• 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.)

• Enhanced Care Management (section II.G.)

• Supervision of Outpatient Therapy Services in Private Practices, Certification of Therapy Plans of Care with a Physician or NPP Order, and KX Modifier Thresholds (section II.H.)

• Advancing Access to Behavioral Health Services (section II.I.)

• Provisions on Medicare Parts A and B Payment for Dental Services Inextricably Linked to Other Covered Services (section II.J.)

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

• Strategies for Improving Global Surgery Payment Accuracy (section II.L.)

• Drugs and Biological Products Paid Under Medicare Part B (section III.A.)

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

• Rural Health Clinic (RHC) and Federally Qualified Health Center (FQHC) Conditions for Certification and Conditions for Coverage (CfCs) (section III.C.)

• Clinical Laboratory Fee Schedule: Revised Data Reporting Period and Phase-in of Payment Reductions (section III.D.)

• Medicare Diabetes Prevention Program (MDPP) (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 Services (§§ 410.10, 410.57, 410.64, 410.152) (section III.H.)

• Medicare Prescription Drug Inflation Rebate Program (section III.I.)

• Request for Information: Building upon the MIPS Value Pathways (MVPs) Framework to Improve Ambulatory Specialty Care (section III.J.)

• Modifications to Coverage of Colorectal Cancer Screening (section III.K.)

• Requirements for Electronic Prescribing for Controlled Substances for a Covered Part D Drug under a Prescription Drug Plan or an MA-PD Plan (section III.L.)

• Expand Hepatitis B Vaccine Coverage (section III.M.)

• Low Titer O+ Whole Blood Transfusion Therapy During Ground Ambulance Transport (section III.N.)

• Medicare Parts A and B Overpayment Provisions of the Affordable Care Act (section III.O.)

• Medicare Parts C and D Overpayment Provisions of the Affordable Care Act (section III.P.)

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

• Collection of Information Requirements (section V.)

• Regulatory Impact Analysis (section VI.)

C. Summary of Costs and Benefits

We have determined that this final rule is economically significant. We estimate the CY 2025 PFS conversion factor to be 32.3465 which reflects a 0.02 percent positive budget neutrality adjustment required under section 1848(c)(2)(B)(ii)(II) of the Act, the 0.00 percent update adjustment factor specified under section 1848(d)(19) of the Act, and the removal of the temporary 2.93 percent payment increase for services furnished from March 9, 2024, through December 31, 2024, as provided in the CAA, 2024. For a detailed discussion of the economic impacts, see section VI., Regulatory Impact Analysis, of this final rule.

II. Provisions of the Final Rule for the PFS

A. Background

In accordance with section 1848 of the Social Security Act (the Act), CMS has paid for physicians' services under the Medicare physician fee schedule (PFS) since January 1, 1992. The PFS relies on national relative values that are established for work, practice expense (PE), and malpractice (MP), which are adjusted for geographic cost variations. These values are multiplied by a conversion factor (CF) to convert the relative value units (RVUs) into payment rates. The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act of 1989 (OBRA '89) (Pub. L. 101-239, December 19, 1989), and the Omnibus Budget Reconciliation Act of 1990 (OBRA '90) (Pub. L. 101-508, November 5, 1990). The final rule published in the November 25, 1991

Federal Register

(56 FR 59502) set forth the first fee schedule used for Medicare payment for physicians' services.

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

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 referred 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 American Medical Association (AMA) Relative Value Scale Update Committee (RUC) and those provided in response to public comment periods. For a detailed explanation of the direct PE methodology, including examples, we referred readers to the 5-year review of work RVUs under the PFS and proposed changes to the PE methodology in the CY 2007 PFS proposed rule (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 to develop the indirect portion of the PE RVUs. Prior to CY 2010, we primarily used the PE/HR by specialty obtained from the AMA's Socioeconomic Monitoring System (SMS). The AMA administered a new survey in CY 2007 and CY 2008, the Physician Practice Information Survey (PPIS). The PPIS is a multispecialty, nationally representative, PE survey of 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 or how the PE/HR data are used. 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 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 2025 PFS final rule PE/HR” on the CMS website under downloads for the CY 2025 PFS final rule at

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

.

For CY 2025, we have incorporated the available utilization data for two new specialties, Marriage and Family Therapist (MFT) and Mental Health Counselor (MHC), which we recognized effective January 1, 2024, in accordance with section 4121 of the CAA, 2023. We proposed to use proxy PE/HR values for these new specialties, as there are no PPIS data for these specialties, by crosswalking the PE/HR as follows from specialties that furnish similar services in the Medicare claims data:

• Marriage and Family Therapist (MFT) from Licensed Clinical Social Workers; and

• Mental Health Counselor (MHC) from Licensed Clinical Social Workers

These updates are reflected in the “CY 2025 PFS final rule PE/HR” file available on the CMS website under the supporting data files for the CY 2025 PFS final rule at

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

.

Comment:

One commenter stated that they supported the proposal to include utilization data for MFTs and MHCs in calculating practice expense Relative Value Units. The commenter stated that accurate RVUs ensure that MFTs and MHCs receive appropriate reimbursement, covering essential overhead costs and sustaining their practices, which supports the financial viability of mental health practices and also promotes equitable access to care for all patients, regardless of the complexity of their conditions.

Response:

We appreciate the support for our proposal from the commenter.

After consideration of the comments, we are finalizing our proposed PE/HR crosswalks for the Marriage and Family Therapist and Mental Health Counselor specialties.

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 healthcare 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 direct 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 2025 PFS final rule at

https://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 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 three 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 a 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 annually. 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.

We did not make any proposals associated with the list of expected specialty assignments for low volume services, however we received public comments on this topic from interested parties. The following is a summary of the comments we received and our responses.

Comment:

Several commenters stated that they had performed an analysis to identify all codes that meet the criteria to receive a specialty override under this CMS policy and drafted updated recommendations for codes that meet these criteria for CY 2024. Commenters stated that the purpose of assigning a specialty to these codes was to avoid the significant adverse impact on MP RVUs that results from errors in specialty utilization data magnified in representation (percentage) by small sample size. These commenters submitted a list of approximately 75 low volume HCPCS codes with recommended expected specialty assignments.

Response:

After reviewing the information provided by the commenters to determine whether the specialty assignments they recommended were appropriate for the services in question, based on determining if the recommended specialty matches the dominant specialty in the claims data, we are finalizing the additions to the list of expected specialty assignments for low volume services identified in Table 1. We agreed with the commenters that, based on claims data, CPT codes 33231 and 33240 should be crosswalked to the Cardiac Electrophysiology specialty and that CPT codes 33900-33904 and 93574-93575 should be crosswalked to the Interventional Cardiology specialty. We also agree with commenters that CPT codes 56633 and 58240 should be crosswalked to the Gynecological Oncology specialty. However, we do not have PE/HR data for these specialties as they were not part of the PPIS when it was conducted in 2007; therefore, we are crosswalking these CPT codes to the closest available specialties (Cardiology and Obstetrics/Gynecology, respectively), as listed on Table 1.

We disagreed with the commenters on a series of additional suggested assigned specialties. In each case, there was another specialty which was reported more than twice as often in the claims data as the specialty suggested by commenters and in some cases reported as much as twenty times as often. Therefore, we are crosswalking CPT code 22505 to the Neurosurgery specialty, CPT code 25670 to the Orthopedic Surgery specialty, CPT code 28116 to the Podiatry specialty, CPT code 35231 to the Otolaryngology specialty, CPT code 36585 to the General Surgery specialty, CPT code 36810 to the Pulmonary Disease specialty, and CPT code 60522 to the Thoracic Surgery specialty (which was additionally suggested by one commenter) as these were the dominant specialties in the claims data. These crosswalks are included in Table 1.

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After consideration of the public comments, we are finalizing the additions to the list of expected specialty assignments for low volume services as detailed in Table 1. The full list of expected specialty assignments is included in the CY 2025 public use files, which are available on the CMS website under downloads for the CY 2025 PFS final rule at

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

.

Step 8:

Calculate the service level allocators for the indirect PEs based on the percentages calculated in Step 7. The indirect PEs are allocated based on the three components: the direct PE RVUs; the clinical labor PE RVUs; and the work RVUs.

For most services the indirect allocator is: indirect PE percentage * (direct PE RVUs/direct percentage) + work RVUs.

There are two situations where this formula is modified:

• If the service is a global service (that is, a service with global, professional, and technical components), then the indirect PE allocator is: indirect percentage (direct PE RVUs/direct percentage) + clinical labor PE RVUs + work RVUs.

• If the clinical labor PE RVUs exceed the work RVUs (and the service is not a global service), then the indirect allocator is: indirect PE percentage (direct PE RVUs/direct percentage) + clinical labor PE RVUs.

(Note: For global services, the indirect PE allocator is based on both the work RVUs and the clinical labor PE RVUs. We do this to recognize that, for the PC service, indirect PEs would be allocated using the work RVUs, and for the TC service, indirect PEs would be allocated using the direct PE RVUs and the clinical labor PE RVUs. This also allows the global component RVUs to equal the sum of the PC and TC RVUs.)

For presentation purposes, in the examples in the download file 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 final 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 referred 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: To calculate the PE and MP RVUs, we exclude certain specialties, such as NPPs paid at a percentage of the PFS and low volume specialties, from the calculation. These specialties are included to calculate the BN adjustment. They are displayed in Table 2.

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•

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 creating the file consistent with the current payment policy as implemented in claims processing. For example, services billed with the assistant at surgery modifier are paid 16 percent of the PFS amount for that service; therefore, the utilization file is modified to only account for 16 percent of any service that contains the assistant at surgery modifier. Similarly, for those services to which volume adjustments are made to account for the payment modifiers, time adjustments are applied as well. For time adjustments to surgical services,

the intraoperative portion in the work time file is used; where it is not present, the intraoperative percentage from the payment files used by contractors to process Medicare claims is used instead. Where neither is available, we use the payment adjustment ratio to adjust the time accordingly. Table 3 details the manner in which the modifiers are applied.

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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 noted 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.

We note that for CY 2025, we proposed mandatory use of the 54 and 55 modifiers when practitioners furnishing global surgery procedures share in patient care and intend only to furnish preoperative/intraoperative or postoperative portions of the total global procedure. If finalized, this proposal will likely increase the number of claims subject to the adjustment described in the discussion above. We discuss this proposal in section II.L. of this final rule.

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

•

Work RVUs:

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

(6) Equipment Cost per Minute

The equipment cost per minute is calculated as:

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

Where:

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

usage = variable, see discussion below in this proposed rule.

price = price of the particular piece of equipment.

life of equipment = useful life of the particular piece of equipment.

maintenance = factor for maintenance; 0.05.

interest rate = variable, see discussion below in this proposed rule.

Usage:

We currently use an equipment utilization rate assumption of 50 percent for most equipment, with the exception of expensive diagnostic imaging equipment, for which we use a 90 percent assumption as required by section 1848(b)(4)(C) of the Act.

Useful Life:

In the CY 2005 PFS final rule we stated that we updated the useful life for equipment items primarily based on the AHA's “Estimated Useful Lives of Depreciable Hospital Assets” guidelines (69 FR 66246). The most recent edition of these guidelines was published in 2018. This reference material provides an estimated useful life for hundreds of different types of equipment, the vast majority of which fall in the range of 5 to 10 years, and none of which are lower than two 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 data sources containing equipment maintenance rates, commenters could not identify an auditable, robust data source that CMS could use 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 4.

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We did not propose any changes to the equipment interest rates for CY 2025.

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

In the past, we have stated that we believe that the MEI is the best measure available of the relative weights of the three components in payments under the PFS—work, practice expense (PE), and malpractice (MP). Accordingly, we believe that to ensure that the PFS payments reflect the relative resources in each of these PFS 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 cost share weights in the Medicare Economic Index (MEI). In the past, we have proposed (and subsequently finalized) to accomplish this by holding the work RVUs constant and adjusting the PE RVUs, MP RVUs, and CF to produce the appropriate balance in RVUs among the three PFS components and payment rates for individual services, that is, that the total RVUs on the PFS are proportioned to approximately 51 percent work RVUs, 45 percent PE RVUs, and 4 percent MP RVUs. As the MEI cost shares are updated, we would typically propose 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 2017-based MEI cost share weights, and to recalibrate the relativity adjustment that we apply in step 18 as described in the CY 2023 PFS final rule (87 FR 69414 and 69415) and CY 2014 PFS final rule (78 FR 74236 and 74237). The most recent recalibration was done for the CY 2014 RVUs.

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 final 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 CY 2023 PFS final rule (87 FR 69688 through 69711), we finalized to rebase and revise the MEI to reflect more current market conditions faced by physicians in furnishing physicians' services (referred to as the “2017-based MEI”). We also finalized a delay of the adjustments to the PE pools in steps 3 and 10 and the recalibration of the relativity adjustment in step 18 until the public had an opportunity to comment on the rebased and revised 2017-based MEI (87 FR 69414 through 69416). Because we finalized significant methodological and data source changes to the MEI in the CY 2023 PFS final rule and significant time has elapsed since the last rebasing and revision of the MEI in CY 2014, we believed that delaying the implementation of the finalized 2017-based MEI was consistent with our efforts to balance payment stability and predictability with incorporating new data through more routine updates. We refer readers to the discussion of our comment solicitation in the CY 2023 PFS final rule (87 FR 69429 through 69432), where we reviewed our ongoing efforts to update data inputs for PE to aid stability, transparency, efficiency, and data adequacy. We also solicited comment in the CY 2023 PFS proposed rule on when and how to best incorporate the 2017-based MEI into PFS ratesetting, and whether it would be appropriate to consider a transition to full implementation for potential future rulemaking. We presented the impacts of implementing the 2017-based MEI in PFS ratesetting through a 4-year transition and through full immediate implementation, that is, with no transition period in the CY 2023 PFS proposed rule. We also solicited comment on other implementation strategies for potential future rulemaking in the CY 2023 PFS proposed rule. In the CY 2023 PFS final rule, we discussed that many commenters supported our proposed delayed implementation, and many commenters expressed concerns with the redistributive impacts of the implementation of the 2017-based MEI in PFS ratesetting. Many commenters also noted the AMA's intent to collect practice cost data from physician practices, which could be used to derive cost share weights for the MEI and RVU shares.

In the CY 2025 PFS proposed rule, we stated that in light of the AMA's current data collection efforts and because the methodological and data source changes to the MEI finalized in the CY 2023 PFS final rule would have significant impacts on PFS payments, similar to our discussion of this topic in the CY 2024 PFS rulemaking cycle (88 FR 78829 through 78831), we continue to believe that delaying the implementation of the finalized 2017-based MEI cost share weights for the RVUs is consistent with our efforts to balance payment stability and predictability with incorporating new data through more routine updates. For these reasons, we did not propose to incorporate the 2017-based MEI in PFS ratesetting for CY 2024. As we noted in the CY 2024 PFS final rule, many commenters on the CY 2024 PFS proposed rule supported our continued delayed implementation of the 2017-based MEI in PFS ratesetting (88 FR 78830). Most of these commenters urged us to pause consideration of other sources for the MEI until the AMA's efforts to collect practice cost data from physician practices have concluded, although a few commenters recommended that we implement the MEI for PFS ratesetting as soon as possible. We stated that we agree with the commenters that it would be prudent, and avoid potential duplication of effort, to wait to consider other data sources for the MEI while the AMA's data collection activities are ongoing. We stated that as we discussed in the CY 2024 PFS final rule, we continue to monitor the data available related to physician services' input expenses, but we are not proposing to update the data underlying the MEI cost weights at this time. Given our previously described policy goal to balance PFS payment stability and predictability with incorporating new data through more routine updates to the MEI, we did not propose to incorporate the 2017-based MEI in PFS ratesetting for CY 2025. We invited comments on this approach, as well as any information on the timing of the AMA's practice cost data collection efforts and other sources of data we could consider for updating the MEI. The following is a summary of the comments we received and our responses.

Comment:

Many commenters supported our continued delayed implementation of the 2017-based MEI in PFS ratesetting. Most of these commenters urged CMS to delay consideration of other sources for the MEI until the AMA's efforts to collect practice cost data from physician practices have concluded. The AMA RUC commented that they concluded survey efforts on August 31, 2024, and are working to analyze the data. Some commenters requested a more frequent update of the PPIS every three to five years given the dramatic redistributive impacts of implementing updated data after many years. Some commenters requested a separate MEI for behavioral health to adequately and appropriately value outpatient mental health and substance use services. Another commenter disagreed with more frequent PPIS efforts because they can be burdensome, particularly for small, independent practices in underserved areas where time must be taken away from direct patient care to complete the survey. The commenter stated that larger health systems and practices are more equipped to respond to these surveys which leads to biased and unreliable survey results. The commenter urged CMS to consider contingencies or alternatives to the PPIS to address the lack of data availability or response rates for some specialties. One commenter requested that CMS seek alternative, more current data sources to rebase and revise the MEI if the AMA PPIS data proves insufficient, stating that the 2017-based MEI derived predominantly from the 2017 US Census Bureau's Service Annual Survey (SAS) are outdated and should not be used for updates.

A few commenters urged CMS to implement the 2017-based MEI for PFS ratesetting as soon as possible. One commenter stated that the SAS Census Bureau data should be used to determine the MEI in the future instead of the AMA's PPIS data because it is reliable, regularly updated, and objectively collected.

Response:

We appreciate commenters' feedback, specifically as it relates to updating PFS ratesetting, and will consider the commenters' feedback in future rulemaking.

Comment:

One commenter stated that CMS finalized the 2017-based MEI based primarily on a subset of data from the 2017 US Census Bureau's SAS. The commenter stated that assumptions made for the updated weights did not include physicians who are employed by hospitals and large health systems. The commenter stated that data from facility-based physicians should be included since MEI weights also cover physician compensation and professional liability insurance.

Response:

We refer the commenter to the discussion of methodologies and a response to this concern in the CY 2024 PFS final rule (88 FR 78830 and 78831).

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 2025 direct PE input public use files, which are available on the CMS website under downloads for the CY 2025 PFS final rule at

https://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 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 the relativity of values among codes. For example, as medical practice and technologies change over time, 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 believe that the three 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. We directed readers to the discussion in the CY 2019 PFS final rule (83 FR 59463 through 59464) for additional details.

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 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 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 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. We directed readers to the discussion in the CY 2020 PFS final rule (84 FR 62584) for additional details.

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 the RUC's development and our review of code values for individual codes. Beginning with its recommendations for CY 2019, the RUC mandated the use of a new PE worksheet for its 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 helps us simplify and standardize the hundreds of clinical labor tasks currently listed in our direct PE database. As in previous calendar years, to facilitate rulemaking for CY 2025, 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 2025 PFS final rule at

https://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 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 referred readers to the CY 2019 PFS final rule with comment period (83 FR 59473 through 59480).

For CY 2025, we proposed to update the price of 17 supplies and one equipment item in response to the public submission of invoices following the publication of the CY 2024 PFS final rule. The 18 supply and equipment items with proposed updated prices are listed in the valuation of specific codes section of the preamble under Table 20, CY 2025 Invoices Received for Existing Direct PE Inputs.

Comment:

Several commenters stated that they commended CMS for recognizing the importance and cost of Long-Term Electrocardiography Monitoring (LT-ECG) Services, reflected in the updated pricing for supply item SD339. The commenters stated that the updated pricing is critical for ensuring patient access to LT-ECG services under CPT codes 93241, 93243, 93245, and 93247, while also providing essential payment stability for providers.

Response:

We appreciate the support from the commenters for our proposed SD339 supply pricing.

Comment:

A commenter stated that they supported the proposed pricing increases for the EP112 equipment and the SL474, SL478, SL479, SL480, SL482, and SL492 supplies. The commenter stated that they supported the proposed changes to the pricing for these items and urges CMS to finalize them as proposed. A separate commenter stated that they supported the proposed change to the pricing of the SL474 supply as they believe it improves the accuracy of pricing for practice expense items within the overall fee schedule.

Response:

We appreciate the support from the commenters for our proposed supply and equipment pricing.

Comment:

A commenter stated that they fully supported CMS's proposal to create three new supply codes in the PE database (SD370, SD371, and SD372) to facilitate appropriate pricing by the MACs for Temporary Female Intraurethral Valve-Pump services. The commenter stated that they agreed that short of establishing national pricing for CPT codes 0596T and 0597T, creating supply codes with accurate pricing for the devices should facilitate rate setting by the MACs that appropriately accounts for the device costs. The commenter urged CMS to finalize as proposed the creation of these supply codes and the proposed prices that correspond to each.

Response:

We appreciate the support from the commenter for our proposed supply pricing of the SD370-SD372 items.

An interested party submitted 30 invoices to update pricing for the human amniotic membrane allograft mounted on a non-absorbable self-retaining ring (SD248) supply. We previously updated the price of this supply in the CY 2024 final rule (88 FR 78901) based on averaging together the price of the Prokera Slim, Prokera Classic, and Prokera Plus devices. The interested party submitted new invoices for all three of these devices which averaged to a new price of $1149.00 which we proposed for the SD248 supply. We solicited additional comments from interested parties regarding the price of the SD248 supply as well as any information as far as whether one of these three devices (the Prokera Slim, Prokera Classic, and Prokera Plus) would be more typical than the other two for use as a supply in CPT code 65778.

Comment:

Many commenters stated that they supported the proposed payment increase for CPT 65778 based on the proposed pricing of the SD248 supply. Commenters described the clinical benefits of the SD248 supply and how it has been instrumental in helping patients with medical conditions that would not respond to conventional medical treatment.

Response:

We appreciate the support from the commenters for our proposed pricing of the SD248 supply.

In the case of the indocyanine green (25ml uou) (SL083) supply, we noticed that there was a clear bimodal distribution of prices on the eight submitted invoices, clustered around $91.00 and $141.67, respectively, with no pricing in between $100 and $140. We proposed the updated total average price of $125.11 based on the eight submitted invoices for the SL083 supply, however, we solicited comments on why there was such divergence in the pricing on the submitted invoices, as well as whether these may represent pricing for two different supplies.

Comment:

Several commenters thanked CMS for updating the price of the indocyanine green (25ml uou) (SL083) supply in the proposed rule and recommended that this price be finalized. Commenters stated that the differences in pricing for the SL084 supply contained on the submitted invoices demonstrated an increase that occurred during the second half of 2023 rather than a price differential between two distinct products; commenters stated that practices paid an average of

$87 earlier in 2023 and by 2024 the price had increased to $141, with some paying as much as $156.

Response:

We appreciate the support from the commenters for our proposed supply pricing of the SL083 supply, as well as the additional information regarding its pricing.

Regarding the Reaction buffer 10X (Ventana 950-300) (SL478) supply, we proposed to update the price from $0.037 to $0.045, which is less than the $0.075 contained on the invoice submitted by interested parties. We were able to find this product readily available for purchase online at a quantity of 10 liters for $453 or a price of $0.045. We do not believe that it would be typical for providers to pay a higher price based on smaller unit quantities; therefore, we proposed to update the price of the SL478 supply but only to $0.045, which is the price to purchase this supply online, as stated above.

Interested parties also alerted CMS to a technical correction for pricing the Atomizer tips (disposable) (SL464) supply. We previously finalized a price of $2.66 for the SL464 supply, which was included in the table of Invoices Received for Existing Direct PE Inputs in the CY 2018 final rule (82 FR 53162). However, due to a technical error, the updated pricing for the SL464 supply was never implemented. We proposed to make this correction for CY 2025; the corrected price of $2.66 for the SL464 supply is included in Table 20.

Comment:

A commenter stated that the proposed payment rates for HCPCS codes G2082 and G2083 did not include the updated supply pricing for esketamine described by the SH109 and SH110 supply codes, based on wholesale acquisition cost (WAC) data submitted by the commenter to CMS on May 31, 2024. The commenter stated that lack of consistent WAC supply pricing updates has contributed to payment instability for these services and puts beneficiary access at risk. The commenter stated that their goal was to align on a clear process to ensure consistency and predictability in the approach to updating the annual payment amounts for the SH109 and SH110 supplies and urged CMS to incorporate the updated WAC pricing data for these supplies in the PFS final rule.

Response:

We did not propose to update the price of the SH109 and SH110 esketamine supplies in the proposed rule. However, as part of our process to act on public requests to update equipment and supply prices, we have reviewed the WAC pricing data submitted by the commenters. Based on this information, we are finalizing an increase in the pricing of the SH109 supply from $735.63 to $772.41 and an increase in the pricing of the SH110 supply from $1103.44 to $1158.62.

With regards to the process for submitting annual pricing updates for these supply items, we remind the commenter that 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 will 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.

We did not propose to update the price of another ten supplies, which were the subject of public submission of invoices. Our reasons for not proposing updates to these prices are detailed below, and we solicited additional information from interested parties for assistance in pricing these supplies:

•

Liposorber supplies: Tubing set (SC083), Plasma LDL adsorption column (SD186), and Plasma separator (SD188):

We received invoices for these three Liposorber supplies from an interested party. However, it was unclear from the invoice submissions what the unit quantity size is for each product. We require additional information regarding the unit size of each supply included on these invoices to establish updated pricing, and therefore, we did not propose updates to the prices for these supplies. We solicited additional comments regarding the pricing of these supplies and whether the pricing has increased so dramatically, as it seems unlikely that prices have tripled in the 5 years since we most recently updated the pricing for these supplies.

Comment:

A commenter stated that they continue to believe that CPT code 36516 suffers from a large reimbursement gap between the facility and non-facility/physician office setting because CMS is using outdated pricing data for essential liposorber supplies. The commenter therefore submitted additional paid invoices for three liposorber supply items: the tubing set (SC083), Plasma LDL adsorption column (SD186), and plasma separator (SD188). The commenter stated that these invoices clearly identified the unit quantity and provided a breakdown of the costs to show the individual (per-supply item price) as well as case price (6 items per case per different supply item).

Response:

We appreciate the additional invoice submissions from the commenter and the clarification on the supply quantities for the associated supply items. Based on this additional pricing data, we are finalizing price increases to $87.52 for the SC083 supply, to $1419.04 to the SD186 supply, and to $149.70 for the SD188 supply, in each case based on an average of the six submitted invoices.

Comment:

A commenter stated that Liposorber supplies are unique in that they require special shipping, handling, storing, and insurance requirements. The commenter stated that, for instance, the Plasma LDL adsorption Column (SD186) and the Plasma Separator (SD188) are sensitive to atmospheric conditions and must be packaged, shipped, and stored at mandated temperatures, as well as avoid exposure to cold, direct sunlight, high humidity, or excessive vibrations. The commenter stated that the high cost and fragility of these supplies requires the practice to purchase additional insurance coverage, and these additional shipping and handling costs are not reflected in the invoiced purchase price but add considerable expense to the provision of apheresis services.

Response:

We remind the commenter that shipping and storage costs are not included in the price of supplies and equipment under our PE methodology. This is because these costs are covered under the indirect portion of the PE; it is not the case that these costs are not being paid, but rather that they are addressed under a different part of the PE methodology.

•

Congo Red kits (SA110):

We received three invoices from interested parties requesting an increase in the price of the SA110 supply from $6.80 to $18.78. However, we were able to find Congo Red staining kits readily available online at a price of 100 for $410 or $4.10 per kit. The unit size of these kits was also unclear, which made price comparisons with the submitted invoices difficult. Based on the three invoices and the online price of 100 for $410 or $4.10 per kit, we do not believe there is enough pricing data to support an increase in the price of the SA110 supply from $6.80 to $18.78, and we did not propose an increase in the price of this supply.

•

Gauze, non-sterile 4in x 4in (SG051):

We received one invoice from interested parties requesting an increase

in the price of the SG051 supply from $0.03 to $0.04. However, the submitted invoice price appeared to be for surgical gauze, not non-sterile gauze. We were able to find the 4x4 non-sterile gauze readily available online at less than the invoice price. Based on this information, we do not believe there is enough pricing data to support an increase in the price of the SG051 supply from $0.03 to $0.04, and we did not propose an increase in the price of this supply.

•

Permanent marking pen (SL477):

We received one invoice from interested parties requesting an increase in the price of the SL477 supply from $2.81 to $4.62. However, we found black marking pens, such as Sharpies, widely available at unit prices around $2.00 when purchased in larger quantities. Based on this information, we do not believe there is enough pricing data to support an increase in the price of the SL477 supply from $2.81 to $4.62, and we did not propose an increase in the price of this supply.

•

Hematoxylin II (Ventana 790-2208) (SL483):

We received four invoices from interested parties requesting an increase in the price of the SL483 supply from $0.780 to $2.722. However, we were able to find hematoxylin II stains readily available online at cheaper prices, such as $52.00 for 500 ml ($0.104 per ml). Based on this information, we do not believe there is enough pricing data to support an increase in the price of the SL483 supply from $0.780 to $2.722, and we did not propose an increase in the price of this supply.

•

Bluing reagent (Ventana 760-2037) (SL484):

We received three invoices from interested parties requesting an increase in the price of the SL484 supply from $4.247 to $6.130. While researching the pricing of the SL484 supply, we were unable to determine the unit quantity size on invoices, which made it difficult to evaluate if the requested price accurately reflected market pricing. As best we could tell, the requested price increase to $6.130 was more expensive than comparable online bluing reagents available for purchase. Based on this information, we do not believe there is enough pricing data to support an increase in the price of the SL484 supply from $4.247 to $6.130, and we did not propose an increase in the price of this supply.

•

EZ Prep (10X) (Ventana 950-102) (SL481) and 250 Test Prep Kit # 78 (Ventana 786-3034) (SL486):

In each of these cases, we received invoices from interested parties requesting substantial increases in the price of the associated supplies, from $0.034 to $0.509 for the SL481 supply and from $0.309 to $2.134 for the SL486 supply. We do not believe that it is reasonable to expect that the typical market prices for these supplies have increased by 1400 percent and 600 percent, respectively, in the 5 years since we most recently updated the pricing for these supplies. The limited pricing information we could find online for each product also failed to support these drastic increases in pricing. Based on this information, we do not believe there is enough pricing data to support the requested increases for the SL481 and SL486 supplies, and we did not propose increases to the prices for these supplies.

(1) Invoice Submission

We reminded readers that we routinely accept public submissions 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 will 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.

In recent years, we have noticed a growing number of invoice submissions for use in updating supply and equipment pricing. Although we continue to believe in the importance of using the most recent and accurate invoice data to reflect current market pricing, we do have some concerns that the increased use of these submissions may distort relativity across the fee schedule. Relying on voluntary invoice submissions to update pricing for a small subset of the total number of supply and equipment items in our database, while leaving the overwhelming majority of prices untouched, could be distorting pricing in favor of the most recent submissions. We believe that it may be more efficient, and more accurate, to update supply and equipment pricing in a more comprehensive fashion similar to the pricing update that took place from CY 2019 to CY 2022. For example, future updates to supply and equipment pricing could take place in tandem with updates to clinical labor pricing after the current clinical labor update concludes in CY 2025. We welcomed public comments on this general topic of more comprehensive updates to supply and equipment pricing, and we may consider comments we receive to inform future rulemaking.

Comment:

Many commenters supported the concept of more regular and comprehensive updates to supply and equipment pricing. Commenters stated their support for a deliberate, systematic approach to supply, equipment, and clinical labor updates and agreed that it would be prudent to update pricing consistently, such as every 5 years. Many commenters stated that such a process would provide transparency in the timing of these updates, give greater granularity into the data sources that serve as the basis of input pricing changes, and maintain the current process that allows stakeholders to submit invoices in advance of rulemaking. Several commenters requested the implementation of a 4-year phase-in transition for any future pricing updates, as gradually phasing in cost changes helps to prevent abrupt and potentially harmful effects on specific providers or services. One commenter stated that establishing a cycle of updates every four years was not advisable, as updates that frequent could amplify the impact of short-term market fluctuations, in addition to increasing the administrative burden for both CMS and health care providers.

Response:

We appreciate the feedback from the commenters regarding potential future updates to supply and equipment pricing, which we will consider for use in potential future rulemaking.

(2) Supply Pack Pricing Update

Interested parties previously notified CMS that they identified numerous discrepancies between the aggregated cost of some supply packs and the individual item components contained within. The interested parties indicated that CMS should rectify these mathematical errors as soon as possible to ensure that the sum correctly matches the totals from the individual items, and they recommended that we resolve these pricing discrepancies in the supply packs during CY 2024 rulemaking. The AMA RUC convened a workgroup on this subject and submitted recommendations to update pricing for a series of supply packs along with the RUC's comment letter for the CY 2024 rule cycle.

We appreciated the additional information and RUC workgroup recommendations regarding discrepancies in the aggregated cost of some supply packs. However, due to the projected significant cost revisions in the pricing of supply packs and because we did not propose to address supply pack pricing in the CY 2024 proposed rule, we stated that this issue would be better addressed in future rulemaking. For example, the cleaning and disinfecting endoscope pack (SA042) is included as a supply input in more than 300 HCPCS codes, which could have a sizable impact on the overall valuation of these services, and which was not incorporated into the proposed RVUs published for the CY 2024 proposed rule. We stated that interested parties would be better served if we comprehensively addressed this topic during future rulemaking in which commenters could provide feedback in response to proposed pricing updates (88 FR 78833 through 78834).

For CY 2025, we proposed to implement the supply pack pricing update and associated revisions as recommended by the RUC's workgroup. We proposed to update the pricing of the “pack, cleaning and disinfecting, endoscope” (SA042) supply from $19.43 to $31.29, to update the pricing of the “pack, drapes, cystoscopy” (SA045) supply from $17.33 to $14.99, to update the pricing of the “pack, ocular photodynamic therapy” (SA049) supply from $16.35 to $26.35, to update the pricing of the “pack, urology cystoscopy visit” (SA058) supply from $113.70 to $37.63, and to update the pricing of the “pack, ophthalmology visit (w-dilation)” (SA082) supply from $3.91 to $2.33. As recommended by the RUC workgroup, we also proposed to delete the “pack, drapes, laparotomy (chest-abdomen)” (SA046) supply entirely. The updated prices for these supply packs are listed in the valuation of specific codes section of the preamble under Table 20, CY 2025 Invoices Received for Existing Direct PE Inputs.

In accordance with the RUC workgroup's recommendations, we also proposed to create 8 new supply codes, including components contained within previously existing supply packs. Aside from the SB056 supply, which is a replacement in several HCPCS codes for the deleted SA046 supply pack, all of these new supplies are not included as standalone direct PE inputs in any current HCPCS codes, as they are, again, components contained within previously existing supply packs. We proposed to add:

• The kit, ocular photodynamic therapy (PDT) (SA137) supply at a price of $26.00 as a component of the SA049 supply pack;

• The Abdominal Drape Laparotomy Drape Sterile (100 in x 72 in x 124 in) (SB056) supply at a price of $8.049 as a replacement for the SA046 supply pack;

• The drape, surgical, legging (SB057) supply at a price of $3.284 as a component of the SA045 supply pack;

• The drape, surgical, split, impervious, absorbent (SB058) supply at a price of $8.424 as a component of the SA045 supply pack;

• The post-mydriatic spectacles (SB059) supply at a price of $0.328 as a component of the SA082 supply pack;

• The y-adapter cap (SD367) supply at a price of $0.352 as a component of the SA049 supply pack;

• The ortho-phthalaldehyde 0.55% (eg, Cidex OPA) (SM030) supply at a price of $0.554 as a component of the SA042 supply pack; and

• The ortho-phthalaldehyde test strips (SM031) supply at a price of $1.556 as a component of the SA042 supply pack.

The new supply pack component items are listed in the valuation of specific codes section of the preamble under Table 21, CY 2025 New Invoices.

We also proposed the following additional supply substitutions based on the recommendations of the RUC workgroup. We proposed to remove the deleted SA046 supply pack and replace it with the drape, sterile, fenestrated 16 in x 29 in (SB011) supply for CPT codes 19020, 19101, 19110, 19112, 20101, and 20102. We proposed to remove the deleted SA046 supply pack and replace it with two supplies—the drape, sterile, three-quarter sheet (SB014) and the drape, towel, sterile 18 in x 26 in (SB019)—for CPT codes 19000 and 60300. We proposed to remove the deleted SA046 supply pack and replace it with 2 supplies—the drape, towel, sterile 18 in x 26 in (SB019) and the newly created Abdominal Drape Laparotomy Drape Sterile (100 in x 72 in x 124 in) (SB056) supply—for CPT codes 22510, 22511, 22513, and 22514. We proposed to remove the deleted SA046 supply pack without replacing it with anything for CPT code 22526; the RUC workgroup did not make a recommendation on what to do with CPT code 27278, which also previously contained the SA046 supply pack. Therefore, we also proposed not to replace the SA046 supply pack with any supplies for this code. The RUC workgroup also recommended removing the SA046 supply pack from CPT code 64595 with no replacement; however, this code was recently reviewed at the April 2022 RUC meeting and it no longer includes the SA046 supply.

Comment:

Several commenters stated their appreciation that CMS proposed to implement the supply pack pricing update and associated revisions as recommended by the RUC's workgroup.

Response:

We appreciate the support for our proposal from the commenters.

Comment:

Several commenters supported the proposed supply pack pricing update as recommended by the RUC workgroup, however they indicated concern over the proposed decrease in the price of the urology cystoscopy visit pack (SA058) from $113.70 to $37.63. Commenters stated that the proposed pricing reduction in the SA058 supply could result in drastic payment rate cuts for physicians performing cystoscopy services in the office setting. Commenters requested that CMS either delay the pricing update or phase-in the supply pack changes over a four-year period like it has done for other PE changes with significant redistributive effects, allowing independent urology practices to better prepare for the negative financial impact this change will have. One commenter requested that pricing reductions should be implemented over a 7- to 10-year period.

Response:

We appreciate the feedback from the commenters regarding the proposed changes in pricing for these supply packs, particularly the decrease in pricing for the urology cystoscopy visit pack (SA058). After considering the comments, we agree that the use of a phased-in transition period would be appropriate to allow practitioners to adjust to the updated pricing of these supplies. During our previous supply and equipment pricing update in the CY 2019 PFS final rule, we finalized a policy to phase in any updated pricing that we established during the 4-year transition period for very commonly used supplies and equipment, such as sterile gloves (SB024) or exam tables (EF023), even if invoices were provided as part of the formal review of a code family (83 FR 59475). Based on this previously established policy, we are finalizing the use of a pricing transition for three supply packs:

ER09DE24.005

Following the same pattern as our previous supply/equipment and clinical labor pricing updates, we are finalizing 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 2025, one-third of the difference between the CY 2025 price and the final price is implemented for CY 2026, and one-half of the difference between the CY 2026 price and the final price is implemented for CY 2027, with the new direct PE prices fully implemented for CY 2028 (86 FR 65025). For the other proposed supply packs, the cystoscopy drapes pack (SA045) is only included in 7 HCPCS codes and the ocular photodynamic therapy pack (SA049) is only included in a single HCPCS code which do not meet these criteria established in previous rulemaking. We are therefore finalizing each of them at their updated pricing for CY 2025 as proposed in the proposed rule. We believe that the use of this pricing transition will minimize any potential disruptive effects during the 4-year transition period that could be caused by other sudden shifts in RVUs due to the high number of services that make use of these very common supply packs.

Comment:

Several commenters stated that although five incomplete packs would have their pricing updated in the proposed rule, mathematical errors still remained for a number of additional supply packs. Commenters stated that only 3 of the 18 affirmed packs were priced correctly to match their components and provided tables showing the pricing of an additional 15 packs that needed mathematical correction by deconstructing the packs to determine the correct price through summing their individual components. Commenters requested that CMS initiate a correction of the packs pricing such that the sum of the individual components match the price of the corresponding pack.

Response:

We appreciate the additional information provided by the commenters regarding the pricing of these supply packs. We have compiled this information provided by the commenters for the 15 affected supply packs into Table 6.

ER09DE24.006

While we share the concerns of the commenters regarding the need for accuracy in the pricing of these supply packs, we have reservations about their potential for pricing disruptions. Ten of these supply packs are included in the direct PE inputs for at least 100 HCPCS codes, and three of the packs are included in more than 1000 HCPCS codes. Many of these pricing updates would lead to drastic changes in pricing for these supply packs which are included in hundreds of HCPCS codes, such as the SA051 pelvic exam pack decreasing in price from $20.16 to $2.81 (−86 percent) and the SA048 minimum multi-specialty visit pack decreasing in price from $5.02 to $1.98 (−61 percent). We are particularly concerned that these changes in supply pack pricing could lead to significant shifts in the overall PE RVU for affected HCPCS codes, without these proposed rates appearing in the proposed rule or allowing any opportunity for public comment.

Therefore, we are not finalizing pricing updates for these additional 15 supply packs as requested by commenters. We anticipate returning to this subject in future rulemaking to allow any changes in associated pricing for HCPCS codes to appear in the proposed rule and provide an opportunity for the public to comment. Should these supply pack pricing updates be proposed in future rulemaking, we anticipate that we may propose the same pricing transition described above due to the number of potentially affected HCPCS codes. We are finalizing all of the other supply pack pricing changes as proposed, with the exception of the 4-year pricing transition for three supply packs as described above.

The RUC workgroup also reviewed the issue of skin adhesives and identified several generic alternatives to using the skin adhesive (Dermabond) (SG007) supply. The workgroup stated that there are multiple skin adhesive products, at different price points, available that work similarly to Dermabond and requested that generic alternatives be used overall in place of brand names in the CMS direct PE database. The workgroup made a series of suggestions for CMS to create new medical supply item codes to encompass the generic formulations of cyanoacrylate skin adhesive in multidose form and single use sterile application.

We appreciated the recommendations from the RUC workgroup and concur that generic alternatives should be used in place of brand names, where appropriate, in the CMS direct PE database. However, we had no pricing information or submitted invoices for the 4 generic formulations of cyanoacrylate skin adhesive requested by the RUC workgroup (2-Octyl-cyanoacrylate, n-Butyl-2-cyanoacrylate, Combined n-Butyl and 2-Octylcyanoacrylate, and Ethyl-2-cyanoacrylate). Since these 4 potential new supplies had no pricing information and are not currently included as direct PE inputs for any HCPCS codes, we did not add them to our direct PE database for the CY 2025 proposed rule due to lack of available information.

Comment:

Several commenters, including the RUC, stated that they solicited invoices for Dermabond and its generic alternatives. The commenters stated that they were able to find and submit invoices for the Dermabond (SG007) supply but were unable to find invoices for the generic skin adhesives. Commenters stated that they continued to believe that generic versions overall are a better alternative than the use of brand names in the CMS direct PE database and encouraged CMS to explore other sources of information regarding generic skin adhesives.

Response:

We appreciate the feedback from commenters regarding these skin adhesives and the submission of invoices associated with the SG007 supply. We agree with the commenters that the use of generic alternatives is preferred in place of brand names when naming new supply and equipment items for use in the CMS direct PE database. However, many of the supply and equipment items such as the SG007 supply have existed in the CMS files for decades at this point. We believe that it would be more disruptive and potentially confusing to attempt to rename items like the SG007 supply given how the current Dermabond name has been in common use for PFS ratesetting for at least 20 years. We are not finalizing a change to the name of this supply, and since we received no pricing information or submitted invoices for the four generic formulations of cyanoacrylate skin adhesive, we are not finalizing any changes to their status as well.

With regards to the submitted invoices for the SG007 supply, the six invoices refer to different Dermabond products and their unit quantity size is unclear. The current SG007 supply simply has the unit size of “item” and we were unable to determine how the submitted invoices relate in terms of pricing to the current supply. We are therefore not finalizing an update to the price of the SG007 supply at this time.

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, several 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 updating the clinical labor pricing was important 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 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 instead of 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 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 clinical labor pricing update implementation 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. (86 FR 65025) 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 7.

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(1) CY 2023 Clinical Labor Pricing Updates

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 proposed this $0.64 rate for the L037B clinical labor type for CY 2023; we also proposed 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 also proposed 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).

Based on comments received on the CY 2023 proposed rule, we finalized a change in the descriptive text of the L041A clinical labor type from “Angio Technician” to “Vascular Interventional Technologist”. We also finalized an update in the pricing of three clinical labor types: from $0.60 to $0.84 for the Vascular Interventional Technologist (L041A), from $0.63 to $0.79 for the Mammography Technologist (L043A), and from $0.76 to $0.78 for the CT Technologist (L046A) based on submitted wage data from the 2022 Radiologic Technologist Wage and Salary Survey (87 FR 69422 through 69425).

(2) CY 2024 Clinical Labor Pricing Updates

We did not receive new wage data or other additional information for use in clinical labor pricing from interested parties prior to the publication of the CY 2024 PFS proposed rule. Therefore, our proposed clinical labor pricing for CY 2024 was based on the clinical labor pricing that we finalized in the CY 2023 PFS final rule, incremented an additional step for Year 3 of the update. Based on comments received on the CY 2024 proposed rule, we finalized an update in the clinical labor pricing of the cytotechnologist (L045A) clinical labor type from $0.76 to $0.85 based on submitted data from the 2021 American Society of Clinical Pathologists (ASCP) Wage Survey of Medical Laboratories (88 FR 78838).

(3) CY 2025 Clinical Labor Pricing Update Proposals

We did not receive new wage data or other additional information for use in clinical labor pricing from interested parties prior to the publication of the CY 2025 PFS proposed rule. Therefore, our proposed clinical labor pricing for CY 2025 in Table 8 is based on the clinical labor pricing that we finalized in the CY 2024 PFS final rule, incremented an additional step for the final Year 4 of the update:

ER09DE24.008

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As was the case for the market-based supply and equipment pricing update, the clinical labor rates remained open for public comment during the 60-day comment period for the CY 2025 PFS proposed rule. We stated that we expect to set the updated clinical labor rates for CY 2025 in this final rule. We updated the pricing of some clinical labor types in the CY 2022, CY 2023, and CY 2024 PFS final rules in response to information provided by commenters. For the full discussion of the clinical labor pricing update, we directed readers to the CY 2022 PFS final rule (86 FR 65020 through 65037).

Comment:

Several commenters urged CMS to freeze the final year of implementation of the clinical labor policy in CY 2025 to avoid further redistributions and instability in the PFS. Commenters asked CMS to hold harmless the specialties that were most affected by the clinical labor pricing update and not move forward with the final year of the phase-in. One commenter disagreed with the finalized BLS 2021 benefit multiplier of 1.296 and stated that CMS should use the originally proposed 1.366 benefits multiplier instead.

Response:

We finalized the use of a 4-year transition in the CY 2022 PFS final rule to help smooth out the changes in payment resulting from the clinical labor pricing update, avoiding potentially disruptive changes in payment for affected stakeholders, and promoting payment stability from year-to-year. As we stated in the CY 2022 PFS final rule, under section 1848 of the Act, we are required to base payment for services under the PFS on relative resource costs. To accomplish that, it is necessary periodically to update the information on which we base relative values. We believe, and commenters overwhelmingly agreed, that the BLS wage data is the best source to use for clinical labor pricing, and commenters did not identify alternative sources of data that could be used to update pricing. Although we recognize that payment for some services will be reduced as a result of the pricing update due to the BN requirements of the PFS, we do not believe that this is a reason to refrain from updating clinical labor pricing to reflect changes in resource costs over time as suggested by some commenters. The PFS is a resource-based relative value payment system that necessarily relies on accuracy in the pricing of resource inputs; continuing to use clinical labor cost data that are nearly two decades old would maintain distortions in relativity that undervalue many services which involve a higher proportion of clinical labor. As noted above, we also finalized the implementation of the pricing update through a 4-year transition to help address the concerns of the commenters about stabilizing RVUs and reducing large fluctuations in year-to-year payments. We direct readers to this prior discussion in the CY 2022 PFS final rule at 86 FR 65025.

Comment:

Several commenters stated that the ongoing clinical labor pricing update was having the effect of driving patient care from the non-facility to the facility setting. The commenters stated that access to care for beneficiaries is increasingly constrained for many essential services and listed a series of procedures most impacted, such as hemorrhagic and ischemic strokes, maternal health, PAD, dialysis access, limb salvage services, and CPT code 93229 (

External mobile cardiovascular telemetry with electrocardiographic recording, concurrent computerized real time data analysis and greater than 24 hours of accessible ECG data storage (retrievable with query) with ECG triggered and patient selected events transmitted to a remote attended surveillance center for up to 30 days; technical support for connection and patient instructions for use, attended surveillance, analysis and transmission of daily and emergent data reports as prescribed by a physician or other qualified health care professional

).

Response:

We previously addressed these concerns about site of service and patient access to care when we finalized the clinical labor pricing update; we direct readers to this prior discussion in the CY 2022 PFS final rule at 86 FR 65025.

Comment:

A commenter stated that, to promote predictability and stability in physician payments and mitigate the financial impacts of significant fluctuations in physician payments that might accompany the clinical labor pricing update, CMS should consider using a threshold to limit the level of reductions in payments for specific services that would occur in a single year. The commenter stated that CMS consider implementing a cap on payment cuts to individual codes in a single year.

Response:

We agree with the commenter on the importance of avoiding potentially disruptive changes in payment for affected interested parties and the need to promote payment stability from year-to-year. This is why we finalized the use of a multi-year transition for the clinical labor update in the CY 2022 PFS final rule to help smooth out the changes in payment resulting from the updated data (86 FR 65024). We also note for the commenter that section 1848(c)(7) of the Act, as added by section 220(e) of the PAMA, 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. For additional information regarding the phase-in of significant RVU reductions, we direct readers to the CY 2016 PFS final rule with comment period (80 FR 70927 through 70929).

Comment:

A commenter thanked CMS for raising the clinical labor rate paid to nurses, however the commenter stated that this was only one step and nurses are consistently undervalued across all settings. The commenter stated that nursing care should be valued more highly than it is today and that nursing care is still undervalued in today's healthcare system. The commenter stated that RNs are mentioned in ten separate rows on the clinical labor pricing table, with the rate per minute for nurses varying from $0.52 per minute to $0.81 per minute, which brings uncertainty to the fee schedule as the value of the nurse fluctuates depending on the situation.

Response:

We note for the commenter that the proposed CY 2025 clinical labor rate for the RN (L051A) type is $0.76,

which is based upon Bureau of Labor Statistics wage data as outlined in our methodology above. We believe that the BLS wage data continues to be the most accurate source to use as a basis for clinical labor pricing, and we did not receive any alternate wage data from commenters to suggest alternate RN pricing. With regards to the multiple listing of RNs on the table, there are a number of “blended” clinical labor types which often include RNs as one of the staffing types being averaged together. Blended clinical labor types have been a historical part of PFS services since we adopted the current PE methodology. We have done our best to identify which staffing types, including RNs, are included in these blends along with how they are averaged together to arrive at the final clinical labor pricing. We also note for the commenter that the pricing for the RN (L051A) clinical labor type is drawn directly from BLS wage data and the inclusion of RNs in other “blended” clinical labor types has no effect on the pricing of the L051A category itself.

Comment:

A commenter stated that CMS must reevaluate the pricing for the Behavioral Health Care Manager (L057B) clinical labor type. The commenter noted that CMS maintained the current clinical labor pricing for the Behavioral Health Care Manager clinical labor type rather than update it in the CY 2022 PFS final rule because, although the BLS data reflected a decreased clinical labor rate for the Behavioral Health Care Manager labor type, CMS did not believe that the typical wages had decreased for this clinical labor type given that every other clinical labor type had increased (86 FR 65022). The commenter stated that growth for Behavioral Health Care Managers has increased on a similar trajectory as other clinical labor types and has in fact outpaced wage growth for other types of behavioral health providers. The commenter stated that BLS data indicates that salaries for clinicians who work as Behavioral Health Care Managers have increased at a rate of approximately 5 percent per year between 2021 and 2023, outpacing the wage increases for other types of related practitioners, such as psychiatrists, nurse practitioners, and physician assistants, which increased at rates below 4 percent per year. The commenter stated that Behavioral Health Care Manager wages increased at a pace that is consistent with the increase in wages for other clinical labor types (such as registered nurses, licensed practical nurses, and medical assistants), increasing by 27.2 percent from 2017 to 2023, compared with a 30.2 percent increase among other clinical labor types during the same period. The commenter requested that rather than holding the clinical labor rate for Behavioral Health Care Managers steady, the rate should be increased at a rate similar to the costs associated with other clinical labor types.

Response:

We appreciate the additional information provided by the commenter with regards to the Behavioral Health Care Manager (L057B) clinical labor type. However, we continue to believe that the proposed pricing for this clinical labor type remains accurate, as it was based directly on BLS wage data (BLS category 21-1018: Substance Abuse, Behavioral Disorder, and Mental Health Counselors) rather than relying on a crosswalk or third party information. Although we understand that it appears unfair that the L057B clinical labor type maintained the same pricing while all of the other clinical labor types increased in valuation, this was due to the fact that the L057B type had been valued much more recently than the other clinical labor types. The L057B clinical labor type was added to the PFS for the CY 2017 final rule and therefore was priced at $0.57 per minute based on then-current rates for genetic counselors (81 FR 80350). Almost all of the other clinical labor types were last valued based on 2002 wage data, which caused the L057B clinical labor type to be artificially inflated in pricing relative to the other clinical labor types. For example, before the current clinical labor pricing update, Behavioral Health Care Managers were priced at $0.57 per minute, higher than the $0.51 per minute valuation of the Registered Nurse (L051A) clinical labor type, which clearly did not reflect market-based salaries. The commenter included a table in their submission indicating that salaries for Registered Nurses are approximately 40 higher than salaries for Behavioral Health Care Managers, which matches our current proposed pricing for these clinical labor types ($0.76 and $0.57 respectively). We believe that the current clinical labor pricing update has brought valuation of the L057B clinical labor type into relativity with the other clinical labor types by virtue of valuing all of them at the same time.

After consideration of the comments, we did not receive any new wage data for use in clinical labor pricing. Therefore, we are finalizing the clinical labor prices as proposed in Table 8 without refinement.

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

We received the following comments on technical corrections to the direct PE input database and supporting files:

Comment:

Several commenters, including the RUC, requested that CMS separately identify and pay for high-cost disposable supplies. Commenters highlighted the outsized impact that high-cost disposable supplies have within the current practice expense RVU methodology, which not only accounts for a large amount of direct practice expense for these supplies but also allocates a large amount of indirect practice expense into the PE RVU for the procedure codes that include these supplies. Commenters stated that if high-cost supplies were paid separately with appropriate HCPCS codes, the disproportionate indirect expense would no longer be associated with that service, with the result that indirect PE RVUs would be redistributed throughout the specialty practice expense pool and the practice expense for all other services. Commenters requested that CMS separately identify and pay for high-cost disposable supplies priced more than $500 using appropriate Healthcare Common Procedure Coding System (HCPCS) codes. Commenters provided several examples from the proposed rule where they stated this policy would be appropriate, including new HCPCS code GMEM1, the potential for a new add-on service based on tympanostomy CPT code 69433, and the price of the SD248 supply (human amniotic membrane allograft mounted on a non-absorbable self-retaining ring). In each case, commenters stated that these issues would be better addressed through the creation of standalone Q codes separately paid from the PFS so those prices could be monitored and, when appropriate, updated annually.

Response:

We have received a number of prior requests from interested parties, including the RUC, to implement these separately billable alpha-numeric Level II HCPCS codes to allow practitioners to be paid the cost of high cost disposable supplies per patient encounter instead of per CPT code. We stated at the time, and we continue to believe, that this option presents a series of potential problems that we have addressed previously in the context of the broader challenges regarding our ability to price high cost disposable supply items. We are therefore not finalizing the implementation of standalone Level II HCPCS codes for high cost disposable supplies at this time. For further discussion of this issue, we direct the

reader to our discussion in the CY 2011 PFS final rule with comment period (75 FR 73251).

We are aware of the issues with the current PE methodology caused by very expensive supply and equipment items, and this is a subject that we may consider for future rulemaking alongside other updates to the PE methodology. We appreciate the continued feedback from commenters as we consider potential approaches to this complicated topic.

Comment:

A commenter echoed the request from other interested parties that CMS separately identify and pay for high-cost disposable supplies priced more than $500. This commenter stated that they believed these services should be paid outside of the PFS, since PFS budget neutrality rules compound the challenge of appropriately valuing high-cost technology inputs without underpaying for physician professional services. The commenter recommended that CMS designate such services as office based procedures under a new place of service designation and establish payment under the outpatient prospective payment system (OPPS)/ambulatory surgical center rulemaking instead of the PFS.

Response:

We appreciate the feedback from the commenter on potential methods for implementing separate payment for high-cost disposable supplies. Although we have no current plans for such a policy, we will take under consideration for potential future rulemaking.

Comment:

Several commenters asked for clarification regarding the proposed PE RVUs for HCPCS code G2251. Commenters stated that the proposed non-facility and facility PE RVUs for HCPCS code G2251 showed a significant reduction from 0.15 to 0.00 despite no mention of a policy proposal for this service. Commenters stated that they wanted to bring this valuation to the attention of CMS and sought clarification on whether this was a data entry error or an intentional change related to the proposed Advanced Primary Care Management (APCM) codes.

Response:

We appreciate the commenters for bringing this issue to our attention, and we clarify that the published 0.00 PE RVUs for HCPCS code G2251 was an unintended technical error. When we investigated this issue, we found that it was due to a previously finalized crosswalk: we finalized a policy in the CY 2021 PFS final rule to value HCPCS code G2251 identically to HCPCS code G2012 (85 FR 84532). However, we also proposed to delete HCPCS code G2012 for CY 2025 which inadvertently resulted in HCPCS code G2251 crosswalking over a zero value for its PE RVUs. Since HCPCS code G2012 will no longer exist in CY 2025, we are finalizing the removal of this crosswalk for HCPCS code G2251 which should correct this error and restore its PE RVUs.

Comment:

A commenter requested that CMS consider changing the assistant at surgery payment policy indicator to “2” for CPT codes 37211, 37212, 37242, and 37197 to allow for the use of assistant surgeons. The commenter stated that these transcatheter procedures involve the infusion of thrombolytic therapy, precise embolization of arteries, and foreign body retrieval, which have the potential to be extremely technical in nature and may require a highly functional team, including an assistant surgeon in select cases. The commenter stated that select cases that are particularly challenging may necessitate the skills of two operators to perform distinct parts of the navigation and procedure for the precise and safe delivery of thrombolytic therapy and vascular embolization devices, as well as the safe and effective retrieval of foreign bodies. The commenter stated that changes to these payment policy indicators will ensure patient procedural safety and bring policy alignment to these complex transcatheter procedures.

Response:

The four CPT codes identified by the commenter each currently have an assistant at surgery payment policy of “1” under which an assistant at surgery may not be paid. After reviewing the four CPT codes identified by the commenter, we agree that an assistant at surgery may be medically necessary in some particularly challenging cases. However, we believe that it would be more accurate to finalize an assistant as surgery payment policy of “0” rather than the requested “2”, which establishes that the payment restriction for an assistant at surgery applies to this procedure only if supporting documentation is submitted to establish medical necessity. We believe that this will ensure that an assistant at surgery will only be employed in the particularly challenging and medically necessary cases described by the commenter. Therefore we are finalizing an assistant at surgery payment policy indicator of “0” for CPT codes 37211, 37212, 37242, and 37197.

Comment:

A commenter stated that the direct PE inputs for CPT code 65426 do not contain a supply item for human amniotic membrane allograft product (the SD247 supply). The commenter stated that as a result, the practice expense valuation does not account for the significant cost of this item when it is purchased and used. The commenter stated that while they are working with stakeholders to submit a potentially misvalued CPT code request for review in future rulemaking, they also wanted to note this issue and concern within the public comment period for this CY 2025 PFS rule.

Response:

We appreciate the feedback from the commenter on this topic, and we would encourage them to continue pursuing the potentially misvalued code process if they believe that CPT code 65426 does not properly capture its typical direct PE inputs. We note the commenter did not present data indicating that the use of the expensive $835 SD247 supply is typical in CPT code 65426. We are not finalizing any changes to the code at this time.

5. Development of Strategies for Updates To Practice Expense Data Collection and Methodology

a. Background

The AMA PPIS was first introduced in 2007 as a means to collect comprehensive and reliable data on the direct and indirect PEs incurred by physicians (72 FR 66222). In considering the use of PPIS data, the goal was to improve the accuracy and consistency of PE RVUs used in the PFS. The data collection process included a stratified random sample of physicians across various specialties, and the survey was administered between August 2007 and March 2008. Data points from that period of time are integrated into PFS calculations today. In the CY 2009 PFS proposed rule (73 FR 38507 through 3850), we discussed the indirect PE methodology that used data from the AMA's survey that predated the PPIS. In CY 2010 PFS rulemaking, we announced our intent to incorporate the AMA PPIS data into the PFS ratesetting process, which would first affect the PE RVU. In the CY 2010 PFS proposed rule, we outlined a 4-year transition period, during which we would phase in the AMA PPIS data, replacing the existing PE data sources (74 FR 33554). We also explained that our proposals intended to update survey data only (74 FR 33530 through 33531). In our CY 2010 final rule, we finalized our proposal, with minor adjustments based on public comments (74 FR 61749 through 61750). We responded to the comments we received about the transition to using the PPIS to inform indirect PE allocations (74 FR 61750). In the responses, we acknowledged concerns about potential gaps in the

data, which could impact the allocation of indirect PE for certain physician specialties and suppliers, which are issues that remain important today. The CY 2010 PFS final rule explains that section 212 of the Balanced Budget Refinement Act of 1999 (Pub. L. 106-113, November 29, 1999) (BBRA) directed the Secretary to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component. BBRA required us to establish criteria for accepting supplemental survey data. Since the supplemental surveys were specific to individual specialties and not part of a comprehensive multispecialty survey, we had required that certain precision levels be met in order to ensure that the supplemental data was sufficiently valid, and acceptable for use in the development of the PE RVUs. At the time, our rationale included the assumption that because the PPIS is a contemporaneous, consistently collected, and comprehensive multispecialty survey, we do not believe similar precision requirements are necessary, and we did not propose to establish them for the use of the PPIS data (74 FR 61742). We noted potential gaps in the data, which could impact the allocation of indirect PE for certain physician and suppliers. The CY 2010 final rule adopted the proposal, with minor adjustments based on public comments, and explained that these minor adjustments were in part due to non-response bias that results when the characteristics of survey respondents differ in meaningful ways, such as in the mix of practices sizes, from the general population (74 FR 61749 through 61750).

Throughout the 4-year transition period, from CY 2010 to CY 2013, we gradually incorporated the AMA PPIS data into the PFS rates, replacing the previous data sources. The process involved addressing concerns and making adjustments as necessary, such as refining the PFS ratesetting methodology in consideration of interested party feedback. For background on the refinements that we considered after the transition began, we referred readers to discussions in the CY 2011 through 2014 final rules (75 FR 73178 through 73179; 76 FR 73033 through 73034; 77 FR 98892; 78 FR 74272 through 74276).

In the CY 2011 PFS proposed rule, we requested comments on the methodology for calculating indirect PE RVUs, explicitly seeking input on using survey data, allocation methods, and potential improvements (75 FR 40050). In our CY 2011 PFS final rule, we addressed comments regarding the methodology for indirect PE calculations, focusing on using survey data, allocation methods, and potential improvements (75 FR 73178 through 73179). We recognized some limitations of the current PFS ratesetting methodology but maintained that the approach was the most appropriate at the time. In the CY 2012 PFS final rule, we responded to comments related to indirect PE methodology, including concerns about allocating indirect PE to specific services and using the AMA PPIS data for certain specialties (76 FR 73033 through 73034). We indicated that CMS would continue to review and refine the methodology and work with interested parties to address their concerns. In the CY PFS 2014 final rule, we responded to comments about fully implementing the AMA PPIS data. By 2014, the AMA PPIS data had been fully integrated into the PFS, serving as the primary source for determining indirect PE inputs (78 FR 74235). We continued to review data and the PE methodology annually, considering interested party feedback and evaluating the need for updates or refinements to ensure the accuracy and relevance of PE RVUs (79 FR 67548). In the years following the full implementation of the AMA PPIS data, we further engaged with interested parties, thought leaders and subject matter experts to improve our PE inputs' accuracy and reliability. For further background, we referred readers to our discussions in final rules for CY 2016 through 2022 (80 FR 70892; 81 FR 80175; 82 FR 52980 through 52981; 83 FR 59455 through 59456; 84 FR 62572; 85 FR 84476 through 84478; 86 FR 62572).

In our CY 2023 PFS final rule, we issued an RFI to solicit public comment on strategies to update PE data collection and methodology (87 FR 69429 through 69432). We solicited comments on current and evolving trends in health care business arrangements, the use of technology, or similar topics that might affect or factor into PE calculations. We reminded readers that we have worked with interested parties and CMS contractors for 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.

As described in previous rulemaking, we have continued interest in developing a roadmap for updates to our PE methodology that account for changes in the health care landscape. Of various considerations necessary to form a roadmap for updates, we reiterate that allocations of indirect PE continue to present a wide range of challenges and opportunities. As discussed in multiple cycles of previous rulemaking, our PE methodology relies on AMA PPIS data, which may represent the best aggregated available source of information at this time. However, we acknowledge the limitations and challenges interested parties have raised about using the current data for indirect PE allocations, which we have also examined in related ongoing research. We noted in our CY 2023 and CY 2024 rules that there are several competing concerns that CMS must take into account when considering updated data sources, which also should support and enable ongoing refinements to our PE methodology.

b. Preparation for Incorporating Refreshed Data and Request for Information on Timing To Effectuate Routine Updates

In the CY 2024 PFS proposed rule, we continued to encourage interested parties to provide feedback and suggestions to CMS that give an evidentiary basis to shape optimal PE data collection and methodological adjustments over time. Considering our ratesetting methodology and prior experiences implementing new data, we issued a follow-up from the CY 2023 comment solicitation for general information. We solicited comments from interested parties on strategies to incorporate information that could address known challenges we experienced in implementing the initial AMA PPIS data. Our current methodology relies on the AMA PPIS data, legislatively mandated supplemental data sources (for, example, we use supplemental survey data collected in 2003, as required by section 1848(c)(2)(H)(i) of the Act to set rates for oncology and hematology specialties), and in some cases crosswalks to allocate indirect PE as necessary for certain specialties and provider types. We also sought to understand whether, upon completion of the updated PPIS data collection effort by the AMA, contingencies or alternatives may be necessary and available to address the lack of data availability or response rates for a given specialty, set of specialties, or specific service suppliers who are paid under the PFS.

In response to last year's RFI, most commenters stated that CMS should

defer significant changes until the AMA PPIS results become available. For further background, refer to 88 FR 78841 to 78843. In responding to our RFI, the AMA RUC provided a set of responses, which many other commenters repeated in their separate, individual comments. In summary, the AMA RUC letter submission from CY 2024 suggested that CMS should not consider further changes until PPIS data collection and analysis is complete. Overall, the AMA comments generally do not support any change to the methodology and stated that CMS should wait to consider any further changes until PPIS updates become available. Further, we noted that through its contractor, Mathematica, the AMA secured an endorsement for the PPIS updates from each State society, national medical specialty society, and others prior to fielding the survey (88 FR 78843). Refer to the AMA's summary of the PPIS, available at

https://www.ama-assn.org/system/files/physician-practice-information-survey-summary.pdf

. The AMA expects analysis, reporting, and documentation to complete by the end of CY 2024, and the AMA would share data with CMS when results become available.

As we stated in the proposed rule, we believe the AMA's approach may possibly mitigate nonresponse bias, which created challenges using previous PPIS data. However, we remain uncertain about whether endorsements prior to fielding the survey may inject other types of bias in the validity and reliability of the information collected. We believe it remains important to reflect on the challenges with our current methodology, and to continue to consider alternatives that improve the stability and accuracy of our overall PE methodology. We reiterate our discussion summarizing the responses to previous years' RFIs in each of the CY 2023 and CY 2024 final rules (refer to 87 FR 69429 through 69432 and 88 FR 78841 to 78843). We have started new work under contract with the RAND Corporation to analyze and develop alternative methods for measuring PE and related inputs for implementation of updates to payment under the PFS. We will continue to study possible alternatives, and would include analysis of updated PPIS data, as part of our ongoing work. In the meantime, we requested general information from the public on ways that CMS may continue work to improve the stability and predictability of any future updates. Specifically, we requested feedback from interested parties regarding scheduled, recurring updates to PE inputs for supply and equipment costs.

We stated that we believe that establishing a cycle of timing to update supply and equipment cost inputs every 4 years may be one means of advancing shared goals of stability and predictability. CMS would collect available data, including, but not limited to, submissions and independent third-party data sources, and propose a phase-in period over the following 4 years. The phase-in approach maps to our experience with previous updates. Additionally, we stated that more frequent updates may have the unintended consequence of disproportionate effects of various supplies and equipment that have newly updated costs.

Further, we solicited feedback on possible mechanisms to establish a balance whereby our methodology would account for inflation and deflation in supply and equipment costs. We remain uncertain how economies of scale (meaning a general principle that cost per unit of production decreases as the scale of production increases) should or should not factor into future adjustments to our methodology. There remains a diversity of perspectives among interested parties about such effects. We sought information about specific mechanisms that may be appropriate, and in particular, approaches that would leverage verifiable and independent, third-party data that is not managed or controlled by active market participants.

Comment:

Numerous commenters expressed concerns regarding CMS's current PE methodology, particularly highlighting its inadequacies in accommodating modern medical technologies and services, such as Software as a Medical Device (SaMD) and artificial intelligence (AI). These commenters stated that there is a need for CMS to revise its PE methodology to better reflect the actual costs of running medical practices today, which includes more frequent updates and the incorporation of direct costs for software and innovative technologies. Many also supported the AMA's ongoing Physician Practice Information Survey (PPIS) to ensure updated and accurate data informs PE calculations. Commenters urged CMS to collaborate closely with medical associations and incorporate broad stakeholder feedback without increasing reporting burdens, particularly for smaller practices.

Response:

We thank commenters for their feedback and may consider this information for future rulemaking.

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 outlined in section II.E. of this final rule, under Valuation of Specific Codes, each year we develop appropriate adjustments to the RVUs taking into account recommendations provided by the American Medical Association (AMA) Resource-Based Relative Value Scale (RBRVS) Update Committee (RUC), MedPAC, and other interested parties. For many years, the RUC has provided us with recommendations on the appropriate relative values for new, revised, and potentially misvalued PFS services. We review these recommendations on a code-by-code basis and consider these recommendations in conjunction with analyses of other data, such as claims data, to inform the decision-making process as authorized by statute. We may also consider analyses of work time, work RVUs, or direct practice expense (PE) inputs using other data sources, such as the Veterans Health Administration (VHA), National Surgical Quality Improvement Program (NSQIP), the Society for Thoracic Surgeons (STS), and the Merit-based Incentive Payment System (MIPS) data. In addition to considering the most recently available data, we assess the results of physician surveys and specialty recommendations submitted to us by the RUC for our review. We also consider information provided by other interested parties such as from the general medical-related community and the public. We conduct a review to assess the appropriate RVUs in the context of contemporary medical practice. We note that section 1848(c)(2)(A)(ii) of the Act authorizes the use of extrapolation and other techniques to determine the RVUs for physicians' services for which specific data are not available and requires us to take into account the results of

consultations with organizations representing physicians who provide the services. In accordance with section 1848(c) of the Act, we determine and make appropriate adjustments to the RVUs.

In its March 2006 Report to the Congress (

https://www.medpac.gov/document/report-to-the-congress-2006-medicare-payment-policy/

), MedPAC discussed the importance of appropriately valuing physicians' services, noting that misvalued services can distort the market for physicians' services, as well as for other health care services that physicians order, such as hospital services. In that same report, MedPAC postulated that physicians' services under the PFS can become misvalued over time. MedPAC stated, “When a new service is added to the physician fee schedule, it may be assigned a relatively high value because of the time, technical skill, and psychological stress that are often required to furnish that service. Over time, the work required for certain services would be expected to decline as physicians become more familiar with the service and more efficient in furnishing it.” We believe services can also become overvalued when PE costs decline. This can happen when the costs of equipment and supplies fall, or when equipment is used more frequently than is estimated in the PE methodology, reducing its cost per use. Likewise, services can become undervalued when physician work increases, or PE costs rise.

As MedPAC noted in its March 2009 Report to Congress (

https://www.medpac.gov/docs/default-source/reports/march-2009-report-to-congress-medicare-payment-policy.pdf

), in the intervening years since MedPAC made the initial recommendations, CMS and the RUC have taken several steps to improve the review process. Also, section 1848(c)(2)(K)(ii) of the Act augments our efforts by directing the Secretary to specifically examine, as determined appropriate, potentially misvalued services in the following categories:

• Codes that have experienced the fastest growth.

• Codes that have experienced substantial changes in PE.

• Codes that describe new technologies or services within an appropriate time-period (such as 3 years) after the relative values are initially established for such codes.

• Codes which are multiple codes that are frequently billed in conjunction with furnishing a single service.

• Codes with low relative values, particularly those that are often billed multiple times for a single treatment.

• Codes that have not been subject to review since implementation of the fee schedule.

• Codes that account for the majority of spending under the PFS.

• Codes for services that have experienced a substantial change in the hospital length of stay or procedure time.

• Codes for which there may be a change in the typical site of service since the code was last valued.

• Codes for which there is a significant difference in payment for the same service between different sites of service.

• Codes for which there may be anomalies in relative values within a family of codes.

• Codes for services where there may be efficiencies when a service is furnished at the same time as other services.

• Codes with high intraservice work per unit of time.

• Codes with high PE RVUs.

• Codes with high cost supplies.

• Codes as determined appropriate by the Secretary.

Section 1848(c)(2)(K)(iii) of the Act also specifies that the Secretary may use existing processes to receive recommendations on the review and appropriate adjustment of potentially misvalued services. In addition, the Secretary may conduct surveys, other data collection activities, studies, or other analyses, as the Secretary determines to be appropriate, to facilitate the review and appropriate adjustment of potentially misvalued services. This section also authorizes the use of analytic contractors to identify and analyze potentially misvalued codes, conduct surveys or collect data, and make recommendations on the review and appropri

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