Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 414, 424, 425, 427, 428, 495, and 512

[CMS-1832-P]

RIN 0938-AV50

Medicare and Medicaid Programs; CY 2026 Payment Policies Under the Physician Fee Schedule and Other Changes to Part B Payment and Coverage Policies; Medicare Shared Savings Program Requirements; and Medicare Prescription Drug Inflation Rebate Program

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This major proposed rule addresses: changes to the physician fee schedule (PFS); other changes to Medicare Part B payment policies to ensure that payment systems are updated to reflect changes in medical practice, relative value of services, and changes in the statute; codification of establishment of new policies for: the Medicare Prescription Drug Inflation Rebate Program under the Inflation Reduction Act of 2022; the Ambulatory Specialty Model; updates to the Medicare Diabetes Prevention Program expanded model; updates to drugs and biological products paid under Part B; Medicare Shared Savings Program requirements; updates to the Quality Payment Program; updates to policies for Rural Health Clinics and Federally Qualified Health Centers update to the Ambulance Fee Schedule regulations; codification of the Inflation Reduction Act and Consolidated Appropriations Act, 2023 provisions; updates to the Medicare Promoting Interoperability Program.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on September 12, 2025.

ADDRESSES:

In commenting, please refer to file code CMS-1832-P.

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

1.

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov.

Follow the “Submit a comment” instructions.

2.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1832-P, P.O. Box 8016, Baltimore, MD 21244-8016.

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

3.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1832-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT:

MedicarePhysicianFeeSchedule@cms.hhs.gov

, for any issues not identified below. Please indicate the specific issue in the subject line of the email. For all questions related to reporting a service on a claim, please contact your Medicare Administrative Contractor.

Michael Soracoe, Morgan Kitzmiller, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

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

Hannah Ahn, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to potentially misvalued services under the PFS.

Julie Rauch, or

MedicarePhysicianFeeSchedule@cms.hhs.gov, for issues related to Malpractice RVUs.

Morgan Kitzmiller, Terry Simananda, or

MedicarePhysicianFeeSchedule@cms.hhs.gov

for issues related to Geographic Practice Cost Indices.

Mikayla Murphy, 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.

Erick Carrera, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to office/outpatient evaluation and management visit inherent complexity add-on and Digital Mental Health Treatment services.

Maya Peterson, Terry Simananda, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to payment for advanced primary care management services.

Sarah Leipnik, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to global surgery payment accuracy.

Pamela West, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to outpatient therapy services and KX modifier thresholds.

Michelle Cruse, Erick Carrera, Zehra Hussain, or Hannah Ahn

MedicarePhysicianFeeSchedule@cms.hhs.gov,

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

Zehra Hussain, or

MedicarePhysicianFeeSchedule@cms.hhs.gov,

for issues related to payment of skin substitutes.

Laura Kennedy, (410) 786-3377, 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.

Allison Cipro, (667) 414-0758, for issues related to Medicare Diabetes Prevention Program.

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 other 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 and shared losses mitigation.

Kari Vandegrift, (410) 786-4008, or

SharedSavingsProgram@cms.hhs.gov

, for issues related to Shared Savings Program participation options, and ACO participant and SNF affiliate change of ownership requirements.

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

Benjamin Picillo or Genevieve Kehoe,

AmbulatorySpecialtyModel@cms.hhs.gov,

or 1-844-711-2664 (Option 4) for issues related to the Ambulatory Specialty Model.

Amy Gruber, (410) 786-1542, for issues related to Ambulance Extender provisions.

Kati Moore, (410) 786-5471, for inquiries related to the Merit-based Incentive Payment System (MIPS) track of the Quality Payment Program (QPP).

Trevey Davis, (667) 290-8527, for inquiries related to the Advanced Alternative Payment Models (APMs) track of QPP.

Jessica Warren, (410) 786-7519, and Lisa Marie Gomez, (410) 786-1175, for inquiries related to the Medicare Promoting Interoperability Program.

Lisa Parker, (410) 786-4949, or

FQHC-PPS@cms.hhs.gov

, for issues related to FQHC payments.

Michele Franklin, (410) 786-9226, or

RHC@cms.hhs.gov

, for issues related to RHC payments.

SUPPLEMENTARY INFORMATION:

Addenda Available Only Through the Internet on the CMS Website:

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

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 2026 PFS proposed rule, refer to item CMS-1832-P. Readers with questions related to accessing any of the Addenda or other supporting documents referenced in this proposed rule and posted on the CMS website identified above should contact

MedicarePhysicianFeeSchedule@cms.hhs.gov.

Plain Language Summary:

In accordance with 5 U.S.C. 553(b)(4), a plain language summary of this rule may be found at

https://www.regulations.gov/.

CPT (Current Procedural Terminology) Copyright Notice:

Throughout this proposed rule, we use CPT codes and descriptions to refer to a variety of services. We note that CPT codes and descriptions are 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.

Deregulation Request for Information (RFI):

On January 31, 2025, President Trump issued Executive Order (EO) 14192 “Unleashing Prosperity Through Deregulation,” which states the Administration policy to significantly reduce the private expenditures required to comply with Federal regulations to secure America's economic prosperity and national security and the highest possible quality of life for each citizen. We would like public input on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, and other stakeholders participating in the Medicare program. CMS has made available a Request for Information (RFI) at:

https://www.federalregister.gov/documents/2025/04/11/2025-06316/request-for-information-deregulation.

Please submit all comments in response to this request for information through the provided weblink.

I. Executive Summary

A. Purpose

This major annual rule proposes to revise payment policies under the Medicare PFS and makes other policy changes, including proposals to implement certain provisions of the Full-Year Continuing Appropriations and Extensions Act, 2025 (Pub. L. 119-4, March 15, 2025), 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 proposed rule includes proposals regarding other Medicare payment policies described in sections III. and IV.

This rulemaking proposes to update policies for the Medicare Prescription Drug Inflation Rebate Program codified or finalized at parts 427 and 428 consistent with sections 1847A(i) and 1860D-14B of the Social Security Act (the Act). With respect to the Medicare Part B Drug Inflation Rebate Program, this rulemaking proposes to describe the identification of payment amount benchmark quarter in certain instances and the calculation for the Part B rebate amount in such instances. With respect to the Medicare Part D Drug Inflation Rebate Program, this rulemaking proposes to clarify the calculation of a Part D rebate amount, and proposes a methodology for removal of units for a Part D rebatable drug for which a manufacturer provides a discount under the 340B Program, as well as the establishment of a 340B data repository for Part D claims.

This rulemaking proposes to modify policies for the Shared Savings Program, which is a voluntary program that started in 2012. The program allows healthcare providers to form or participate in Accountable Care Organizations (ACOs), to be held accountable for the quality and total cost of care for an assigned population of Medicare fee-for-service (FFS) beneficiaries.

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 major proposed rule, we are proposing to establish RVUs for CY 2026 for the PFS to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute. This proposed rule also includes discussions and provisions regarding several other Medicare Part B payment policies, and other policies regarding programs administered by CMS.

Specifically, this proposed 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.)

• Outpatient Therapy Services 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 Specific Covered Services (section II.J.)

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

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

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

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

• 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.)

• Ambulatory Specialty Model (ASM) (section III.C.)

• Medicare Diabetes Prevention Program (MDPP) (section III.D.)

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

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

• Changes to the Regulations Associated with the Ambulance Fee Schedule (section III.G.)

• Updates to the Quality Payment Program and Medicare Promoting Interoperability Program (section IV.)

• Collection of Information Requirements (section V.)

• Responses to Comments (section VI.)

• Regulatory Impact Analysis (section VII.)

C. Summary of Costs and Benefits

Based on our estimates, the Office of Information and Regulatory Affairs in the Office of Management and Budget has determined that this proposed rule is economically significant under section 3(f)(1) of Executive Order 12866. As required by section 1848(d)(1)(A) of the Act, beginning in 2026, there will be two separate conversion factors (CFs): one for items and services furnished by a qualifying APM participant as defined in section 1833(z)(2) of the Act (referred to as the qualifying APM conversion factor) and another for other items and services (referred to as the nonqualifying APM conversion factor), equal to the respective conversion factor for the previous year (or, for CY 2026, equal to the single conversion factor for CY 2025) multiplied by the update established under section 1848(d)(20) of the Act for such respective conversion factor for such year. Under these proposals, the 2026 qualifying APM conversion factor represents a projected increase of $0.39 (1.2 percent) from the current conversion factor of $32.3465. Similarly, the 2026 nonqualifying APM conversion factor represents a projected increase of $0.23 (0.7 percent) from the current conversion factor of $32.3465.

For a detailed discussion of the economic impacts, see section VII., Regulatory Impact Analysis, of this proposed rule.

II. Provisions of the Proposed 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 proposed rule, unless otherwise noted, the term “practitioner” is used to describe both physicians and nonphysician practitioners (NPPs) who are permitted to bill Medicare under the PFS for the services they furnish to Medicare beneficiaries.

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 expenses, and all other expenses. The sections that follow provide more detailed information about the methodology for translating the resources involved in furnishing each service into service specific PE RVUs. We refer readers to the CY 2010 Physician Fee Schedule (PFS) final rule with comment period (74 FR 61743 through 61748) for a more detailed explanation of the PE methodology.

2. Practice Expense Methodology

a. Direct Practice Expense

We determine the direct PE for a specific service by adding the costs of the direct resources (that is, the clinical staff, medical supplies, and medical equipment) typically involved with furnishing that service. The costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are generally based on our review of recommendations received from the American Medical Association (AMA) )/Specialty Society Relative Value Scale (RVS) Update Committee (referred to as the 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 have stated that 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 is 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 2026 PFS proposed rule PE/HR” on the CMS website under downloads for the CY 2026 PFS proposed rule at

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

For CY 2026, we have incorporated the available utilization data for one new specialty, Epileptologists, which we recognized effective July 1, 2024 through our established process. We are proposing to use proxy PE/HR values from Neurology for this new specialty, as there are no PPIS data for this specialty.

These updates are reflected in the “CY 2026 PFS proposed rule PE/HR” file available on the CMS website under the supporting data files for the CY 2026 PFS proposed rule at

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

c. Allocation of PE to Services

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

(1) Direct Costs

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

(2) Indirect Costs

We allocate the indirect costs at the code level based on the direct costs specifically associated with a code and the greater of either the clinical labor costs or the work RVUs. We also incorporate the survey data described earlier in the PE/HR discussion. The general approach to developing the indirect portion of the PE RVUs is as follows:

• For a given service, we use the direct portion of the PE RVUs calculated as previously described and the average percentage that direct costs represent of total costs (based on survey data) across the specialties that furnish the service to determine an initial indirect allocator. That is, the initial indirect allocator is calculated so that the direct costs equal the average percentage of direct costs of those specialties furnishing the service. For example, if the direct portion of the PE RVUs for a given service is 2.00 and direct costs, on average, represent 25 percent of total costs for the specialties that furnish the service, the initial indirect allocator would be calculated so that it equals 75 percent of the total PE RVUs. Thus, in this example, the initial indirect allocator would equal 6.00, resulting in a total PE RVU of 8.00 (2.00 is 25 percent of 8.00 and 6.00 is 75 percent of 8.00).

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

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

(3) Facility and Nonfacility Costs

For procedures that can be furnished in a physician's office, as well as in a facility setting, where Medicare makes a separate payment to the facility for its costs in furnishing a service, we establish two PE RVUs: facility and nonfacility. The methodology for calculating PE RVUs is generally 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. We note, too, that in this proposed rule we are proposing a modification in the allocation of indirect PE, described in detail below.

(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 2026 PFS proposed 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.

The full list of expected specialty assignments is included in the CY 2026 public use files, which are available on the CMS website under downloads for the CY 2026 PFS proposed 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).

We note that for CY 2026, we are proposing a change to the methodology so that when work RVUs are used to

allocate indirect PE to the facility RVUs, they are assigned at one-half the amount allocated to the nonfacility PE RVUs for that same service. This proposed change is detailed later in this section.

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 as the denominator and Step 13 as the numerator, calculate the specialty specific indirect PE scaling factors.

Step 15:

Using the results of Step 14, calculate an indirect practice cost index at the specialty level by dividing each specialty specific indirect scaling factor by the average indirect scaling factor for the entire PFS.

Step 16:

Calculate the indirect practice cost index at the service level to ensure the capture of all indirect costs. Calculate a weighted average of the practice cost index values for the specialties that furnish the service. (Note: For services with TCs and PCs, we calculate the indirect practice cost index across the global service, PCs, and TCs. Under this method, the indirect practice cost index for a given service (for example, echocardiogram) does not vary by the PC, TC, and global service.)

Step 17:

Apply the service level indirect practice cost index calculated in Step 16 to the service level adjusted indirect allocators calculated in Step 11 to get the indirect PE RVUs.

(d) Calculate the Final PE RVUs

Step 18:

Add the direct PE RVUs from Step 5 to the indirect PE RVUs from Step 17 and apply the final PE budget neutrality (BN) adjustment. The final PE BN adjustment is calculated by comparing the sum of steps 5 and 17 to the aggregate work RVUs scaled by the ratio of current aggregate PE and work RVUs. This adjustment ensures that all PE RVUs in the PFS account for the fact that certain specialties are excluded from the calculation of PE RVUs but included in maintaining overall PFS BN. (See “Specialties excluded from ratesetting calculation” later in this proposed rule.)

Step 19:

Apply the phase-in of significant RVU reductions and its associated adjustment. Section 1848(c)(7) of the Act specifies that for services that are not new or revised codes, if the total RVUs for a service for a year would otherwise be decreased by an estimated 20 percent or more as compared to the total RVUs for the previous year, the applicable adjustments in work, PE, and MP RVUs shall be phased in over a 2-year period. In implementing the phase-in, we consider a 19 percent reduction as the maximum 1-year reduction for any service not described by a new or revised code. This approach limits the year one reduction for the service to the maximum allowed amount (that is, 19 percent), and then phases in the remainder of the reduction. To comply with section 1848(c)(7) of the Act, we adjust the PE RVUs to ensure that the total RVUs for all services that are not new or revised codes decrease by no more than 19 percent, and then apply a relativity adjustment to ensure that the total pool of aggregate PE RVUs remains relative to the pool of work and MP RVUs. For a more detailed description of the methodology for the phase-in of significant RVU changes, we refer readers to the CY 2016 PFS final rule with comment period (80 FR 70927 through 70931).

(e) Setup File Information

• Specialties excluded from ratesetting calculation: 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 1.

BILLING CODE 4120-01-P

EP16JY25.005

BILLING CODE 4120-01-C

•

Crosswalk certain low volume physician specialties:

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

•

Physical therapy utilization:

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

•

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

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

•

Payment modifiers:

Payment modifiers are accounted for in 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 2 provides details in which the modifiers are applied.

EP16JY25.006

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

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

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

•

Work RVUs:

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

(6) Equipment Cost per Minute

The equipment cost per minute is calculated as:

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

Where:

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

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

price = price of the particular piece of equipment.

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

maintenance = factor for maintenance; 0.05.

interest rate = variable, see discussion below in this 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 3.

EP16JY25.007

We are not proposing any changes to the equipment interest rates for CY 2026.

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 had 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 comments 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 comments 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 CY 2025 PFS rulemaking (89 FR 97722), we stated that in light of the AMA's current data collection efforts and because the methodological and data source changes to the 2017-based 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 continued to believe that delaying the implementation of the finalized 2017-based MEI cost share weights for the RVUs was 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 and CY 2025. 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 recommended to us to pause consideration of other sources for the MEI until the AMA's efforts to collect practice cost data from physician practices 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 were 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 were not proposing to update the data underlying the MEI cost weights at that time.

At the time of publication of this proposed rule, the AMA has concluded their data collection efforts and, in early 2025, submitted data from its Physician Practice Information (PPI) and Clinician Practice Information (CPI) Surveys to CMS for us to consider implementing the PE/HR data and cost shares in PFS ratesetting for CY 2026. We appreciate the AMA's data collection efforts, and recognize the significant efforts required to develop the survey and collect the data. We have prioritized review of the submitted information during the first part of this year based on our longstanding interest in the value of updated practice expense information. At this time, however, we have substantive concerns about the accuracy and suitability of the PPI and CPI Survey data as an immediate replacement for the current PE/HR data and cost shares for use in CY 2026 PFS ratesetting. Due to overarching concerns with the data as described below and our previously described policy goal to balance PFS payment stability and predictability with incorporating new data through routine updates to the MEI, we are not proposing to implement the PE/HR or cost shares from the AMA's survey data at this time. Instead, we propose to maintain the current PE/HR and 2006-based MEI cost shares for CY 2026 PFS ratesetting.

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 2026 direct PE input public use files, which are available on the CMS website under downloads for the CY 2026 PFS proposed rule at

https://www.cms.gov/Medicare/Medicare-Fee-fafor-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 direct 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 direct 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 2026, 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 2026 PFS proposed 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 1,300 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 refer readers to the CY 2019 PFS final rule with comment period (83 FR 59473 through 59480).

For CY 2026, we are proposing to update the price of 35 supplies and seven equipment items in response to the public submission of invoices following the publication of the CY 2025 PFS final rule. The 42 supply and equipment items with proposed updated prices are listed in the valuation of specific codes section of the preamble under Table 6, CY 2026 Invoices Received for Existing Direct PE Inputs.

We received a series of invoices associated with the SD339 supply prior to our February 10th submission deadline and are proposing to update its pricing accordingly for CY 2026, as detailed in Table 6, CY 2026 Invoices Received for Existing Direct PE Inputs. We later received additional invoices associated with this supply several months following our February 10th deadline which arrived too late to be included in the proposed updated pricing for this supply as shown in Table 6. Consistent with our previously finalized policy associated with the February 10th deadline (79 FR 67608), we will review these invoices during the comment period following the publication of this CY 2026 PFS proposed rule for potential inclusion in the final rule.

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

•

Radiation treatment vault (ER056):

We received pricing information associated with the radiation treatment vault from an interested party. However, this pricing information contained numerous costs associated with building construction which would not be included on a traditional invoice, such as surveying, plumbing and HVAC expenses, drywall packaging, and the installation of electrical equipment. As we previously stated in the CY 2021 PFS final rule about similar costs associated with proton beam treatment delivery services, the expenses associated with constructing new office facilities fall outside of our direct PE methodology and would be more accurately classified as a form of building maintenance or office rent under indirect PE (85 FR 84626). We do not agree that construction costs should be included as a form of direct PE because they are not individually allocable to a particular patient for a particular service. Therefore, we do not believe that it would serve the interests of relativity to include these building construction costs for the radiation treatment vault as a type of direct PE expense. In the absence of other pricing information associated with the radiation treatment vault, or pricing of the vault absent these building construction costs, we are proposing to maintain its current price of $773,104.

•

Congo red kits (SA110) and UltraView Universal DAB Detection Kit (SL488):

We received three invoices from interested parties requesting an increase in the price of the SA110 supply from $6.80 to $20.12 and another three invoices from interested parties requesting an increase in the price of the SL488 equipment from $12.28 to $41.26. In both cases, we do not understand how the typical price of these supplies could be increasing by such a large amount, tripling the current price in both cases, given that the price of both supplies was recently updated. Both the SA110 supply and the SL488 supply had their prices updated in the CY 2024 PFS final rule, with the SA110 supply increasing from $6.16 to $6.80 and the SL488 supply increasing from $9.70 to $12.28 (88 FR 78966 through 78967). We do not believe that the typical price for these supplies would increase to such a great degree given that their pricing was already recently updated for CY 2024; therefore, we are not proposing to update.

•

Catheter, balloon, rectal pressure (SD017); catheter, pressure, urodynamic (SD027); and transducer dome (pressure) (SD125):

We received one invoice from interested parties for each of these three supplies. Interested parties requested an increase in the price of the SD017 supply from $35.89 to $74.00, an increase in the price of the SD027 supply from $19.35 to $86.80, and an increase in the price of the SD125 supply from $3.58 to 17.32. However, in each of these three cases, it was unclear if the item on the invoice matched the supply item in question. The invoice for the SD017 supply listed a “Abdominal Sensor Catheter”, the invoice for the SD027 supply listed a “Single Sensor Catheter”, and the invoice for the SD125 supply listed a “transducer cartridge with luer lock”. Given the differences between the names of the items in question, and the significant increases in requested pricing, we are not proposing to update the pricing of these three supplies as we cannot verify that the invoices refer to the same supply items.

•

Electrode, surface (SD062):

We received one invoice from interested parties requesting a decrease in the price of the SD062 supply from $1.58 to $0.34. The invoice appeared to state that there are 10 copies of 10 packs of 3 electrodes which, when dividing the total price of $103 by 300 electrodes, results in a price of $0.34 per electrode. We do not believe that the interested parties intended to submit an invoice resulting in a 78 percent decrease in pricing for the SD062 supply, and we are not convinced that we have correctly understood the unit quantity for this item. As a result, we are not proposing to change the pricing of the SD062 supply at this time.

•

Biohazard specimen transport bag (SM008):

We received one invoice from interested parties requesting an increase in the price of the SM008 supply from $0.087 to $0.750, an increase of more than 750 percent. However, when we reviewed the invoice, we determined that it referred to a different type of disposal bag than the biohazard specimen transport bag described by the SM008 supply, which explained the disparity in the pricing. We are therefore not proposing to update the pricing of the SM008 supply.

•

Wipes, lens cleaning (per wipe) (Kimwipe) (SM027):

We received one invoice from interested parties requesting an increase in the price of the SM027 supply from $0.04 to $0.33, an increase of approximately 700 percent. However, when we reviewed the supply in question, we found that lens cleaning wipes were readily available for purchase at the current price of $0.04 per wipe. We are therefore not proposing to update the pricing of the SM027 supply.

(1) Invoice Submission

We remind 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.

(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 in the CY 2024 final rule 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 (89 FR 97726 through 97727). 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 were listed in the valuation of specific codes section of the preamble under Table 6, CY 2025 Invoices Received for Existing Direct PE Inputs (89 FR 97852).

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 percent (for example, 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 were listed in the valuation of specific codes section of the preamble under Table 8, CY 2025 New Invoices (89 FR 97853).

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 16in x 29in (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 18in x 26in (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 18in x 26in (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.

In the comments on the CY 2025 PFS proposed rule (89 FR 97727 through 97729), 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.

After considering these comments, we agreed 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 finalized the use of a pricing transition for three supply packs in Table 4:

EP16JY25.008

Following the same pattern as our previous supply/equipment and clinical labor pricing updates, 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 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. 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 and described above. We therefore finalized 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.

Several commenters also 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 as detailed in Table 5:

EP16JY25.009

While we shared the concerns of the commenters regarding the need for accuracy in the pricing of these supply packs, we had 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 were 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 did not finalize pricing updates for these additional 15 supply packs as requested by commenters. We anticipated 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 anticipated that we might propose the same pricing transition described above due to the number of potentially affected HCPCS codes. We finalized 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.

For CY 2026, we are proposing to continue implementing the supply pack pricing update and associated revisions as previously recommended by the RUC's workgroup. We are proposing to update the price of the 15 supply packs detailed in Table 5 which were received too late in CY 2025 to allow for proposed pricing or public comment. In the case of the surgical instruments cleaning pack (SA043), the moderate sedation pack (SA044) and the small ortho drapes pack (SA081), the proposed pricing update is modest enough that we are proposing these supplies move immediately to their final prices for CY 2026.

For the 12 other supply packs, we are proposing that they be incorporated into the muti-year supply pack pricing transition finalized in CY 2025 rulemaking. Rather than having two separate 4-year pricing transitions associated with supply packs, we are proposing that these 12 additional supply packs fold into the previous pricing transition using the same methodology, such that 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 (89 FR 97728). With the inclusion of the SA042, SA058, and SA082 supply packs which began their pricing transition last year for CY 2025, we are proposing the total supply pack pricing update detailed in Table 6:

EP16JY25.010

This table also includes the hydrophilic guidewire (SD089) supply which we are proposing to transition in pricing over three years given its inclusion in approximately 100 HCPCS codes. We continue to believe that the use of this pricing transition will minimize any potential disruptive effects during the 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 items.

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

Following the publication of the CY 2025 PFS final rule, we received a request from the RUC to remove all equipment items priced below $500 from the CMS ratesetting database. The RUC stated that since CMS has defined that medical equipment must be at least $500 and all equipment inputs under $500 are considered indirect expense, the 11 current equipment items under this threshold should no longer be listed as equipment. The RUC requested that CMS remove these items from its equipment list and from the specific HCPCS codes to conform to the definition of direct medical equipment and to ensure that the rule remains consistently applied.

We appreciate the RUC bringing this topic to our attention. However, we are not proposing to remove these 11 equipment items that fall under the $500 threshold from the CMS ratesetting database. These equipment items have historically been included as direct PE inputs in their respective HCPCS codes for the last two decades and, given the very small valuation associated with their use (such as the ED004 digital

camera priced at approximately 0.06 cents per minute of use), we do not believe that it is necessary to remove them from the database. We believe that it better serves relativity by continuing to maintain these equipment items due to their historical inclusion in their associated HCPCS codes, as opposed to the removal of long-standing direct PE inputs which may cause unnecessary confusion and lead to concern that the valuation of these services would be negatively impacted. We are soliciting comments on whether to maintain or remove these equipment items.

We also received a request from the RUC to update the names of several supplies and equipment items in the CMS ratesetting database. The RUC stated that these naming changes would remove specific product or brand names and more accurately describe the items in question. We agree with the RUC and we are proposing naming changes for the following supplies and equipment items:

• EQ392: We are proposing to rename the “heart failure patient physiologic monitoring equipment package” to “patient physiologic monitoring equipment package”.

• ER089: We are proposing to rename the “IMRT Accelerator” to “Radiation Treatment Delivery Linear Accelerator”.

• SD253: We are proposing to rename the “atherectomy device (Spectronetics laser or Fox Hollow)” supply to “atherectomy device”.

• SD254: We are proposing to rename the “covered stent (VIABAHN, Gore)” to “covered stent (VIABAHN)”.

We received a separate request from the RUC for a technical correction involving CPT code 65780 (

Ocular surface reconstruction; amniotic membrane transplantation, multiple layers

). The RUC stated that there was a potential issue with the intraservice work time for CPT code 65780, which was recommended by the RUC with 35 minutes of work time and finalized by CMS with no work time refinements. However, CPT code 65780 was listed with 25 minutes of intraservice work time in the work time public use file issued with the CY 2025 PFS final rule; the RUC questioned whether this was a potential technical error. We have reviewed CPT code 65780 and concluded that the intraservice work time was unintentionally listed with the incorrect work time of 25 minutes; we are proposing to correct this to the intended work time of 35 minutes. We note that the total work time of 192 minutes was listed correctly for CPT code 65780 and does not require a technical correction.

We also received a request from the RUC for a technical correction involving CPT code 15851 (

Removal of sutures or staples requiring anesthesia (that is, general anesthesia, moderate sedation

)). The RUC stated that CPT code 15851 continued to receive PE RVUs in the nonfacility setting despite no longer having any direct PE inputs following its review at the January 2022 RUC meeting. Since CMS finalized the RUC's recommended lack of direct PE inputs for CPT code 15851 in the CY 2023 PFS final rule, the RUC questioned whether this was a potential technical error. We have reviewed CPT code 15851 and concluded that the continued assignment of PE RVUs in the nonfacility setting is an unintended technical error; we are proposing to correct this code by removing the nonfacility PE RVUs for CY 2026.

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 refer 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 refer 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 may affect or factor into PE calculations. 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 currently relies on AMA PPIS data, which we have maintained represented the best aggregated available source of information at the time of its implementation. 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. 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 practitioner 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 the CY 2024 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 through 78843. In responding to our RFI, the AMA RUC provided a set of responses, which many other commenters echoed in separate 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 stated that it expects analysis, reporting, and documentation to be completed by the end of CY 2024 and would share data with CMS when results become available.

Some commenters did not recommend that CMS defer significant changes until the AMA PPIS results become available. These commenters stated that reliance on the PPIS updates may not improve the accuracy and stability of the PE methodology because of the survey design, possible implementation challenges, and a possible lack of transparency or granularity in resulting datasets. Other commenters stated that dependence on the PPIS or survey data in general, due to timing and frequency constraints, may continue to jeopardize independent practice and discourage fair competition among suppliers and providers of services paid under the PFS. These commenters assert that if current trends continue, it will result in far fewer independent practices and more consolidation before the availability of updated survey data, undermining the sampling methodology of any survey and the general goals of our PE methodology updates.

As we stated in the CY 2025 proposed rule (89 FR 61614), 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 also 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 in the CY 2025 proposed rule RFI (89 FR 61614) on possible mechanisms to establish a balance whereby our methodology would account for inflation and deflation in supply and equipment costs. We stated that 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. We stated that 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.

In response to our CY 2025 proposed rule RFI (89 FR 97737), numerous commenters expressed concerns regarding CMS's current PE methodology, particularly highlighting its perceived inadequacies in accommodating modern medical technologies and services, such as Software as a Service (SaaS) 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 PPIS efforts 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.

We note that we have an ongoing 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 have included analysis of the updated PPI and CPI Survey data in this proposed rule, as part of our ongoing work.

As previously stated above and discussed in sections II.N. and VI. of this proposed rule, we acknowledge that, at the time of publication of this proposed rule, the AMA concluded their data collection efforts and has submitted the data to CMS for us to consider implementing the PE/HR data and cost shares in PFS ratesetting for CY 2026. In the current system, accurate measurement of the indirect to direct PE ratio and the PE/HR for each specialty is critical to ensure that allocated indirect PE RVUs (and therefore total PE RVUs) accurately estimate service-level PE as defined by PFS ratesetting steps described above. Because the PE methodology is budget neutral, inaccuracies in the PE/HR data for some specialties can significantly impact the overall pool of PE available to distribute across all services, and therefore overall valuation and payment.

We appreciate the AMA's PPI and CPI Survey data collection efforts, and recognize the significant costs incurred to collect the data. However, our initial review of the new data raises substantive concerns about their accuracy, utility, and suitability as an immediate replacement for the current PE/HR data and cost shares for use in allocating nearly $91 billion in payments across PFS services. These concerns relate to issues including:

•

Low Response Rates and Representativeness:

A primary concern is the low response rate of the surveys. The 2024 PPI Survey had a response rate of 3 to 7 percent, depending on whether practices that did not click through the invitation email link were counted as non-respondents. The CPI Survey had a slightly higher response rate between 7 to 9 percent. In comparison, the 2008 PPIS had a response rate of 12 percent. Low response rates raise concerns as to whether responding practices are systematically different from sampled practices that did not or could not respond. Additionally, in response to lower-than-expected response rates, the AMA allowed 102 practices to volunteer to participate in the survey. Although most of these volunteer practices did not complete the survey, allowing practices to volunteer data adds to concerns about the representativeness of the data.

Additionally, the 2008 PE/HR estimates were based on the observations (about half of responses) that had no missing expense data, whereas the 2024 PE/HR estimates and the shares are based on observations that had at least some non-missing data where the missing data was imputed as described in the Survey Methods Report (Step 6).

1

It should be noted that some expense categories were reported more consistently by survey respondents. For example, 97 percent of the respondents reported compensation (physician work) compared to only 69 percent that were able to report non-billable drugs (direct expense under supplies) and information technology (indirect expense). Similarly, many survey respondents were not able to separately report expenses for qualified health providers (QHPs). Nearly 40 percent of the responses used in the calculation of the PE/HR estimates reported that they had nurse practitioners or physician assistants in their practice, but only 27 percent were able to separately report non-physician compensation expenses.

1

https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf.

•

Small Sample Sizes and Sampling Variation:

Due in part to the low response rates, the number of respondents was small for many specialties included in the 2024 PPI and CPI data. For example, the PE/HR measures for Vascular Surgery are based upon responses from only 20 practices. Moreover, the PPI and CPI survey estimates give more weight to responses from practice types that would otherwise be under-represented in the sample, relative to the population of all eligible practices in a given specialty. For example, such an adjustment would be applied if the sample contained a higher proportion of facility-based practices than there are in the full population of practices in a given specialty. Applying such weights generally results in estimates that are less precise than an unweighted sample of a given size. One way to quantify this is via the effective sample size, which estimates the sample size from an unweighted sample that would be required to produce survey estimates that are as precise as those from the weighted sample. The effective sample size can be estimated as the ratio of the sample size to the design effect, which is reported in the PPI/CPI Methods Reports.

2 3

For Vascular Surgery, the

reported design effect is 1.82, meaning that the 20 observations correspond to an effective sample size of only 11 (calculated as 11.0=20/1.82). For 12 of 18 broad specialty groupings reported in the 2024 PPI Survey, the effective sample size is less than 18.0 and for four of these specialties the effective sample size is less than 10.0. Similarly, in the CPI Survey data, the effective sample sizes are also small, with all but one below 20.0, and as low as 6.2 for Oral Surgery. Not including practices that volunteered, only 327 sampled practices completed the 2024 PPI Survey compared to 3,088 anticipated completions.

2

https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf.

3

https://www.ama-assn.org/system/files/cpi-survey-methods-report-main-report.pdf.

The low sample sizes contribute to substantial statistical uncertainty regarding the true specialty-level PE/HR measures. Figure A-B1 illustrates the 95 percent confidence intervals for direct and indirect PE/HR as reported in the 2024 PPI/CPI Surveys. The large points represent the new PE/HR estimates, the bars indicate the confidence intervals, and the smaller points show the current PE/HR estimates used in PFS ratesetting from the 2008 PPIS. The 2024 CPI and PPI Survey confidence intervals are so broad that they cover most of the original 2008 PPI PE/HR values in nominal dollars (that is, not adjusted for inflation). Therefore, in most cases, the new data are unable to establish statistically significant changes from the status quo, especially since the old PE/HR measures were themselves estimated with substantial levels of statistical uncertainty. Even so, the new PE/HR estimates differ enough from the old ones that many specialty-level impacts of adopting the new data are quite large. When translated into RVUs, the PE/HR standard errors for specialties such as Cardiology, Pathology, Ophthalmology, and Vascular Surgery correspond to a wide range of payments for services provided by those specialties meaning that the new data are compatible with a wide range of specialty impacts for many specialties.

•

Lack of Comparability to Previous Survey Data:

The 2024 PPI and CPI Survey data groups specialties in a considerably different way from the current structure, with 29 specialty groupings compared to 51 in the 2008 data. We found that using the 2008 PE/HR data averaged within the 2024 PPI Survey specialty groupings would lead to large specialty-level impacts in some cases, further complicating comparisons between the old and new data and indicating that the new 2024 specialty groupings is impactful on redistribution among the PFS alone. We refer readers to section VI. of this proposed rule for discussion of the impacts of the 2024 PPI Survey specialty groupings on PFS ratesetting. It is also unclear why some specialties were collapsed into relatively broad groups for the purposes of data collection and reporting while others were not.

•

Potential Measurement Error:

We are concerned that sampled practices were not able to accurately report the data necessary to respond to the PPI and CPI Surveys. For example, the survey contractor found that practices frequently had challenges reporting the number of physicians working in the practice. One may expect that the number of physicians in a practice is relatively easier for practices to measure than some of the specific costs integral to reporting PE/HR. However, the contractor noted that—prior to an adjustment—their estimate of the total number of physicians was nearly three times as large as the number of physicians in their sampling frame which “indicated a large potential for measurement error in this estimate.”

4

Also, because information on the number of physicians in each practice was available from external data which were obtained before survey data were collected, to inform the survey design, we believe it is likely that the number of physicians was highlighted as having high potential measurement error because it was possible to compare this measure against external data. Moreover, some responding practices reported that it took more than 40 hours to complete the survey, which suggests that the required data are not readily captured by their accounting systems and therefore may not be fully reliable.

4

https://www.ama-assn.org/system/files/ppi-survey-methods-report.pdf.

Thus, we are left with doubts about not just the amount of data collected, but its quality as well.

•

Missing and Incomplete Data Submission:

The PPI Survey summary data was submitted to CMS in January 2025 and the CPI Survey summary data in February 2025. These initial submissions were missing from many of the elements required to analyze the data and determine their usability in our PE methodology. We inquired about these elements and have since received some additional information, but some of the information was not available due to the survey contract concluding, such as estimates based solely on the survey responses that had no missing expense data or the impact of the trims and edits of the data described in the PPI Survey Methods Report. Additionally, some data is completely missing from the submission, therefore we had to utilize old PE/HR data in analyses for specialties such as Independent Diagnostic Testing Facilities (IDTFs) when developing models to incorporate the data. Additionally, the American Occupational Therapists Association (AOTA) requested the continued crosswalk of PE/HR data from Physical Therapy to Occupational Therapy because the CPI respondents may have indirectly reported the salaries of occupational therapy assistants with provider compensation rather than including their salaries in clinical staff compensation.

Additionally, there is summary data provided from the PPI Survey

5

that are not provided for the CPI Survey.

6

For example, the PPI Survey summary data include two lines—“MEI shares” and “All [specialties]”—that could presumably be used to establish the share of total RVUs that should be attributed to work, practice expense, and malpractice, but we do not believe that they reflect the specialties' data from the CPI Survey, even though those specialties are included in PFS ratesetting, account for a significant portion of the PFS PE RVU pool, and draw from the same pool of RVUs as the PPI Survey specialties. Similarly, we do not have the corresponding CPI Survey specialty weighting information provided to CMS for the PPI Survey specialties, therefore, we have limited information to develop an approach for calculating shares for all CMS specialties accounted for in both the PPI and CPI Surveys.

5

https://www.ama-assn.org/system/files/table-1-results-from-ppi.pdf.

6

https://www.ama-assn.org/system/files/table-1-results-from-cpi-final.pdf.

In an effort to incorporate PPI and CPI Survey specialties' data despite the lack of analogous summary data, we developed possible methods to weight the data for all CMS specialties in a cohesive manner for use in the PFS PE methodology such as estimates of total RVUs and total service time by specialty used for CY 2026 PFS ratesetting. We refer readers to section VI. of this proposed rule for discussion of the different weighting methodologies and their resulting shares of work, PE, and MP.

Overall, the small sample sizes and the apparent presence of high levels of measurement error in data elements that could be compared to external estimates suggest that specialty-level PE/HR measures may be challenging to measure reliably through voluntary surveys alone. We note that the

interested parties may concur with this assertion based on the Methods Report, which states considerations for future data collection efforts that may forego the survey structure and rely on other practice expense sources such as tax returns. We believe that a more efficient and transparent system that could be updated on a regular basis may be possible using available administrative data (such as Medicare claims; hospital cost reports; publicly-reported tax information such as from IRS Form 990; and data collected by other agencies, such as the Census Bureau's Service Annual Survey (SAS)) to the fullest extent possible and relying on survey data only to fill gaps only where available data do not exist. An alternative to collecting any survey data would be to modify the PE allocation system so that it only relies only on data that can be measured accurately and on an on-going basis. For example, if there are components of indirect PE that are not captured in administrative data, those expense categories could potentially be re-classified as direct costs and accounted for in a manner similar to how direct costs are currently considered.

Beyond the use of the data in our PE methodology, we need information on the total share of PFS payments that should be allocated for work, PE, and MP. Data collected in the 2024 PPI and CPI Surveys could be used for this purpose, as well as potentially be considered in a construction of the MEI in the future; however, there still remain underlying concerns with the sample representativeness for these purposes. The AMA has asserted that shares derived from data collected from the Service Annual Survey (SAS) for the 2017-based MEI miss many physicians who work in facility settings and thereby understate the percent of total PFS payments that should be allocated to physician work. The data needed to derive the three component shares (work, PE, and MP) are more aggregated than the specialty-level PE/HR data required for the PE methodology, so we have fewer concerns with the small sample sizes for this application. However, we continue to have similar concerns with the data related to measurement error and sample representativeness for purposes of the shares.

BILLING CODE 4120-01-P

EP16JY25.011

BILLING CODE 4120-01-C

At the time of the publication of this proposed rule, we continue to conduct ongoing analyses on the potential impact of the AMA's PPI and CPI Survey data on PFS ratesetting. Due to overarching concerns with the data described above and our previously described policy goal to balance PFS payment stability and predictability with incorporating new data through routine updates to the MEI, we reiterate that we are not proposing to implement the PE/HR data or cost shares from the AMA's survey data at this time, and are proposing instead to maintain the current PE/HR data and cost shares for CY 2026 PFS ratesetting. At the same time, we remain focused on proposals that reflect evolutions in practice, including the site of service payment differential discussed below, while we continue to hold strong interest in specialty-level practice expense updates. Consequently, we intend to work with interested parties, including the AMA, to understand whether and how such data should be used in PFS ratesetting in future rulemaking.

c. Updates to Practice Expense (PE) Methodology—Site of Service Payment Differential

While we are not proposing to incorporate the PPI and CPI Survey data into PFS ratesetting for CY 2026, we are proposing a significant refinement to our PE methodology to better reflect trends in physician practice settings. As detailed in the description of the

practice expense methodology above, many services have a site of service payment differential between the facility (F) and nonfacility (NF) settings under the PFS. Services furnished in the nonfacility setting, such as a physician's office, include the physician work RVUs, direct costs for supplies, clinical staff, and equipment, and indirect costs allocated based on the direct costs and the greater of either the clinical labor costs or the physician work RVUs. In the facility setting, the payment rate includes physician work RVUs and the indirect practice expense allocated based on the physician work RV

U

. The direct costs in the facility setting are paid under a different payment system than the PFS, such as the OPPS. Indirect costs allocated to services furnished in the facility setting are meant to reflect the typical costs associated with practice expenses in that setting of care.

In the decades since implementing the PE methodology, there have been significant transformations to the landscape of the healthcare delivery system in the United States, particularly regarding physician practice patterns. Historically, private practice was the dominant model for physicians, offering them autonomy, flexibility, and the opportunity to build independent practices. Specifically, in 1988, approximately 72 percent of physicians were full or part owners in their practice.

7

This percentage had dropped to 35.4 percent by 2024, representing a 52 percent decrease, with a corresponding rise in physicians in hospital-owned practices and physicians employed directly by a hospital. The percentage of physicians in hospital-owned practices has increased by over 47 percent, from 23.4 percent in 2012 to 34.5 percent in 2024. Similarly, 12.2 percent of physicians were employed directly by a hospital (or contracted directly with a hospital) in 2024, up from 5.6 percent in 2012.

8

In their June 2025 Report to Congress,

9

MedPAC notes that there are 9 specialties where 60 percent of the clinicians who billed Medicare furnished 90 percent or more of their services in the facility setting. These trends indicate a steady decline in the percentage of physicians working in private practice, with a corresponding rise in physician employment by hospitals; and growth in the percentage of physicians who practice exclusively, or almost exclusively, in the facility setting. When the PFS was established, the methodology for allocating indirect practice expense was based in part on an assumption that the physician maintained an office-based practice even when also practicing in a facility setting. In that context, the PE methodology has allocated the same amount of indirect costs per work RVU, without regard to setting of care.

7

Kane CK. Emmons, DW. New data on physician practice arrangements: private practice remains strong despite shifts toward hospital employment. Chicago (IL): American Medical Association; 2013. Policy Research Perspective 2013-2.

8

Kane CK. Physician Practice Characteristics in 2024: Private Practices Account for Less Than Half of Physicians in Most Specialties. American Medical Association.

9

MedPAC. (2025). June 2025 Report to the Congress: Medicare Payment Policy. Chapter 1 Reforming physician fee schedule updates and improving the accuracy of relative payment rates.

https://www.medpac.gov/wp-content/uploads/2025/06/Jun25_MedPAC_Report_To_Congress_SEC.pdf.

We note that, in the AMA's comment letter on the CY 2023 PFS proposed rule,

10

they stated that physician practices maintain some indirect practice expense costs for physicians who are solely facility-based such as coding, billing, and scheduling. We acknowledge that these indirect costs should be accounted for in PFS payment through PE RVUs, but we believe that allocating the same amount of indirect practice expense based on work RVUs in both settings may overstate the range of indirect costs incurred by facility-based physicians if it is now less likely that they would maintain an office-based practice separate from their facility practice. In a 2018 report developed under contract with CMS, RAND noted that “operating from the perspective of paying for the `typical' instance of a procedure, these analyses suggest that the current system could be improved by shifting more of the allocation of PE RVUs to the physician office setting”.

11

As MedPAC notes in their June 2025 report, “In cases when clinicians practice exclusively or almost exclusively in a facility, or where a facility is financing indirect PE for clinicians, payment to both entities for indirect PE costs may be duplicative and unnecessary”. While the relative relationship between the PE allocated to services furnished in a facility and nonfacility setting may have been more reflective of the actual expenses incurred by physicians when the PE methodology was originally established, maintenance of that element of the methodology in the face of changing practice patterns likely represents an imbalance of the practice expense allocated to the facility relative to the nonfacility. Within the PFS relative value system, any overstatement of practice expenses in the facility setting would affect the allocation of indirect costs in the nonfacility setting. This dynamic, in which relative resources involved in furnishing PFS services may not be adequately reflected in facility and nonfacility settings, has the potential to contribute to broader undesirable financial incentives toward higher-priced settings of care, like hospitals, and away from more efficient settings, like physician offices.

12

13

14

This could result in unnecessary costs for payers and beneficiaries, and obstacles to physicians and other professionals operating independent practices.

10

https://downloads.regulations.gov/CMS-2023-0121-2694/attachment_1.pdf.

11

Burgette, Lane F., Jodi L. Liu, Benjamin M. Miller, Barbara O. Wynn, Stephanie Dellva, Rosalie Malsberger, Katie Merrell, et al. “Practice Expense Methodology and Data Collection Research and Analysis.” RAND Corporation, April 11, 2018.

https://www.rand.org/pubs/research_reports/RR2166.html.

12

https://pmc.ncbi.nlm.nih.gov/articles/PMC4191490/#:~:text=Using%20generally%20accepted%20accounting%20practices,to%20more%20intense%20resource%20use.

13

https://healthcostinstitute.org/hcci-originals-dropdown/all-hcci-reports/shifting-care-office-to-outpatient.

14

https://www.bcbs.com/dA/392da3b5a7/fileAsset/BHI%20Issue%20Brief%20December_121323_SiteNeutral.pdf.

We share MedPAC's concerns regarding the potential for duplicative payment under the current PE methodology for allocating indirect costs for physicians practicing in the facility setting. Allocating the same amount of indirect PE per work RVU for services furnished in the facility setting as the nonfacility setting may no longer reflect contemporary physician practice trends. As we noted above, data suggests that fewer than half of physicians currently own their practices, but the underlying assumption embedded in the PFS payment methodology presumed that physicians generally maintained office practices (and incurred associated indirect costs) even when they furnished care in facility settings. For these reasons, for each service valued in the facility setting under the PFS, we are proposing to reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to nonfacility PE RVUs beginning in CY 2026. This proposed change would occur in step 8 of the PE RVU Methodology described earlier in this section, in which indirect allocators (direct costs, clinical labor, and work RVUs) are assigned. For example, the work RVU for CPT code 33533 (

Coronary artery bypass, using arterial graft(s); single arterial graft

) is 33.75. For CY 2025, using the full work RVU as an indirect allocator, CPT code 33533 had approximately 12 indirect PE RVUs. Under this proposed change to the

methodology, where we would reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to nonfacility PE RVUs, CPT code 33533 would have approximately 7.2 indirect PE RVUs.

We note that this proposed change to the indirect cost allocation methodology is intended to better recognize the relative resources involved in furnishing services paid under the PFS in facility and nonfacility settings. We compare this proposed change to our current methodology, which functionally presumes approximately equal indirect costs incurred by physicians across sites of service. This presumption was initially made in the context of most practitioners maintaining office practices independent of the facilities in which they provided care, and as we discussed above, appears to be inconsistent with contemporary trends in physician practice. We understand from the AMA's comment letter on the CY 2023 PFS proposed rule noted above that physician practices may incur some indirect PE costs (such as coding, billing, and scheduling) for physicians who are facility-based. To better inform our consideration of how to account for any such costs in the PE RVU methodology, we are seeking comment on the specific types and magnitude of indirect PE costs incurred that are attributable to physicians who practice in part or exclusively in a facility setting, and any variables that affect whether and to what extent a practice would incur them. We are also seeking comments on whether our proposal to reduce the portion of the facility PE RVUs allocated based on work RVUs to half the amount allocated to nonfacility PE RVUs is an appropriate reduction or whether we should consider a different percentage reduction for CY 2026 or in future years. While our proposed change to the methodology represents a starting point to correcting potential historic distortions in the allocation of indirect PE costs across settings of care, we intend to further examine our methodology and consider additional refinements based upon public comments received and any studies or data sources identified. We are seeking comments on whether there are additional data sources that might help identify a more precise site of service difference in the allocation of indirect PE RVUs. We believe the implementation of this proposal would more accurately account for the resource costs involved in physicians furnishing care across all settings and correct potential distortions in the allocation of indirect PE under our current methodology. We refer readers to section VI. of this proposed rule for discussion of the impacts of this proposal on CY 2026 PFS ratesetting.

We are specifically soliciting comments on whether and how this proposed policy should apply to codes with MMM global periods (maternity services) and how it could specifically impact access to maternity services, given our understanding that many of the patient encounters across those services occur in the office setting. As we noted in the CY 2024 PFS final rule (88 FR 78949), maternity services are unique within the PFS in that they are the only global codes that provide a single payment for almost 12 months of services, which include a relatively large number of E/M visits performed along with delivery services and imaging; and were valued using a building-block methodology as opposed to the magnitude estimation method. Given that the work RVUs for maternity services encompass significant care during this lengthy period that may be furnished in the nonfacility setting, we are soliciting comment on whether we should include these services in our proposed policy to reduce the allocation of PE based on work in the facility setting.

We welcome comments on all aspects of this proposal, including ways to improve the allocation of facility and nonfacility PE RVUs in the future. We also seek comments on alternative approaches to improving the allocation of indirect PE as outlined in Chapter 1 of MedPAC's June 2025 Report to the Congress (pages 27 through 33).

d. Use of OPPS Data for PFS Ratesetting

For several kinds of PFS services, we are proposing to deviate from the use of the AMA survey data, and instead utilize data from auditable, routinely updated hospital data to either set relative or absolute rates, especially for technical services paid under the PFS. This approach promotes price transparency across settings, offers more predictable ratesetting outcomes, and limits the influence of anecdotal/survey data. We refer readers to sections II.E.24 and II.E.30 of this proposed rule for specific proposals related to radiation treatment delivery and superficial radiation therapy services and remote patient monitoring and remote therapeutic monitoring services respectively and section II.K of this proposed rule for specific proposals related to skin substitutes. Although we are proposing different methodologies for use of OPPS data based on service type, we are seeking comment on whether it would be preferable to adopt a single methodology, such as a scaler and how such a methodology would account for differences in practice expenses between services, such as services with extensive clinical staff time versus services where the valuation is primarily driven by the equipment costs.

6. Payment for Services in Urgent Care Centers

In the CY 2025 PFS proposed rule (89 FR 61746 through 61747), we sought comment on urgent care centers, noting that interested parties describe that hospital emergency departments are often used by beneficiaries to address non-emergent urgent care needs that could be appropriately served in less acute settings, but where other settings, such as physician offices, urgent care centers or other clinics, are not available or readily accessible. Patients enter EDs to treat common conditions like allergic reactions, lacerations, sprains and fractures, common respiratory illnesses (for example, flu or RSV), and bacterial infections (for example, strep throat, urinary tract infections or foodborne illness). Conditions like these often can be treated in less acute settings. We stated that we were interested in system capacity and workforce issues broadly and are interested in hearing more on those issues, including how entities such as urgent care centers can play a role in addressing some of the capacity issues in emergency departments.

In response to our CY 2025 PFS proposed rule (89 FR 61746 through 61747) question about whether the current “Urgent Care Facility” Place of Service code (POS 20) adequately identify and define the scope of services furnished in such settings other than the existing place of service codes,, commenters stated that the current place of service (POS) definitions are inadequately differentiated, especially if CMS wishes to encourage proliferation of the type of urgent care centers that can provide suitable alternatives to EDs, noting that POS 11 generally refers to physician offices that provide diagnostic and therapeutic care in an office setting, by appointment, typically during regular business hours; POS 17 generally refers to clinics that are attached to retail operations, such as pharmacies, grocery stores or big box stores, and provide low-acuity primary and preventive health care, such as vaccinations; and POS 20 refers to Urgent Care Facilities but does not adequately differentiate between those that offer services more akin to the typical general practitioner's office and those that offer enhanced diagnostic and therapeutic services and extended

hours. They recommended that the creation of a new POS code describing “enhanced'” urgent care centers that offer specific diagnostic and therapeutic services and that operate outside typical business hours could fill this need. In response to our CY 2025 PFS proposed rule (89 FR 61746 through 61747) question about whether the current “Urgent Care Facility” Place of Service code (POS 20) adequately identify and define the scope of services furnished in such settings other than the existing code set and valuation, they stated that Medicare's fee-for-service payment systems do not recognize and adequately value services furnished in Urgent Care Clinics (UCCs) and stated that while there is some overlap in the types of professional services furnished in UCCs and physician offices, UCCs that operate for extended hours and that have enhanced diagnostic and therapeutic capabilities incur additional costs to provide these services.

In recent months, an interested party has requested that for CY 2026, we consider adopting a new Place of Service code for “enhanced” urgent care centers as well as create a new add-on G-code to describe the resource costs involved when practitioners furnish certain services in enhanced urgent care centers that offer extended hours and certain diagnostic and therapeutic services. The interested party suggested the following descriptor:

“Visit complexity inherent to evaluation and management associated with medical care services that serve as the immediate focal point for all needed urgent, non-emergent health care services and/or with urgent, non-emergent medical care services that are related to diagnosis and treatment of an unscheduled, ambulatory patient's urgent, non-emergent conditions. (Add-on code, list separately in addition to office/outpatient evaluation and management visits, new or established)”

and recommended that it be valued based on a crosswalk to HCPCS code G2211

(Visit complexity inherent to evaluation and management associated with medical care services that serve as the continuing focal point for all needed health care services and/or with medical care services that are part of ongoing care related to a patient's single, serious condition or a complex condition. (add-on code, list separately in addition to office/outpatient evaluation and management visit, new or established)

and made billable with all levels of office/outpatient E/M visits for both new and established patients when services are furnished in an enhanced urgent care center.

We are seeking comments from the public regarding whether separate coding and payment is needed for evaluation and management visits furnished at urgent care centers, including whether or not an add-on code would be appropriate or if a new set of visit codes would be more practical We note that the process for requesting new place of service codes or modification of existing place of service codes is described on the CMS website at

https://www.cms.gov/medicare/coding-billing/place-of-service-codes/process-requesting-new-codes-modification-existing-codes.

Additionally, as discussed in Section II.B of this proposed rule, many PFS services have a site of service payment differential between the facility and nonfacility settings under the PFS. Services furnished in the nonfacility setting, such as a physician's office, include direct costs for supplies, clinical staff, and equipment, the physician work RVU and indirect practice expense allocated based on the direct costs and the physician work RVU. In the facility setting, the payment rate includes physician work and the indirect practice expense allocated based on physician work. The direct costs in the facility setting are paid under a different payment system other than the PFS, such as the OPPS. PE allocated to services furnished in the facility setting is meant to reflect typical costs associated with practice expenses in that setting of care. We note that we are proposing a change in our PE RVU methodology to better recognize variations in indirect costs between facility and nonfacility settings of care in section II.B of this rule. We note here that we are likewise interested in understanding how practice costs, including but not limited to indirect costs, may vary among different nonfacility settings of care. We are also interested in receiving feedback regarding how either the code set, or the PE methodology might be improved to better recognize the relative resources involved in furnishing services across these kinds of settings.

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 (PMVC) under the PFS, using the same criteria used to identify PMVC, and to make appropriate adjustments.

As outlined in section II.E. of this proposed 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)/Specialty Society Relative Value Scale (RVS) Update Committee (referred to as the 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, stating 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 appropriate adjustment of potentially misvalued services. Additionally, this section provides that the Secretary may coordinate the review and adjustment of any RVU with the periodic review described in section 1848(c)(2)(B) of the Act. Section 1848(c)(2)(K)(iii)(V) of the Act specifies that the Secretary may make appropriate coding revisions (including using current processes for consideration of coding changes), which may involve consolidating individual services into bundled codes for payment under the PFS.

2. Progress in Identifying and Reviewing Potentially Misvalued Codes

To fulfill our statutory mandate, we have identified and reviewed numerous PMVC as specified in section 1848(c)(2)(K)(ii) of the Act, and we intend to continue our work examining PMVC in these areas over the upcoming years. As part of our current process, we identify PMVC for review, and request recommendations from the RUC and other public commenters on revised work RVUs and direct PE inputs for those codes. The RUC, through its own processes, also identifies PMVC for review. Through our public nomination process for PMVC established in the CY 2012 PFS final rule with comment period (76 FR 73026, 73058 through 73059), other individuals and groups submit nominations for review of PMVC as well. Individuals and groups may submit codes for review under the PMVC initiative to CMS in one of two ways. Nominations may be submitted to CMS via email or through postal mail. Email submissions should be sent to the CMS e-mailbox at

MedicarePhysicianFeeSchedule@cms.hhs.gov,

with the phrase “Potentially Misvalued Codes” and the referencing CPT code number(s) and/or the CPT descriptor(s) in the subject line. Physical letters for nominations should be sent via the U.S. Postal Service to the Centers for Medicare & Medicaid Services, Mail Stop: C4-01-26, 7500 Security Blvd, Baltimore, Maryland 21244. Envelopes containing the nomination letters must be labeled “Attention: Division of Practitioner Services, Potentially Misvalued Codes.” Nominations for consideration in our next annual rule cycle should be received by our February 10th deadline. Since CY 2009, as a part of the annual PMVC review and Five-Year Review process, we have reviewed over 1,700 PMVC to refine work RVUs and direct PE inputs. We have assigned appropriate work RVUs and direct PE inputs for these services as a result of these reviews. A more detailed discussion of the extensive prior reviews of PMVC is included in the CY 2012 PFS final rule with comment period (76 FR 73052 through 73055). In the same CY 2012 PFS final rule with comment period, we finalized our policy to consolidate the review of physician work and PE at the same time and established a process for the annual public nomination of potentially misvalued services.

In the CY 2013 PFS final rule with comment period (77 FR 68892, 68896 through 68897), we built upon the work we began in CY 2009 to review PMVC that have not been reviewed since the implementation of the PFS (so-called “Harvard-valued codes”

15

). In the CY 2009 PFS proposed rule (73 FR 38589), we requested recommendations from the RUC to aid in our review of Harvard-valued codes that had not yet been reviewed, focusing first on high-volume,

low intensity codes. In the fourth Five-Year Review of Work RVUs published in a separate notice (76 FR 32410, 32419), we requested recommendations from the RUC to aid in our review of Harvard-valued codes with annual utilization of greater than 30,000 services. In the CY 2013 PFS final rule with comment period, we identified specific Harvard-valued services with annual allowed charges that total at least $10,000,000 as potentially misvalued. In addition to the Harvard-valued codes, in the CY 2013 PFS final rule with comment period we finalized for review a list of PMVC that have stand-alone PE (codes with physician work and no listed work time and codes with no physician work that have listed work time). We continue each year to consider and finalize a list of PMVC that have or will be reviewed and revised as appropriate in future rulemaking.

15

The research team and panels of experts at the Harvard School of Public Health developed the original work RVUs for most CPT codes, in a cooperative agreement with the Department of Health and Human Services (HHS). Experts from both inside and outside the Federal Government obtained input from numerous physician specialty groups. This input was incorporated into the initial PFS, which was implemented on January 1, 1992.

3. CY 2026 Identification and Review of Potentially Misvalued Services

In the CY 2012 PFS final rule with comment period (76 FR 73058 through 73059), we finalized a process for the public to nominate PMVC. In the CY 2015 PFS final rule with comment period (79 FR 67548, 67606 through 67608), we modified this process whereby the public and interested parties may nominate PMVC for review by submitting the code with supporting documentation by February 10th of each year. Supporting documentation for codes nominated for the annual review of PMVC may include the following:

• Documentation in peer reviewed medical literature or other reliable data that demonstrate changes in physician work due to one or more of the following: technique, knowledge and technology, patient population, site-of-service, length of hospital stay, and work time.

• An anomalous relationship between the code being proposed for review and other codes.

• Evidence that technology has changed physician work.

• Analysis of other data on time and effort measures, such as operating room logs or national and other representative databases.

• Evidence that incorrect assumptions were made in the previous valuation of the service, such as a misleading vignette, survey, or flawed crosswalk assumptions in a previous evaluation.

• Prices for certain high cost supplies or other direct PE inputs that are used to determine PE RVUs are inaccurate and do not reflect current information.

• Analyses of work time, work RVU, or direct PE inputs using other data sources (for example, VA, NSQIP, the STS National Database, and the MIPS data).

• National surveys of work time and intensity from professional and management societies and organizations, such as hospital associations.

We evaluate the supporting documentation submitted with the nominated codes and assess whether the nominated codes appear to be PMVC appropriate for review under the annual process. In the following year's PFS proposed rule, we publish the list of nominated codes and indicate for each nominated code whether we agree with its inclusion as a PMVC. The public has the opportunity to comment on these and all other proposed PMVC. In each year's final rule, we finalize our list of PMVC.

a. Public Nominations

In each proposed rule, we seek nominations from the public and from interested parties of codes that they believe we should consider as potentially misvalued. We receive public nominations for PMVC by February 10th and we display these nominations on our public website (

https://www.cms.gov/medicare/payment/fee-schedules/physician/federal-regulation-notices?DLSort=2&DLEntries=10&DLPage=1&DLSortDir=descending

), where we include the submitter's name, their associated organization and the submitted studies for full transparency. We sometimes receive submissions for specific, PE-related inputs for codes, and discuss these PE-related submissions, as necessary under the Determination of PE RVUs section of the rule. We summarize below this year's submissions under the PMVC initiative. For CY 2026, we received 11 requests concerning various codes as PMVC. The nominations are as follows:

(1) Maxillofacial Prosthetic Services (CPT codes 21076, 21077, 21079, 21080, 21081, 21082, 21083, 21084, 21085, 21086, 21087)

An interested party nominated CPT codes 21076 (

Impression and custom preparation; surgical obturator prosthesis

), 21077 (

Impression and custom preparation; orbital prosthesis

), 21079 (

Impression and custom preparation; interim obturator prosthesis

), 21080 (

Impression and custom preparation; definitive obturator prosthesis

), 21081 (

Impression and custom preparation; mandibular resection prosthesis

), 21082 (

Impression and custom preparation; palatal augmentation prosthesis

), 21083 (

Impression and custom preparation; palatal lift prosthesis

), 21084 (

Impression and custom preparation; speech aid prosthesis

), 21085 (

Impression and custom preparation; oral surgical splint

), 21086 (

Impression and custom preparation; auricular prosthesis

), and 21087 (Impression and custom preparation; nasal prosthesis) as potentially misvalued based on what they believe to be missing, outdated, and undervalued practice expense inputs. The nominator stated that these misvalued PE inputs (equipment, supplies, and clinical staff time) result in inadequate payment rates to clinicians who furnish these services, which limits patient access to necessary care. The nominator indicated that the physician work values remain accurate for all of the nominated codes.

According to the nominator, maxillofacial prosthodontists provide specialized rehabilitation care for patients with compromised oral and facial anatomy due to conditions such as cancer, trauma, or congenital defects, addressing both physical and psychological challenges experienced by such patients. Custom prosthetic obturators are medical devices that restore vital oral functions in cancer patients with palatal defects. These implant-retained devices are prescribed based on the location of the defect: maxillary obturators for hard palate issues, pharyngeal obturators for soft palate problems, or a combination for both. The primary purpose of the intraoral prostheses is to enable patients to speak, eat, and swallow more naturally. The nominator stated that these implants can improve patients' quality of life and may eliminate the need for feeding tubes.

The nominator is concerned that CMS payment rates for maxillofacial prosthetic services, which were last reviewed in 1995, are outdated. In particular, the nominator stated that CPT codes 21080 and 21081 have undergone significant changes since the development of their PE values in the mid-1990s. At that time, mandibular reconstruction was rare, and removable prostheses were used to align the jaw. Microvascular reconstruction and virtual surgical planning have since transformed the procedures described by CPT codes 21080 and 21081, allowing precise prosthetic rehabilitation during surgery and improving oral function, speech, and quality of life. The nominator asserted that the PE inputs for CPT codes 21080 and 21081 did not account for these advancements, which did not exist in 1995 when the codes were valued. Furthermore, they stated that when these maxillofacial prosthetic services

were valued in 1995, CMS used inaccurate inputs, which they believe did not account for the appropriate clinical staff time and materials required for prostheses. They stated that changes in clinical staff time, supplies, and equipment require the direct PE inputs to be updated.

The nominator stated that significant technological advancements have also occurred for extraoral prostheses, such as orbital (CPT code 21077), auricular (CPT code 21086), and nasal prostheses (CPT code 21087). For orbital prostheses, hand sculpting and painting remain time-intensive tasks, with limited use of 3D technology. In auricular prostheses, 3D technology has significantly improved the waxing process. For nasal prostheses, preoperative scanning now helps to shape the prosthesis, leading to better cosmetic outcomes. All extraoral p

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