Medicare Program; Refinements to Geographic Adjustment Factor Values, Revisions to Payment Policies, Adjustments to the Relative Value Units (RVUs) Under the Physician Fee Schedule for Calendar Year 1995, and the 5-Year Refinement of RVUs

Federal RegisterDec 8, 1994

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SUMMARY: This final rule revises the geographic adjustment factor

values and fee schedule payment areas, various payment policies for

specific physician services, the relative value units (RVUs) for

certain existing procedure codes, and establishes interim RVUs for new

and revised procedure codes. It implements section 13518 of the Omnibus

Budget Reconciliation Act of 1993 that requires payment for antigens

under the physician fee schedule. This final rule also discusses the

process for periodic review and adjustment of RVUs not less frequently

than every 5 years as required by section 1848(c)(2)(B)(i) of the

Social Security Act.

DATES: Effective Date: January 1, 1995.

The revisions to the geographic adjustment factor values, other

payment policies, and RVUs apply to physician services furnished

beginning January 1, 1995.

Comment Date: We will accept comments on interim RVUs for new or

revised procedure codes identified in Addendum C and on all RVUs

considered under the 5-year refinement process. Comments will be

considered if we receive them at the appropriate addresses, as provided

below, no later than 5 p.m., February 6, 1995.

ADDRESSES: Mail written comments related to the 5-year refinement

process (1 original and 3 copies) to the following address: Health Care

Financing Administration, Department of Health and Human Services,

Attention: BPD-789-FC (5-Year Refinement), P.O. Box 26688, Baltimore,

MD 21207.

Mail written comments related to interim RVUs for new and revised

procedure codes (1 original and 3 copies) to the following address:

Health Care Financing Administration, Department of Health and Human

Services, Attention: BPD-789-FC (Interim RVUs), P.O. Box 7519,

Baltimore, MD 21207-0519.

If you prefer, you may deliver your written comments to one of the

following addresses: Room 309-G, Hubert H. Humphrey Building, 200

Independence Avenue, SW., Washington, DC 20201, or Room 132, East High

Rise Building, 6325 Security Boulevard, Baltimore, MD 21207.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code BPD-789-FC. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue, SW., Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

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ASCII.

FOR FURTHER INFORMATION CONTACT: For further information concerning

revisions to payment policies and the adjustments to the relative value

units contact Elizabeth Holland, (410) 966-1309. For issues related to

refinements to the geographic adjustment factor values and changes to

the geographic practice cost indices and payment areas, contact Bob

Ulikowski, (410) 966-5721.

SUPPLEMENTARY INFORMATION: The information in this final rule with

comment period updates information in the following Federal Register

documents:

June 5, 1991, proposed rule entitled ``Fee Schedule for

Physicians' Services'' (56 FR 25792).

November 25, 1991, final rule entitled ``Fee Schedule for

Physicians' Services'' (56 FR 59502).

September 15, 1992, correction notice for the 1992 fee

schedule (57 FR 42491).

November 25, 1992, final notice with comment period

entitled ``Fee Schedule for Physicians' Services for CY 1993'' (57 FR

55914).

June 7, 1993, correction notice for the 1993 fee schedule

(58 FR 31964).

July 14, 1993, proposed rule entitled ``Revisions to

Payment Policies Under the Physician Fee Schedule'' (58 FR 37994).

December 2, 1993, final rule with comment entitled

``Revisions to Payment Policies and Adjustments to the Relative Value

Units under the Physician Fee Schedule for Calendar Year 1994'' (58 FR

63626). (There were two correction notices published for the 1994

physician fee schedule (July 15, 1994, 59 FR 36069) and (August 4,

1994, 59 FR 39828).)

June 24, 1994, proposed rule entitled ``Refinements to

Geographic Adjustment Factor Values and Other Policies Under the

Physician Fee Schedule'' (58 FR 32754).

July 15, 1994, correction notice for the 1993 fee schedule

(57 FR 36069).

August 4, 1994, correction notice for the 1993 fee

schedule (57 FR 39828).

In this final rule, we provide background on the statutory

authority for and development of the physician fee schedule. We also

explain in detail the process by which certain interim work relative

value units (RVUs) are reviewed and, in some cases, revised. In

addition, we explain the 5-year refinement process for RVUs required by

section 1848(c)(2)(B)(i) of the Act as added by section 6102 of the

Omnibus Budget Reconciliation Act of 1989 (OBRA '89), Public Law 101-

237.

Section 1848(c)(2)(B) of the Act provides that adjustments in RVUs

resulting from an annual review of those RVUs may not cause total fee

schedule payments to differ by more than $20 million from what they

would have been had the adjustments not been made. Thus, the statute

allows a $20 million tolerance for increasing or reducing total

expenditures under the physician fee schedule. We have determined that

net increases because of changes in RVUs for codes reviewed as part of

a refinement process, the addition of new codes to the fee schedule,

and the revisions in payment policies would have added to projected

expenditures in calendar year (CY) 1995 by approximately $385 million

($35 million of which result from the addition of new procedure codes

or refinements of existing procedure codes). Therefore, it is necessary

to adjust the RVUs for all services paid under the physician fee

schedule. We have made those adjustments in such a manner as to achieve

budget neutrality as we were best able to estimate. As a result, the

total projected expenditures from the revised fee schedule are

estimated to be the same as they would have been had we not changed the

RVUs for any individual codes or added new codes to the fee schedule.

We have adjusted all RVUs by a uniform adjustment factor of 0.989,

which results in a uniform reduction of 1.1 percent to the RVUs for all

services.

The conversion factor (CF) is a national value that converts RVUs

into payment amounts. There are three separate CFs: one for surgical

services, one for primary care services, and one for nonsurgical

services other than primary care. The CFs are updated annually.

Anesthesia services are paid differently from other physicians'

services under the fee schedule. Payment for anesthesia services is

based on base unit RVUs that are assigned to each service and on time

units that can vary by procedure. The base and time units are

multiplied by an anesthesia-specific CF, not the CFs used for surgical,

nonsurgical, or primary care services.

This final rule also contains revisions to the geographic

adjustment factor (GAF) values as required in section 1848(e)(1)(c) of

the Act.

Addenda to this rule provide the following information:

Addendum A--Explanation and Use of Addenda B through G

Addendum B--1995 Relative Value Units (RVUs) and Related Information

Used in Determining Medicare Payments for 1995

Addendum C--Codes with Interim RVUs

Addendum D--1995 Geographic Practice Cost Indices by Medicare Carrier

and Locality

Addendum E--1996 Geographic Practice Cost Indices by Medicare Carrier

and Locality

Addendum F--Procedure Codes Subject to the Site-of-Service Differential

Addendum G--Reference Set with 1995 Work RVUs

The RVUs and revisions to payment policies in this final rule apply

to physicians' services furnished on or after January 1, 1995.

For those codes identified in Addendum C of this final rule as new

or revised codes, the RVUs and update indicators are considered to be

interim as they have not been published before this final rule.

Therefore, we will accept comments on these interim RVUs and update

indicators if they are received no later than 5 p.m. February 6, 1995.

The RVUs for the remaining codes are final. However, as we discuss in

section VI, we are accepting comments on RVUs as part of the 5-year

refinement process.

To assist readers in referencing sections contained in this

proposed rule, we are providing the following table of contents:

Table of Contents

I. Background

A. Legislative History

B. Related Federal Register Publications

C. Components of the Fee Schedule Payment Amounts

D. Summary of the Development of the RVUs

1. Work RVUs

2. Practice Expense and Malpractice Expense RVUs

II. Specific Proposals for Calendar Year 1995 and Responses to Public

Comments

A. GPCI Changes

B. Payment Area (Locality) Change

C. Work RVUs--Refinement of Proposed RVUs (Includes Table 1--

Refinement of Proposed RVUs)

D. Separate Payment for Physician Care Plan Oversight Services

E. Payment for Multiple Surgical Procedures

F. Application of Site-of-Service Payment Differential

G. Bundled Services

1. Generation and Interpretation of Automated Data (CPT Codes

78890 and 78891)

2. Noninvasive Ear or Pulse Oximetry (CPT Code 94760)

H. RVUs for Doppler Echocardiography (CPT Code 93325)

I. Nuclear Medicine

J. End-Stage Renal Disease (ESRD)

1. Hospital Inpatient Dialysis on the Same Date as an Evaluation

and Management Service

2. Payment for Outpatient ESRD-Related Services under the

Physician Fee Schedule

K. Therapeutic Apheresis

III. OBRA '93 Provision--Payment for Antigens (Allergen Immunotherapy)

IV. Provisions of this Final Rule

V. Refinement of RVUs for CY 1995 and Responses to Public Comments on

Interim RVUs for 1994

A. Summary of Issues Discussed Related to the Adjustment of RVUs

B. Process for Establishing Work RVUs for the 1995 Fee Schedule

1. Work RVU Refinements of Interim RVUs

a. Methodology (Includes Table 2--Work RVU Refinements of

Interim and Related RVUs)

b. Discussion of Codes Not Reviewed by Panel (Includes Table 3--

Prolonged Services)

2. Establishment of Interim Work RVUs for New and Revised Codes

for 1995

a. Methodology (Includes Table 4--American Medical Association

(AMA) Relative Value Update Committee (RUC) Recommendations and

HCFA's Decisions

b. Discussion of Codes for Which the RUC Recommendations Were

Not Accepted (Includes Table 5--Preventive Medicine)

C. Adjustments to All RVUs Due to Limitation on Annual Expenditures

D. Summary of Changes for the 1995 Fee Schedule (Includes Table 6--

Anesthesia Codes and Imputed RVUs)

VI. Five-year Refinement of RVUs

A. Proposed Process for Refinement of Work RVUs

B. Scope of the 5-year Refinement

C. Nature and Format of Comments on Work RVUs

D. Including Anesthesia Services Under the 5-year Refinement

(Includes Table 6--Anesthesia Codes and Imputed RVUs)

VII. Collection of Information Requirements

VIII. Response to Comments

IX. Regulatory Impact Analysis

A. Introduction

B. Effects of Implementing Specific Proposals for CY 1995

1. GPCI Changes

2. Payment Area (Locality) Change

3. Separate Payment for Physician Care Plan Oversight Services

4. Payment for Multiple Surgical Procedures

5. Application of Site-of-Service Payment Differential

6. Bundled Services

7. RVUs for Doppler Echocardiography (CPT Code 93325)

8. Nuclear Medicine

9. End-Stage Renal Disease (ESRD)

a. Hospital Inpatient Dialysis on the Same Date as an Evaluation

and Management Service

b. Payment for Outpatient ESRD-Related Services Under the

Physician Fee Schedule

10. Therapeutic Apheresis

C. OBRA '93 Provision--Payment for Antigens (Allergen Immunotherapy)

D. Refinement of RVUs for CY 1995

E. Rural Hospital Impact Statement

Text of Final Regulations

Addenda

Addendum A--Explanation and Use of Addenda B through G

Addendum B--1995 Relative Value Units (RVUs) and Related Information

Used in Determining Medicare Payments for 1995

Addendum C--Codes with Interim RVUs

Addendum D--1995 Geographic Practice Cost Indices by Medicare

Carrier and Locality

Addendum E--1996 Geographic Practice Cost Indices by Medicare

Carrier and Locality

Addendum F--Procedure Codes Subject to the Site-of-Service

Differential

Addendum G--Reference Set with 1995 Work RVUs.

In addition, because of the many organizations and terms to which

we refer by acronym in this final rule, we are listing those acronyms

and their corresponding terms in alphabetical order below:

AAFP--American Academy of Family Practice

ACC--American College of Cardiology

ACR--American College of Radiology

AMA--American Medical Association

ARM--Alternate reimbursement method

ASC--Ambulatory surgical center

ASIM--American Society of Internal Medicine

BOMA--Building Owners and Managers Association

CF--Conversion factor

CFR--Code of Federal Regulations

CMD--[Medicare] Carrier medical director

CPT--[Physicians'] Current Procedural Terminology [4th Edition,

1994, copyrighted by the American Medical Association]

CY--Calendar year

EEG--Encephalogram

ESRD--End-stage renal disease

FY--Fiscal year

GAF--Geographic adjustment factor

GPCI--Geographic practice cost index

GRT--Gross receipts tax

GSA--General Services Administration

HCFA--Health Care Financing Administration

HCPAC--Health Care Professional Advisory Council

HCPCS--HCFA Common Procedure Coding System

HHA--Home health agency

HHS--[Department of] Health and Human Services

HUD--[Department of] Housing and Urban Development

ICU--Intensive care unit

JCAI--Joint Council of Allergy and Immunology

MCP--Monthly capitation payment

MEI--Medicare Economic Index

MRI--Magnetic resonance imaging

MVPS--Medicare volume performance standards

NAMCS--National Ambulatory Medical Care Survey

NF--Nursing facility

OBRA--Omnibus Budget Reconciliation Act

PC--Professional component

PT--Physical therapist

RFA--Regulatory Flexibility Act

RPA--Renal Physicians Association

RUC--[AMA Specialty Society] Relative [Value] Update Committee

RVU--Relative value unit

SMI--Supplementary medical insurance

SNF--Skilled nursing facility

TC--Technical component

USPS--United States Postal Service

I. Background

A. Legislative History

The Medicare program was established in 1965 by the addition of

title XVIII to the Social Security Act (the Act). Until January 1,

1992, Medicare paid for physicians' services based on a reasonable

charge system. This system led to payment variations among types of

services, physician specialties, and geographic areas. Thus, the

Congress included a physician payment reform provision in OBRA '89,

Public Law 101-239, enacted on December 19, 1989. Section 6102 of OBRA

'89 amended title XVIII of the Act by adding a new section 1848,

``Payment for Physicians' Services.'' This section contains three major

elements: (1) A fee schedule for the payment of physicians' services;

(2) a Medicare volume performance standard (MVPS) for the rates of

increase in Medicare expenditures for physicians' services; and (3)

limits on the amounts that nonparticipating physicians can charge

beneficiaries. The Act requires that payments under the fee schedule be

based on national uniform RVUs based on the resources used in

furnishing a service. Section 1848(c) of the Act requires that national

RVUs be established for physician work, practice expense, and

malpractice. The Omnibus Budget Reconciliation Acts of 1990 (OBRA '90)

and 1993 (OBRA '93), Public Laws 101-508 and 103-66, enacted on

November 5, 1990 and August 10, 1993, respectively, contained several

modifications and clarifications to the OBRA '89 provisions that

established the physician fee schedule.

Section 1848(e)(1)(C) of the Act requires us to review and, if

necessary, adjust the geographic practice cost indices (GPCIs) at least

every 3 years. This section also requires us to phase in the adjustment

over 2 years and implement only one-half of any adjustment if more than

1 year has elapsed since the last GPCI revision. The GPCIs were first

implemented in 1992 and have not been reviewed since that time. Thus,

we are required to complete the first GPCI review and implement only

one-half of any adjustment by 1995 and one-half in 1996.

The Act requires that payments vary among fee schedule areas

according to geographic indices. In general, the fee schedule areas

that existed under the prior reasonable charge system were retained

under the fee schedule. A detailed discussion of fee schedule areas can

be found in the June 5, 1991 proposed rule (56 FR 25832) and in the

November 25, 1991 final rule (56 FR 59514). We are required by section

1848(e)(1)(A) of the Act to develop separate indices to measure

relative cost differences among fee schedule areas compared to the

national average for each of the three fee schedule components. While

requiring that the practice expense GPCIs and malpractice GPCIs reflect

the full relative cost differences, the Act requires that the work

indices reflect only one-quarter of the relative cost differences

compared to the national average.

B. Related Federal Register Publications

We published a final rule on November 25, 1991 (56 FR 59502) to

implement section 1848 of the Act by establishing a fee schedule for

physicians' services furnished on or after January 1, 1992. (The fee

schedule regulations were originally set forth at 42 CFR, part 415 and

later moved to 42 CFR, part 414 as described in the September 1992

correction notice (57 FR 42491).) In the November 1991 final rule (56

FR 59511), we stated our intention to update RVUs for new and revised

codes in the American Medical Association's (AMA) Physicians' Current

Procedural Terminology (CPT) through an ``interim RVU'' process every

year. Our first update to the RVUs was published on November 25, 1992,

as a final notice with a 60-day comment period on new and revised RVUs

only (57 FR 55914).

On July 14, 1993, we published a proposed rule (58 FR 37994) to

announce our plans to establish physician work RVUs for new and revised

codes and to revise payment policies for specific physician services

and supplies. On December 2, 1993, we published a final rule (58 FR

63626) announcing revised payment policies and RVUs for 1994. (We

solicited comments on new and revised RVUs.)

On June 24, 1994, we published a proposed rule (59 FR 32754) to

announce our intention to revise the GAF values, fee schedule payment

areas, payment policies for specific physician services, and the MVPS

calculation. We also proposed RVUs for certain physician services.

C. Components of the Fee Schedule Payment Amounts

Under the formula set forth in section 1848(b)(1) of the Act, the

payment amount for each service paid for under the physician fee

schedule is the product of three factors: (1) A nationally uniform

relative value; (2) a GAF for each physician fee schedule area; and (3)

nationally uniform CFs for surgical and nonsurgical services. (There is

a separate CF for anesthesia services.) (Beginning with the CY 1994

update, section 13511 of OBRA '93 requires us to establish a separate

CF for primary care services.) This general formula can be expressed

as:

Payments=RVUts x GAFtsa x CF

where

RVUt=Total relative value units for the service

GAFt=Total geographic adjustment factor for the fee schedule area

CF=Uniform national CF

s=Service

a=Fee schedule area

The RVUs for each service reflect the relative resources involved

in furnishing the three components of a physician's service: (1) Work;

(2) practice expenses or overhead exclusive of malpractice liability

insurance costs; and (3) professional liability insurance or

malpractice costs.

Section 1848(e) of the Act requires the Secretary to develop GAFs

for all physician fee schedule areas. The total GAF for a fee schedule

area is equal to a weighted average of the individual GPCIs for each of

the three components of the service. Thus, the GPCIs reflect the

relative costs of practice expenses, malpractice insurance, and

physician work in an area compared to the national average. In

accordance with the law, however, the GAF for the physician's work

reflects one-quarter of the relative cost of physician's work compared

to the national average.

The CFs are national values that convert RVUs into payment amounts.

We also established a separate CF for anesthesia services. For the

first year of the fee schedule, the law required a base-year CF that

was budget-neutral relative to 1991 estimated expenditures. The

Secretary is required to recommend to the Congress updates to the CFs

by April 15 of each year as part of the MVPS and annual fee schedule

update process. The Congress may choose to enact the Secretary's

recommendation, enact another update amount, or not act at all. If the

Congress does not act, the annual fee schedule update is set according

to a ``default'' mechanism in the law. Under this mechanism, the update

will equal the Medicare Economic Index (MEI) adjusted by the amount

actual expenditures for the second previous fiscal year (FY) were

greater or less than the performance standard rate of increase for that

FY. (The MEI is a physician input price index, in which the annual

percent changes for the direct-labor price component are adjusted by an

annual percent change in a 10-year moving average index of labor

productivity in the nonfarm business sector.) The MVPS for FY 1995 and

the physician fee schedule update for CY 95 are published elsewhere in

this Federal Register issue as a final notice (BPD-807-FN).

D. Summary of the Development of the RVUs

1. Work RVUs

Approximately 7,500 codes represent services included in the

physician fee schedule. The work RVUs established for the

implementation of the fee schedule in January 1992 were developed with

extensive input from the physician community. The original work RVUs

for most codes were developed by a research team at the Harvard School

of Public Health in a cooperative agreement with us. In constructing

the vignettes for the original RVUs, Harvard worked with panels of

expert physicians and obtained input from physicians from numerous

specialties.

The RVUs for radiology services are based on the American College

of Radiology (ACR) relative value scale, which we integrated into the

overall physician fee schedule. The RVUs for anesthesia services are

based on RVUs from a uniform relative value guide. We established a

separate CF for anesthesia services because we continue to recognize

time as a factor in determining payment for these services.

Proposed RVUs for services were published in a proposed rule in the

Federal Register on June 5, 1991 (56 FR 25792). We responded to the

comments in the November 1991 final rule. Since many of the RVUs were

published for the first time in the final rule, we considered the RVUs

to be interim during the first year of the fee schedule and gave the

public 120 days to comment on all work RVUs. In response to the final

rule, we received comments on approximately 1,000 services. We

responded to those comments and listed the new RVUs in the November

1992 notice for the 1993 fee schedule for physicians' services. We

considered these RVUs to be final and did not request comments on them.

The November 1992 notice (57 FR 55914) also discussed the process

used to establish work RVUs for codes that were new or revised in 1993.

The RVUs for these codes, which were listed in Addendum C of the

November 1992 notice, were considered interim in 1993 and open to

comment through January 26, 1993.

We responded to comments received on RVUs listed in Addendum C of

the November 1992 notice (57 FR 56152) in the December 1993 final rule

(58 FR 63647) for the 1994 physician fee schedule. The December 1993

final rule discussed the process used to establish RVUs for codes that

were new or revised in 1994. The RVUs for these codes, which are listed

in Addendum C of the December 1993 final rule (58 FR 63842), were

considered interim in 1994 and open to comment through January 31,

1994. We proposed RVUs for some non-Medicare and carrier-priced codes

in our June 1994 proposed rule (59 FR 32760). Codes listed in Table 1

of the June 1994 proposed rule were open to comment.

2. Practice Expense and Malpractice Expense RVUs

Section 1848(c)(2)(C) of the Act requires that the practice expense

and malpractice expense RVUs equal the product of the base allowed

charges and the practice expense and malpractice percentages for the

service. Base allowed charges are defined as the national average

allowed charges for the service furnished during 1991, as estimated

using the most recent data available. For most services, we used 1989

charge data ``aged'' to reflect the 1991 payment rules, since those

were the most recent data available for the 1992 fee schedule.

If charge data were unavailable or insufficient, we imputed the

practice expense and malpractice expense RVUs from the work RVUs. For

example, if a procedure has work RVUs of 6.00, and the specialty

practice cost percentages for the specialty furnishing the service is

60 percent work, 30 percent practice expense, and 10 percent

malpractice expense, then the total RVUs would be 10.00 (6.00/.60), the

practice expense RVUs would be 3.00 (10 x .30), and the malpractice

expense RVUs would be 1.00 (10 x .10).

II. Specific Proposals for Calendar Year 1995 and Responses to Public

Comments

In response to the publication of the June 24, 1994 proposed rule,

we received approximately 3,400 comments. We received comments from

individual physicians and health care workers and professional

associations and societies. The majority of the comments addressed two

proposals: (1) To allow separate payment for physician care plan

oversight; and (2) to convert Iowa to a statewide payment area

effective January 1, 1995.

The proposed rule discussed policies that affect the number of RVUs

on which payment for certain services would be based. Any changes

implemented through this final rule are subject to the $20 million

limitation on annual adjustments as required by section 1848(c)(2)(B)

of the Act.

After reviewing the comments and determining the policies we will

implement, we have estimated the costs and savings of these policies

and added those costs and savings to the estimated costs associated

with any other changes in RVUs for 1995, including RVU changes

necessitated by the 1995 CPT coding changes. We discuss in detail the

effects of these changes in the Regulatory Impact Analysis (section

IX).

In the June 1994 proposed rule (58 FR 32754), we invited public

comments on a proposal to include clinical diagnostic laboratory

services performed in hospital outpatient settings in the MVPS category

of nonsurgical services beginning in FY 1996. We are responding to the

comments we received on this issue in the final notice entitled

``Physician Fee Schedule Update For Calendar Year 1995 and Physician

Performance Standard Rates of Increase for Federal Fiscal Year 1995''

(BPD-807-FN) published elsewhere in this Federal Register issue.

For the convenience of the reader, the headings for the policy

issues in sections II and III, for the most part, correspond to the

headings used in the June 1994 proposed rule. More detailed background

information for each issue can be found in the June 1994 proposed rule

(59 FR 32754).

A. GPCI Changes

As stated earlier, section 1848(e)(1)(C) of the Act requires that

the GPCIs be reviewed and, if necessary, revised at least every 3

years. The first review is required by 1995. The law also requires that

only one-half of any revision be implemented in the first year if more

than 1 year has elapsed since the last GPCI revision. The proposed

fully revised 1996 GPCIs were published at Addendum B in the June 1994

proposed rule (59 FR 32779). The proposed 1995 GPCIs, representing one-

half of the effects of the revision, were published at Addendum C in

the June 1994 proposed rule (59 FR 32783). The final revised GPCIs for

1995 and 1996 can be found at Addenda D and E respectively, of this

final rule. Except for Iowa, which was converted from seven payment

areas to a single statewide locality and now has statewide GPCIs (see

discussion of locality changes later in this final rule), the GPCIs are

unchanged from those listed in the proposed rule.

We based the GPCIs on proxy data selected to best measure the area

differences in a ``market basket'' of goods consisting of the resources

required to operate a private medical practice. A reevaluation of the

proxies used and a search for alternative data sources led us to

conclude that the original proxies are still the best available data

sources. While there were some very minor refinements made in the

methodology, the GPCI revisions primarily consist of using the same

proxies but much more recent and comprehensive data. The wage proxy

data for physician work and employee wages are from 1990 census data,

rather than from 1980 census data as in the current GPCIs. The

Department of Housing and Urban Development (HUD) rental proxy data are

from 1994 fair market rental data rather than from 1987 fair market

rental data. The actual malpractice insurance premium data are from

1990 through 1992 premium data rather than from 1985 and 1986 premium

data and are for 20 rather than 3 physician specialties. Studies

available from the National Technical Information Service containing

detailed descriptions of the methodology, technical aspects, and data

underlying the GPCIs are listed in the June 1994 proposed rule (59 FR

32756 and 32758).

We mentioned in the proposed rule that we were analyzing commercial

rent data to assess their suitability for use in constructing the

rental indices. We have completed our analysis of commercial rent data

from the Building Owners and Managers Association (BOMA), the General

Services Administration (GSA), and the United States Postal Service

(USPS). We did not use the BOMA and GSA data because of poor geographic

coverage, especially outside of large metropolitan areas. That is, data

were not widely and consistently available for all Medicare fee

schedule areas. The USPS data have much better geographic coverage, but

sample sizes in many fee schedule areas were often unacceptably small,

which could cause erroneous results. Where data were available, all

three sources of commercial data were highly correlated with and

generally validated the HUD indices. USPS rents and HUD rents were

highly correlated across States, with a correlation coefficient of

0.85. The HUD rents were highly correlated; coefficients ranged from

0.73 to 0.89 with USPS, GSA, and BOMA indices across 48 large

metropolitan areas. We still believe that the HUD rental data are the

best available data to construct the GPCI rental indices.

Comment: Commenters generally agreed with the use of more recent

and comprehensive data in updating the GPCIs. They expressed concern,

however, over the continued use of proxy data rather than actual

physician cost data, particularly for physician work and office rents.

Some commenters stated that we should use actual physician earnings

rather than the earnings of other professional occupations for the work

index. Others stated that we should have used only the earnings of

professionals with advanced degrees, rather than the all-education

sample. Other commenters expressed concern over the continued use of

residential rather than commercial rents.

Response: In revising the GPCIs, we conducted an extensive search

for alternative data sources as well as for more recent data. The

search led us to conclude that the current GPCI proxies are still the

best available data to measure practice cost variations among

geographic areas. As stated in all previous discussions in proposed and

final rules on the GPCI, the actual earnings of physicians were not

used to adjust geographical differences in fees because these fees are,

in large part, the determinants of the earnings. That is, the use of

actual physician earnings would be ``circular.'' We used the all-

education sample (which includes professionals with advanced degrees)

rather than the advanced degree only sample, because its larger sample

size makes it more accurate and the differences between the two were

negligible in all but a few of the smallest localities. We believe the

small advanced degree sample in these smallest localities may produce

inaccurate results. As discussed in the paragraph preceding this

comment, we believe that the HUD data are still the best data available

for measuring rental differences among areas.

Comment: Some commenters from areas estimated to experience the

largest decreases in payments under the revised GPCIs stated that the

magnitude of the changes demonstrates that the GPCIs are inherently

unstable and unreliable and contain significant methodological and data

difficulties. They attribute the difficulties to the use of proxy data

rather than actual physician cost data.

Response: We disagree. The revised GPCIs are based on census data

that are 10 years more recent, HUD rental data that are 7 years more

recent, and malpractice data that are 6 years more recent than the data

used to construct the current GPCIs. We believe the validity and

stability of the GPCIs are underscored by the fact that, out of the 216

physician fee schedule areas, which are an inconsistent mix of large

and small and urban and rural areas, no area's GAF increased or

decreased by more than about 8 percent, with 75 percent of GAFs

changing by less than 3 percent. It is not unreasonable to assume that

the use of actual physician cost data would have resulted in changes of

the same or larger magnitude over the same period of time.

Comment: Many commenters questioned how their GPCIs could decrease

when their actual expenses have increased every year.

Response: The GPCIs measure area costs compared to the national

average. As we explained in the June 1994 proposed rule (59 FR 32759),

a decrease in an area GPCI does not mean that actual costs have

decreased in that area. It means that costs in that area have declined

compared to the national average. That is, costs in that area have not

increased as fast as national average costs since the current GPCIs

were computed.

Comment: Commenters stated that Medicare physician payments should

be the same everywhere because physician effort and quality of services

do not differ among areas. One commenter did not believe that the

GPCIs, or any index, could accurately reflect area cost differences

because of factors such as practice differences and supply and demand.

Response: Section 1848(e)(1)(A) of the Act requires that payments

vary among fee schedule areas. It would be impossible for the GPCIs to

exactly reflect cost differences for each individual practice. However,

the GPCIs have been examined by government and private groups, and

there is general agreement that the GPCIs are the best available

measurement of area practice cost differences.

Comment: One commenter stated that the GPCIs should reflect only

the differences in practice expense and malpractice expense and that

there should be no recognition of area differences in the value of

physician work.

Response: Section 1848 (e)(1)(A) of the Act requires that the GPCIs

measure one-quarter of the differences among fee schedule areas in the

relative value of physician work effort. It recognizes the full

differences among areas in practice expense and malpractice costs.

Comment: Commenters questioned the GPCI assumption that the cost of

medical equipment, supplies, and miscellaneous items are uniform

everywhere, that is, has an index value of 1.000.

Response: We agree that price differences for medical equipment,

supplies, and miscellaneous items may exist. However, such differences

are more likely to be based on factors such as volume discounts than on

geographic location. We could find no data demonstrating consistent

area price differences for this component. Also, since this component

represents only about 14 percent of the GPCI, a 10-percent variation in

area price differences would yield about a 1-percent difference in

payments.

Comment: Commenters from New York State complained that the use of

1990 through 1992 malpractice data does not reflect the situation in

1994 because 1990 through 1992 was a stable period for malpractice

premiums in New York, while premiums have increased dramatically in

1993 and 1994. The commenters also objected to basing the malpractice

GPCIs primarily on policies written by a single insurer, St. Paul Fire

and Marine, which they state does not currently provide policies in New

York State. The commenters suggested that we use premium data from

Medical Liability Mutual of New York, which has the largest malpractice

market share in the State.

Response: In calculating the proposed malpractice GPCIs, we used

more recent premium data (1990 through 1992 versus 1985 and 1986 data)

and more comprehensive premium data (more insurers and premiums for 20

versus 3 physician specialties). Thus, we believe the proposed

malpractice GPCIs are vastly improved over the current malpractice

GPCIs. The current malpractice GPCIs, not the proposed malpractice

GPCIs, were based primarily on policies written by St. Paul Fire and

Marine. The proposed New York malpractice GPCIs were based on premium

data from insurers providing 80 percent of the malpractice insurance

market in New York, including premium data from Medical Liability

Mutual of New York. Because of the time required to collect and analyze

data, it is not possible to be absolutely current. That is, a 1995 GPCI

proposed in 1994 cannot be based on 1994 or 1995 data. The 1990 through

1992 malpractice data were the most recent data available when the

revised GPCIs were developed. More recent malpractice premium trends

will be reflected in the next GPCI revision.

Comment: One commenter expressed concern that the revised GPCIs

would further exacerbate the problem of access to medical care in rural

areas because GPCIs in urban areas increased, while those in rural

areas decreased.

Response: We believe that the revised GPCIs have a broadly mixed

effect, in large part because of the great variation in the composition

of fee schedule payment areas. Some areas are a whole State, others are

primarily urban or rural, and still others are a combination of urban

and rural areas. It is an oversimplification to argue that revised

urban GPCIs increased while rural GPCIs decreased. For example, while

GPCIs in some urban areas--Rhode Island, Manhattan, Miami, and

Houston--showed significant increases, GPCIs in other urban areas--Las

Vegas, San Diego, Los Angeles, and Chicago--showed significant

decreases. While some rural GPCIs--southern Illinois, rural Oregon,

Montana, and Idaho--showed decreases, other rural areas--Maine,

Vermont, New Hampshire, and rural Florida--showed significant

increases. About 75 percent of all 216 fee schedule areas changed by

less than 3 percent under the fully revised GPCIs.

Comment: Commenters from urban areas in two States, Arkansas and

New Mexico, that currently have statewide payment areas, stated that

costs were higher in their areas than in the rural areas of the State

and that they should have a different GPCI from the rest of the State.

Response: Section 1848 (e)(1)(A)(i) of the Act requires that the

GPCIs reflect practice cost differences among fee schedule areas. These

fee schedule areas happen to be statewide areas and, thus, have

statewide GPCIs. This is a locality issue rather than a GPCI issue. As

stated in the locality section of the proposed rule (59 FR 32759), we

are reviewing the existing payment locality configuration for possible

changes sometime after 1996. In the meantime, the only locality changes

we will consider are changes to a statewide locality in States

currently having multiple payment areas.

Comment: One commenter stated that the GPCIs should recognize the

effect of a gross receipts tax (GRT) in States such as Hawaii and New

Mexico, which have a GRT on physician professional services.

Response: A State GRT on the professional services of physicians is

not a resource cost in producing a physician's service and, thus, is

not included in the GPCIs. Conceptually, there is little difference

between State taxes on physicians' professional services and State

taxes on the net income or earnings of professional corporations,

partnerships, or sole proprietorships. The purpose of a State GRT is to

raise revenue for the State. In addition to being inconsistent with the

statutory intent of measuring resource costs, increasing Medicare

payments to reflect a State GRT would in effect be passing the State

tax through to the Federal Medicare program. We do not believe that the

Medicare Part B trust funds should be used to subsidize State tax

measures.

Final Decision: Except for Iowa, the proposed GPCIs will be

effective beginning in 1995. (As stated earlier, one-half of the

effects of the revision will be effective in 1995 and one-half in

1996.) The GPCIs for Iowa are discussed below.

B. Payment Area (Locality) Change

In the June 1994 proposed rule (59 FR 32759), we proposed to

convert Iowa to a statewide payment area on January 1, 1995. In the

June 1991 proposed rule (56 FR 25832) and the November 1991 final rule

(56 FR 59514) on the physician fee schedule, we stated that until we

decide on ultimate large-scale changes, the only locality changes we

would consider would be requests for converting individual States with

multiple localities to a single statewide locality if ``* * *

overwhelming support from the physician community for the change can be

demonstrated.'' The Iowa Medical Society requested a statewide payment

area and presented evidence that local organizations representing about

75 percent of total State medical society members, including

organizations representing about 70 percent of members in areas

expected to experience payment reductions under a statewide locality,

supported a statewide payment area. The Iowa Medical Society membership

represents about 75 percent of all Iowa physicians.

Proposing the conversion in the proposed rule provided an

opportunity for all physicians in Iowa, both State medical society

members and nonmembers, to comment on the change. The comments we

received support our position that overwhelming support exists for a

statewide locality in Iowa. Of the 1,625 comments received from Iowa

physicians, 98 percent supported a statewide payment area. Support was

unanimous among the 1,095 comments from Iowa physicians in winning

areas. Of the 530 letters from physicians in losing areas, about 94

percent supported the change. We received only 34 comments from

physicians opposing the change.

The new statewide payment area for Iowa means replacing the current

seven area GPCIs with budget-neutral statewide GPCIs. The revised

statewide GPCIs for Iowa can be found at Addenda D and E. These are the

same statewide GPCIs that were published at Addenda E and F in the June

1994 proposed rule (50 FR 32789).

Comment: Commenters supported a statewide payment area because they

believed that services and costs were the same in all areas and that

equal payment rates would help improve access to care in underserved

rural areas.

Response: We agree that there is no evidence that the quality of

services is different in rural and urban areas. We also agree that

equal payment rates may encourage physicians to practice in rural

areas.

Comment: Some urban physicians in Iowa commented that their

practice costs were higher than in rural areas and that their payments

should, therefore, continue to reflect these higher costs.

Response: We agree that the GPCIs show that practice costs are

generally slightly higher in urban areas in Iowa. However, as

previously mentioned, in responding to comments on the June 1991

proposed rule and in order to be responsive to the physician community,

we agreed to consider requests for conversion to a statewide payment

area if overwhelming support exists among the physician community for

the change. This support was demonstrated in Iowa.

Comment: On the general subject of localities, several commenters

stated that the current locality structure is outdated and inconsistent

and should be revised.

Response: We are funding a study of the physician fee schedule

locality structure. We expect to have the results next year and will

consider possible locality changes in the future.

Comment: Some commenters suggested that we establish clear

criteria, such as an absolute numerical standard of the level of

support among physicians in the State, to be met in order for us to

convert localities to a statewide payment area. They requested an

explanation of the decision process in the States that we converted.

Response: To be responsive to the physician community we stated

that we would consider requests for a change to a statewide locality if

there was overwhelming support for the change among physicians in both

winning and losing areas. We did not set absolute numerical levels of

support to be met because of the uniqueness of the current locality

structure in each State. Some large populous, primarily urban, States

have only two localities. On the other hand, some less populous,

primarily rural, States have seven localities. We believe that setting

an absolute numerical level of support would limit the discretion

required for us to properly evaluate the request in each unique

situation.

While not setting an absolute numerical standard, we have employed

a consistent process in evaluating each request. Upon receiving a

preliminary contact from a State medical society, we inform the society

that at a minimum we require: (1) A formal request for the change from

the State medical society, along with a copy of a recently adopted

resolution requesting the change; (2) the number of licensed actively

practicing physicians in the State and the number that are society

members; (3) the number of society members in each local (county)

society; and (4) letters from the local societies representing

physicians in the losing areas indicating the level of support for the

change. After evaluating this material, and, in some cases, contacting

the medical society if more information is required, if we believe that

the material demonstrates overwhelming support among both winning and

losing physicians, we announce the proposed change in the Federal

Register. If the public comments received demonstrate this overwhelming

support, we announce the change in a final rule in the Federal

Register.

Final Decision: Iowa will become a statewide payment area effective

January 1, 1995.

C. Work RVUs--Refinement of Proposed RVUs (Includes Table 1--Refinement

of Proposed RVUs)

In the June 1994 proposed rule (59 FR 32760), we proposed physician

work RVUs for approximately 100 carrier-priced and non-Medicare CPT

codes. For 35 of those codes, we received recommendations from the AMA

Specialty Society Relative Value Update Committee (RUC) that were

consistent with our proposed work RVUs. We received 37 substantive

comments objecting to the proposed work RVUs associated with 23 CPT

codes.

Although we did not include a work RVU for CPT code 30450

(rhinoplasty or revision of nose) in the proposed rule, we received

comments on it. Since it is part of the ``revision of nose'' family of

codes and we received a RUC recommendation, we included it in this

refinement process. Since we did not propose a work RVU for this code,

the work RVU will be considered interim for 1995.

We convened a multispecialty panel of physicians to assist us in

reviewing the comments. The panel was moderated by our medical staff

and consisted of the following groups:

A clinician representing each of the specialties most

identified with the procedures in question. The specialists on the

panel were nominated by the specialty society that submitted the

comments. Eleven specialty societies were represented on the panel.

Primary care clinicians nominated by the American Academy

of Family Practice (AAFP), the American Society of Internal Medicine

(ASIM), the American Academy of Osteopathy, and the American Academy of

Pediatrics.

Medicare carrier medical directors (CMDs).

After reviewing the comments we received, we submitted comments on

24 codes for evaluation by the panel. The panel discussed the physician

work involved in each procedure under review in comparison to the work

associated with other services on the fee schedule. We assembled a set

of reference services that included: (1) Services that are commonly

performed whose work RVUs are not controversial; (2) services that span

the entire spectrum from the easiest to the most difficult; and (3) at

least three services performed by each of the major specialties so that

each specialty would be represented. The set listed approximately 120

services. Panelists were encouraged to make comparisons to these

reference services whose work RVUs had not been challenged in the

comment process. We asked specialty societies to compare clinical

aspects of the work of services they believed were incorrectly valued

to one or more of the reference services.

The intent of the panel process is to capture each participant's

independent judgment based on the discussion and his or her clinical

experience. Following each discussion, participants rated the work for

the procedure. Ratings were individual and confidential, and there was

no attempt to achieve consensus among the panel members.

We analyzed the ratings of work for consistency among the groups

represented on each panel. Generally, we used the statistical tests

described in the November 1992 final notice (57 FR 55938) to determine

if there was agreement among the groups of the panel and if the agreed-

upon RVUs were significantly different from the proposed RVUs.

Our decision to convene multispecialty panels of physicians and to

apply statistical tests was based on our need to balance the interests

of those who commented on the work RVUs against the redistributive

effects that would occur in other specialties, particularly the

potential adverse effect on primary care services. Of the 24 codes

reviewed by our multispecialty panel, all of the requests were for

increased work RVUs.

Of the 24 proposed work RVUs that were reviewed, approximately 87.5

percent (21 codes) were increased and approximately 12.5 percent (3)

were not changed. We had to clarify the meaning of two of the codes

reviewed before the panel members could rate the work. First, the

repair of a protruding ear (CPT code 69300) is interpreted to represent

the repair of a single ear. If both ears are repaired during the same

operative session, CPT code 69300 should be reported with a bilateral

modifier and payment will be made at 150 percent of the payment amount

for repairing only one ear. Second, the descriptor for newborn

resuscitation (CPT code 99440) is unclear because it refers to ``high

risk newborn.'' Some physicians have misinterpreted this code and used

it to report the services provided to any newborn following a cesarean

section. Rather, CPT code 99440 should be used to report only the care

provided to infants requiring life support following delivery. Our

interpretation of CPT code 99440, which was the basis of the panel

members' rating of the work, is that newborn resuscitation means

providing positive pressure ventilation and/or chest compressions in

the presence of inadequate ventilation and/or cardiac output.

Table 1 lists the codes reviewed during the refinement process

described in this section. This table includes the following

information:

HCPCS (HCFA Common Procedure Coding System) code. This is

the CPT code for a service.

Description. This is an abbreviated version of the

narrative description of the code.

HCFA proposed work RVUs. The work RVUs that appeared in

Table 1 of the June 1994 proposed rule (59 FR 32760) are shown for each

reviewed code.

Requested work RVUs. This column identifies the work RVUs

requested by commenters. We received more than one comment on some

codes, and, in a few of these cases, the commenters requested different

RVUs. The table lists the highest requested RVUs.

1995 work RVUs. This column contains the final RVUs for

physician work. The 1995 RVUs shown have not been adjusted for budget

neutrality.

The HCFA proposed RVUs for codes that do not appear in this table

but did appear in Table 1 in the proposed rule are considered final.

The RVUs for these codes will be rescaled to maintain budget

neutrality.

Table 1.--Refinement of Proposed RVUs

------------------------------------------------------------------------

HCFA

HCPCS* Description proposed Requested 1995 work

work RVUs work RVUs RVU**

------------------------------------------------------------------------

15775.. Hair transplant punch grafts.. 4.00 5.31 4.00

15776.. Hair transplant punch grafts.. 5.60 7.44 5.60

19396.. Design custom breast implant.. 1.70 2.96 2.19

30400.. Reconstruction of nose........ 8.85 9.87 9.34

30410.. Reconstruction of nose........ 9.95 13.82 12.53

30420.. Reconstruction of nose........ 12.76 16.62 15.57

30430.. Revision of nose.............. 5.60 7.40 6.80

30435.. Revision of nose.............. 9.65 12.24 11.35

30450.. Revision of nose.............. 13.43 18.51 18.26

31582.. Revision of larynx............ 16.32 20.18 19.95

37788.. Revascularization, penis...... 15.00 22.70 21.57

50320.. Removal of donor kidney....... 16.16 22.37 21.46

54670.. Repair testis injury.......... 5.33 6.50 6.13

55870.. Electroejaculation............ 0.30 3.95 2.61

69300.. Revise external ear........... 5.50 6.91 6.43

92015.. Refraction.................... 0.38 0.53 0.38

92314.. Prescription of contact lens.. 0.64 0.79 0.70

92341.. Fitting of spectacles......... 0.44 0.51 0.48

92342.. Fitting of spectacles......... 0.51 0.59 0.54

92370.. Repair & adjust spectacles.... 0.17 0.49 0.32

99431.. Initial care, normal newborn.. 0.74 1.23 1.18

99432.. Newborn care not in hospital.. 1.15 1.28 1.27

99433.. Normal newborn care, hospital. 0.44 0.64 0.63

99440.. Newborn resuscitation......... 0.92 2.96 2.96

------------------------------------------------------------------------

*All numeric CPT HCPCS Copyright 1994 American Medical Association.

**RVUs do not reflect adjustment for budget neutrality.

D. Separate Payment for Physician Care Plan Oversight Services

We proposed to allow separate payment for care plan oversight

services furnished on or after January 1, 1995 for beneficiaries

receiving Medicare-covered home health care services. We did not

propose to pay separately for care plan oversight for beneficiaries in

hospices, beneficiaries under the care of an HHA but not receiving

covered HHA care, and beneficiaries residing in skilled nursing

facilities (SNFs) and nursing facilities (NFs). We also stated that we

would prohibit payment to a physician who has a significant ownership

interest in, or a significant financial or contractual relationship

with, an HHA (see Sec. 424.22(d) regarding the limitations on

certification and the establishment of a treatment plan for home health

services).

We proposed to establish one level of payment when the care plan

oversight services require at least 30 minutes in a 30-day period.

We stated that the physician work involved in HHA care plan

oversight is similar to that described as hospital discharge day

management (CPT code 99238); therefore, we proposed assigning the same

level of RVUs to the code for care plan oversight. For 1994, CPT code

99238 is assigned 1.63 total RVUs (1.07 work RVUs, 0.52 practice

expense RVUs, and 0.04 malpractice expense RVUs). We proposed to

subject these services to the CF for nonsurgical services other than

primary care.

[Hospice]

Comment: Many commenters expressed concern that the prospective

rate paid to the hospice does not include payment to the beneficiary's

attending physician for care plan oversight services. Numerous

commenters, including physicians, hospice and visiting nurses, and

hospice and medical organizations argued that the care plan oversight

services furnished by the attending physician in a hospice setting are

often greater than those required in the typical home care setting due

to the deteriorating condition of hospice patients. The complex pain

management required by many hospice patients and the undesirability of

having these patients leave their homes for office visits were cited as

examples of the need for separate payments for care plan oversight

services.

Response: We agree that the attending physician for a beneficiary

receiving care under the Medicare hospice benefit may furnish physician

services that meet the requirements for care plan oversight services.

In certain situations, the care requirements of patients receiving the

hospice benefit are complex and require significant medical management

furnished by the attending physician. We plan to allow separate payment

for care plan oversight services when our other criteria for payment

are met. We will not allow separate payment for care plan oversight

services furnished by the hospice medical director or a physician who

is employed by the hospice or who provides services under arrangements

with the hospice (see Sec. 418.304(c)) since payments for care plan

oversight services furnished by those physicians are included in the

prospective rates paid to the hospices.

[Skilled Nursing Facility (SNF)/Nursing Facility (NF)]

Comment: Several commenters expressed concern that the 1993

increase in work RVUs for the SNF and NF evaluation and management

codes for new or established patients did not account for care plan

oversight services. These commenters believed that the SNF and NF

values were increased to incorporate the demands of required

comprehensive reassessments and do not include the level of work and

associated physician costs specified in the care plan oversight CPT

codes.

Response: For a patient residing in an SNF or NF, a physician is

required to perform a reassessment annually and after any episode when

the patient's condition changes significantly. This requirement ensures

that, as necessary, treatment plans are updated and care is coordinated

with other providers. The evaluation and management codes for SNF and

NF visits include payment for supervision services and were

specifically increased in 1993 to account for physician work involved

in developing and revising medical plans of care. We believe that the

payments for the prework and postwork associated with the required and

medically necessary periodic reassessments and visits provide adequate

payment for the medical management of a patient. Therefore, we will not

allow separate payment for care plan oversight services for patients

residing in an SNF or NF.

[Beneficiaries Not Receiving Covered Home Health Services]

Comment: Several commenters recommended that we allow payment for

care plan oversight services for all beneficiaries under the care of

HHAs, including situations when Medicaid pays for the home health

services. Further, several commenters believed that we should allow

payment for care plan oversight services for beneficiaries receiving

home intravenous therapy, parenteral and enteral feeding, and

ventilator support, whether or not HHAs were involved in the care.

The commenters stated that many families furnish care to

chronically ill beneficiaries under the direction of a physician

without the services of an HHA. These commenters believed that

increased physician involvement would benefit all Medicare

beneficiaries. They also believed that physicians should be paid for

furnishing care plan oversight services for all patients who need

medical supervision.

Response: We agree with the commenters that active physician

involvement in the care of patients is essential for ensuring quality

care. We do not believe, however, that all circumstances in which

physician involvement is desired demonstrate a need for additional

payment for care plan oversight services. Care plan oversight services

for which we have determined separate payment is warranted include the

physician supervision and management of complex or multidisciplinary

care modalities involving regular physician development or revision.

The Medicare beneficiaries who require this type of service are the

most ill and demand the level of services indicated under the Medicare

home health and hospice benefits. Therefore, we will not allow separate

payment for care plan oversight for services furnished to beneficiaries

not receiving Medicare-covered home health or hospice services.

We believe that care plan oversight services are distinct from

routine follow-up services for patients receiving home intravenous

therapy, parenteral and enteral feeding, ventilator support, and other

sophisticated treatments. We do not believe that all patients who

benefit from the use of new therapies and medical advances necessarily

require extensive care plan oversight services. We do recognize,

however, that some of these patients may require more intense services

related to complex medical conditions. We believe that these

beneficiaries are likely to be receiving covered home health services.

[Care Plan Oversight by Other Practitioners]

Comment: Some commenters believed that patients may require care

plan oversight services that could be furnished by nurse practitioners

and physician assistants. These commenters, however, expressed

conflicting opinions as to which patients required physician care plan

oversight services and which patients could be managed by nonphysician

providers.

Response: Section 1861(m) of the Act provides coverage of home

health services where those services are furnished under a plan of care

established and periodically reviewed by a physician. Further, sections

1814(a)(2)(C) and 1835(a)(2)(A) of the Act require physicians to

certify the need for home health services. Thus, while there may be

some cases for which nurse practitioners or physician assistants are

able to oversee the care of patients in the home, physicians are

required by current law to perform certain functions. As a matter of

equity, we wish to provide adequate payment for services to those

patients with complex conditions requiring significant medical

decision-making for whom physicians are required to perform these

services. We will continue to evaluate these comments in the context of

our initiative to improve the Medicare home health benefit.

[Concerns About Fraud]

Comment: Some commenters expressed concern that limiting payment

for care plan oversight services only for beneficiaries receiving

covered HHA services would lead to inappropriate HHA referrals and

fraudulent billing for care plan oversight services.

Response: We have no basis to believe that physicians would certify

inappropriately the need for home health services and do not believe

that our proposal would invite fraudulent billing. We believe that the

professional integrity of physicians combined with postpayment

monitoring and education will be sufficient to deter fraudulent

referrals.

[Other Comments]

Comment: One commenter suggested that payments for physician home

visits be increased instead of implementing separate payment for care

plan oversight services. Another commenter maintained that reducing the

often unneeded and duplicative administrative work that is required

under current Medicare rules be investigated before implementing

payment for physician care plan oversight. Another commenter

recommended developing an alternative method of identifying

beneficiaries who need an unusual amount of oversight through the use

of a modifier or identifying diagnosis.

Response: We believe, in certain situations, patients receiving

home health and hospice services require significant medical management

that does not require face-to-face encounters with the physician.

Increasing payments for home visits would not provide an adequate

method of ensuring increased payments for physicians furnishing complex

care plan oversight services during a month in which the physician does

not make a visit to the patient's home. Furthermore, this alternative

would increase payments for all home visits whether or not the patient

required complex oversight services rather than compensating physicians

for the level of services furnished.

Care plan oversight services for patients requiring complex or

multidisciplinary care modalities involving regular physician

development or revision necessitate a high level of decision-making and

go beyond administrative functions. While we recognize the need to look

for opportunities to streamline Medicare administrative requirements,

we plan to provide payment for significant medical management services

for which our past policy may not have provided adequate payment.

We believe that patients who require care plan oversight services

have complex health needs. Often these patients require significant

medical management services due to a variety of physical and

psychosocial conditions that are not easily identified by any one

diagnosis. We also do not believe that the use of a modifier would

provide a more efficient method of payment for care plan oversight

services.

[Physicians Eligible to Receive Payment]

Comment: Several commenters supported restricting payment for care

plan oversight services to one physician per month. Other commenters

maintained that there may be certain situations in which payment for

care plan oversight services to more than one physician in a month

would be appropriate.

Response: The conditions of participation for HHAs, set forth in

Sec. 484.18(b), state that the patient's plan of care is reviewed by

the patient's attending physician. We believe that, in general, only

one physician typically performs this role and is responsible for

signing the HHA plan of care. Under the Medicare hospice benefit, the

hospice medical director or physician designee and the patient's

attending physician participate in the plan of care. However, only

attending physician services, which are not considered hospice care,

are paid directly through Medicare Part B. Services of a hospice

medical director and all other hospice physician services are paid

directly to the hospice through the Medicare hospice prospective

payment system. Therefore, the hospice patient's designated attending

physician is the single physician outside of the Medicare hospice

benefit potentially participating in hospice care plan oversight

services and, hence, eligible for payment for care plan oversight

services under Medicare Part B. Finally, single physician involvement

in care plan oversight services is consistent with the CPT definition

of the care plan oversight code.

[Requirement That the Physician See the Patient]

Comment: A few commenters questioned the appropriateness of

requiring that the physician billing for care plan oversight services

be required to have seen the patient in the prior 6-month period and at

6-month intervals. Some commenters were concerned that this requirement

was arbitrary and not necessary because physicians should decide the

frequency of visits. Some commenters expressed concern over situations

in which the patient moved or traveled to another State or a physician

was covering for the physician supervising the plan of care.

Response: Before proposing separate payment for care plan

oversight, we expressed concern for the need to ensure that high

quality care is delivered to beneficiaries receiving care in the home.

We believe that the medical management of patients with complex health

needs should be linked with a face-to-face evaluation of the patient.

We do not believe that it is unreasonable to specify that a physician

be required to see a patient within 6 months of establishing, or

significantly revising, a plan of care. While we, in general, support

the role of the physician in determining the frequency of visits, we

believe that the patients for whom we plan to allow separate payment

for care plan oversight have complex medical conditions requiring

intensive treatments, frequent determinations of responses to

therapies, and reassessments of plans of care.

Several commenters expressed concern that a face-to-face encounter

would be required every 6 months. We believe that these commenters have

misunderstood our proposal. We are not proposing periodic face-to-face

encounters as a condition for payment for care plan oversight services

although periodic face-to-face encounters could contribute to the

delivery of high quality services. We plan to require a face-to-face

encounter within 6 months of the first billing for care plan oversight

services to indicate the active involvement of the physician in the

medical decision-making required to develop or modify the plan of care.

With respect to the comments concerning patients who travel, we do

not believe that, during the same 1-month period, patients generally

would require 30 minutes of care plan oversight services from two

physicians. Further, we do not believe that patients requiring covered

home health or hospice services travel to a great extent, particularly

those who require recurrent revisions in their treatment plans. In

cases in which the patient traveled and required physician services

involving significant medical decision-making, we believe that a

physician, having never seen or not having seen a patient for a period

of time exceeding 6 months, would schedule a face-to-face encounter in

order to perform an accurate evaluation.

We believe the cases in which a covering physician may furnish

medical supervision services to a patient for whom another physician

bills for care plan oversight services are similar to traditional

arrangements between physicians for cross-coverage. The covering

physician may bill for services furnished to the extent that the

appropriate criteria were met.

[Thirty-Day Period]

Comment: A number of commenters asked how the 30-day period covered

by care plan oversight would be determined.

Response: We proposed to allow separate payment for physician care

plan services involving 30 or more minutes of the physician's time in a

30-day period. We agree with the commenters' belief that a calendar

month period would be easier to administer. Therefore, we plan to allow

separate payment for physician care plan oversight services requiring

at least 30 minutes per calendar month. Physicians may bill for

services when they meet the requirements for payment.

[Interest in HHA]

Comment: One commenter stated that payments for care plan oversight

services should not be denied to physicians who have ownership interest

in HHAs other than the agency furnishing services to the physician's

patients.

Response: We will not allow separate payment for care plan

oversight services furnished by a physician to patients receiving

services from a HHA with which the physician has a significant

financial or contractual relationship. This policy is consistent with

Sec. 424.22(d), which prohibits a physician who has a significant

ownership interest in, or a significant financial or contractual

relationship with, an HHA that is furnishing the services from

certifying or recertifying the need for home health services or from

establishing or reviewing a plan of treatment. Given the strictures

against the participation of such a physician in establishing a plan of

treatment, it would be anomalous to pay the physician for care plan

supervision.

[Conversion Factor (CF)]

Comment: A number of commenters opposed the application of the CF

for nonsurgical services other than primary care to care plan oversight

services. These commenters supported the use of the CF for primary care

services and the inclusion of care plan oversight services in the

primary care volume performance standard. They believed that primary

care physicians are the most likely to furnish care plan oversight

services to patients under Medicare's home health and hospice benefits.

Further, the commenters maintained that care plan oversight services

are most similar in work to primary care visits.

Response: We have reconsidered our proposal and agree that the CF

for primary care should be used for care plan oversight services.

Section 1842(i)(4) of the Act, as amended by section 4042(b) of the

Omnibus Budget Reconciliation Act of 1987 (OBRA '87), Public Law 100-

203, enacted on December 22, 1987, and section 13511 of OBRA '93,

defines primary care services as ``office medical services, emergency

department services, home medical services, skilled nursing,

intermediate care, and long-term care medical services, or nursing

home, boarding home, domiciliary, or custodial care medical services.''

We have considered payment for care plan oversight services to be

bundled into medical visits as well as other services, and we are now

establishing separate payment for them under certain conditions.

Because we consider care plan oversight to be primarily bundled into

those services that were cited by the Congress as primary care

services, we believe that the separate payment for care plan oversight

services should also be classified as primary care services.

[Use of Hospital Discharge Day RVUs for Care Plan Oversight]

Comment: Several commenters objected to our decision to decrease

the RUC recommendations for work RVUs for care plan oversight. These

commenters requested that we provide an explanation for the proposed

RVUs for care plan oversight services. Further, these commenters were

concerned that the type and amount of services associated with the

hospital discharge day were not similar to care plan oversight services

since the physician often must make complex care plan decisions based

on new information from nonphysician health professionals without

directly examining the patient.

Response: We proposed to assign 1.07 work RVUs to care plan

oversight services (CPT code 99375) because we believe that the nature

of the work involved in care plan oversight is comparable to the work

of hospital discharge management (CPT code 99238) that involves the

development of plans for home care of varying complexities that serve a

variety of patients including those who have changing conditions. While

we agree that the physician activities associated with discharging a

patient from the hospital are not identical to the physician activities

associated with care plan oversight, we do believe they are

sufficiently comparable to warrant the assignment of the same work RVUs

to both services.

We also believe that the physician work in care plan oversight is

comparable to the preservice and postservice work associated with

evaluation and management services provided to established patients in

the office setting. Consequently, we analyzed Harvard Phase III data on

the intensity of work associated with this category of evaluation and

management services to determine the reasonableness of our decision to

assign 1.07 work RVUs to this service.

The Harvard data indicate that the intensity of preservice and

postservice work equals 90 percent of the intensity of the intraservice

work for evaluation and management services provided to established

patients. When we revised the intraservice work of evaluation and

management services for 1993 in our November 1992 final notice (57 FR

55951), we established the intraservice intensity at 0.03 work RVUs per

minute for established patient visits. Using the Harvard data on

preservice and postservice intensity, we arrived at 0.027 work RVUs per

minute for preservice and postservice work for evaluation and

management services.

Using our intensity value of 0.027 work RVUs per minute and our

proposed work RVUs of 1.07 for care plan oversight (CPT code 99375), we

are able to calculate, by dividing the work RVUs by the intensity

(1.07/0.027), that 40 minutes of preservice and postservice work is

associated with the proposed RVUs for this service. The care plan

oversight code for which we will allow separate payment is used to

report a minimum of 30 minutes of service in a 30-day period, and we

believe that an assignment of work RVUs that corresponds to 40 minutes

of service is appropriate. Therefore, we have assigned interim work

RVUs of 1.07 that are reduced to 1.06 after application of the

adjustment necessary to achieve budget neutrality as described

elsewhere in this rule.

[Excluding Payment for Care Plan Oversight During the Same Month as

Hospital Discharge]

Comment: A number of commenters opposed our not permitting payment

for care plan oversight services during the same month that a physician

bills for the hospital discharge day management (CPT code 99238). The

commenters believed that the RVUs assigned to CPT code 99238 do not

account for all the adjustments in the care plan that occur, sometimes

daily, as unstable patients are managed at home. Further, the physician

cannot predict all changes that may occur for 30 days following

discharge, the time when the patient is the least stable and requires

the most care plan oversight. The commenters believed that the work

associated with a hospital discharge does not include care plan

oversight services and, thus, is not included in the payment for CPT

code 99238.

Response: As a result of our review of the comments on this issue,

we have decided to allow payment for care plan oversight services for

patients receiving covered home health and hospice services during the

month following hospital discharge if the other conditions for payment

are met. The physician must furnish at least 30 minutes of care plan

oversight in that month beyond that which was furnished on the day of

hospital discharge. We agree that physician involvement during the

period of transition from care received in the hospital to services

furnished in the home is important in facilitating continuity of care

and improving outcomes.

[Conditions for Payment]

[Establishment of a HCPCS Code]

Comment: Several commenters opposed the establishment of a level 2

HCPCS code for care plan oversight services. These commenters were

concerned that a HCPCS code would cause confusion and increase

implementation costs. The commenters also believed it was unnecessary

since there is an existing CPT code for the service. The commenters

suggested that we issue coverage instructions to carriers rather than

develop a HCPCS code. Further, the commenters believed that

establishing a HCPCS code for care plan oversight services furnished to

Medicare beneficiaries would undermine data integrity and comparability

across many payers. Some of the commenters believed that the

development of codes should remain the medical profession's

responsibility, not ours, unless there is no suitable code.

Response: Our proposal to establish an alpha-numeric HCPCS code for

care plan oversight, rather than to use the CPT codes, arose from the

fact that the CPT codes include categories of patients who will not be

included in our policy. Furthermore, the CPT includes two levels of

code: CPT code 99375 describes care plan oversight requiring 30 to 60

minutes within a 30-day period, and CPT code 99376 describes care plan

oversight requiring more than 60 minutes. Nevertheless, there are other

instances in which Medicare policy is based on a different

interpretation of a code than the interpretation indicated by the CPT,

and we recognize the burden placed on physicians by existence of

multiple codes with essentially the same definition. Therefore, we have

decided to apply our policy to CPT code 99375 and will pursue a change

in the definition of the CPT code that is consistent with our policy.

If that change does not occur by 1996, we will establish an alpha-

numeric procedure code.

[Payment for Telephone Calls]

Comment: Several commenters suggested that we allow payment for

telephone calls to patients and family members under the care plan

oversight code. Further, a number of commenters recommended that phone

calls by nurses to relay decisions from physicians to HHAs be included

as covered care plan oversight services.

Response: The care plan oversight services for which we will allow

separate payment do not include telephone calls to patients and family

members. The code definition identifies communication with other health

care professionals involved in the patient's care as care plan

oversight services. It has been our long-standing policy not to allow

separate payment for telephone calls to patients and family members

because payment for telephone calls is included in the payment for

evaluation and management services. We will recognize for separate

payment only the physician's communications to the health care

professionals involved in the patient's care. Further, we have decided

to define care plan oversight services as those covered activities

performed by the responsible physician, and we plan to allow separate

payment for care plan oversight services only to that physician.

[Budget Neutrality]

Comment: Several commenters did not believe that care plan

oversight services have been bundled into existing services. The

commenters suggested that care plan oversight be treated as a new

service and, thus, not be subject to the $20 million budget neutrality

limit. Other commenters opposed the reduction of RVUs across all

services to pay for care plan oversight and maintain budget neutrality.

These commenters argued that care plan oversight services associated

with surgical procedures are covered in the global payment for these

services and cannot be billed separately and, therefore, oppose

applying budget neutrality reductions to surgical procedures. Other

commenters believed that services that traditionally have never

required care plan oversight were valued appropriately at their current

RVU assignments and that any reductions in these RVUs would be

inappropriate.

Response: We do not consider medical management and supervision of

complex patients to be a new service. Our proposal is to provide

additional separate payment for services for which our current policy

may not provide adequate payment. Medical management and coordinating

care for patients has traditionally been furnished along with a variety

of physician services including covered visits and procedures, and

payment has been made through the preservice and postservice work

components of these visits and procedures. Global surgical fees include

payment for the necessary adjustments in therapy during the global

period. As we stated in our June 1994 proposed rule, we will allow

payment during the global surgical period for furnished care plan

oversight services unrelated to the surgical procedure and identified

by CPT modifier -24.

Although primary care physicians may be more likely to furnish care

plan oversight services than physicians of certain other specialties,

physicians are not prohibited from furnishing care plan oversight

services because of the specialty area in which they practice.

Therefore, we believe that payment for care plan oversight is an

``unbundling'' of services previously covered by payments for a wide

variety of existing services and, thus, requires that budget neutrality

adjustments apply to RVUs across all physician services.

Comment: Several commenters opposed RVU adjustments as a mechanism

to preserve budget neutrality. These commenters suggested that the CFs

be adjusted, instead, in order to maintain the integrity of the

relative value system.

Response: These comments reflect the misunderstanding that RVUs

are, in themselves, a measurement of a fixed quantity of work or other

resources. RVUs are not units of measurement; they are ratios. When

RVUs are adjusted across the board for budget neutrality purposes, the

relativity between different services is maintained. The valuation of

services is meaningful only when RVUs are combined with a CF. Thus, the

changing of either RVUs or the CF produces the same effect on the

valuation of services.

Section 1848(d)(1)(B) of the Act provides for establishing a

budget-neutral CF for the 1992 physician fee schedule. Section

1848(d)(1)(A) of the Act, however, provides that the CF for each year

after 1992 will be the CF for the prior year adjusted by the update(s)

under section 1848(d)(3) of the Act. Section 1848(d)(3) of the Act sets

forth the default update and does not authorize further adjustments for

budget neutrality purposes.

For the 1995 fee schedule, we have estimated the net change in

expenditures resulting from the assignment of RVUs for care plan

oversight services to be approximately $310 million. Thus, a budget-

neutrality adjustment of 0.90 percent is needed to comply with the

statutory requirement that changes in RVUs not exceed $20 million. We

determined that this adjustment should be made to all RVUs, that is, to

the work, practice expense, and malpractice expense RVUs for all

services.

Comment: Several commenters suggested redistributing funding from a

variety of home health programs to pay for care plan oversight services

rather than adjusting only the physician fee schedule.

Response: Section 1848(c)(2)(B)(ii) of the Act requires that

adjustments to RVUs for a year may not cause the amount of Medicare

expenditures for physician services to differ by more than $20 million

from the amount of expenditures that would have been made if revisions

in payment policies or RVU adjustments had not been made. This section

does not authorize us to offset Medicare expenditures for physician'

services by lowering expenditures elsewhere in the program.

Comment: Several commenters expressed concern that we have

overestimated the utilization frequency and potential budget impact of

the new care plan oversight code.

Response: We believe that our utilization and cost estimates, which

are based on covered home health and hospice claims data, are

reasonable. We are considering the RVUs established for the care plan

oversight services (CPT code 99375) to be ``interim'' for 3 years. If

utilization of this service differs significantly from our estimates,

we will make an additional adjustment to achieve budget neutrality.

Further, estimates of changes in utilization had an insignificant

effect on the adjustment necessary to achieve budget neutrality in

1995.

[Other Comment]

Comment: One commenter recommended that payment for care plan

oversight services be given to the HHA, which could use the payments as

a means of encouraging physicians to sign the care plans on time.

Response: We plan to recognize care plan oversight services as a

physician service covered under Medicare Part B. In general, Medicare

pays the provider only for services furnished by the provider (see

Sec. 424.51) and pays the physician for the services furnished by the

physician. Medicare law sharply limits reassignment of claims to other

than the individual entitled to payment (see section 1842(b)(6) of the

Act and Sec. 424.70) as recommended by the commenter. In addition, we

would not permit separate payment for care plan oversight services to a

physician who has a significant financial or contractual relationship

with an HHA (see Sec. 424.22(d)). Further, the purpose of allowing

separate payment for care plan oversight services is to compensate

physicians for the time they spend coordinating complex care among

practitioners and integrating significant new information into the

treatment plan, not to sign care plans for certification or

recertification purposes. For these reasons, we cannot pay HHAs for

care plan oversight services.

[Documentation Requirements]

Comment: Several commenters expressed concern that physicians not

be held to a ``stop watch'' standard in recording the time associated

with furnishing care plan oversight services and that physicians should

not be required to make those extra efforts. These commenters claimed

that it is unlikely that physicians will be able to time these

activities exactly and that each oversight activity will require

preparation time and follow-up time. Other commenters maintained that

documentation of the precise time associated with a telephone call

should only be required if the call is unusually extensive. A number of

commenters suggested that the signed treatment plan be considered

adequate documentation that care plan oversight services had been

furnished. One commenter believed that HHAs should be prohibited from

maintaining the documentation necessary for the physician to support a

claim for care plan oversight services.

Response: We believe it is appropriate to require physicians to

document and maintain a record of the care plan oversight services

furnished and the duration of time spent on the services for which

payment is claimed. We believe this documentation requirement is

consistent with standard medical practice. Physicians can best describe

the services furnished and the time spent by documenting them in the

patient's record. We also believe that the nature of individualized

plans of care for patients requiring complex medical management is not

adaptable to a standardized report. Further, all covered home health

services must be furnished under a plan of treatment that is

established and periodically reviewed by a physician (see

Sec. 409.42(d)). Thus, we have decided that a signed treatment plan is

not sufficient documentation that significant complex medical

management requiring the integration of new information into the plan

of care or the adjustments in medical therapy was furnished by the

physician.

We plan to work with the CMDs and their carrier advisory

committees, which include representatives from medical specialty

societies, in educating physicians on documentation requirements. We

will require that the physician who furnishes the services document

which services were furnished and the date and length of time

associated with those services.

[Postpayment Monitoring]

Comment: Several commenters expressed concern that initial

postpayment reviews should emphasize education on the proper use of the

code and the conditions for which Medicare recognizes payment and

should not result in denial of payment. These commenters requested that

professional organizations be consulted in developing protocols for

sample and focused medical reviews. Further, the commenters emphasized

the need to recognize legitimate high users of care plan oversight,

that is, physicians specializing in the care of the aged.

Response: We agree with commenters that the initial postpayment

reviews should emphasize education on the proper use of the care plan

oversight code and conditions for which Medicare will allow separate

payment and should not ordinarily result in denials of payment. We also

agree that certain physicians, by the nature of their practices and

patient populations, may furnish care plan oversight services more

frequently than other physicians. We plan to include mechanisms in the

medical review guidelines to identify these providers. In addition,

local medical review policy is developed with the participation of the

carrier advisory committees.

[Beneficiary Liability]

Comment: We did not receive comments from beneficiaries on the

beneficiary liability aspect of the proposal. Several other commenters,

however, believed that any additional liability for coinsurance would

be a burden on some beneficiaries. One commenter predicted that

requiring coinsurance for physician care plan oversight services would

cause patients to refuse home care altogether. Other commenters

maintained that the benefits of increased physician involvement in care

plan development and oversight would outweigh the burden of any

additional coinsurance. These commenters agreed with our contention

that there would not be an increase or decrease in overall beneficiary

liability for coinsurance amounts.

Several commenters stated that beneficiaries may not understand

that they would be liable for coinsurance for care plan oversight

services. The major medical societies indicated a willingness to work

with beneficiary groups and with us to ensure that beneficiaries are

informed that physicians may bill and that Medicare will pay for care

plan oversight services when the specified conditions are met.

Response: Section 1833 of the Act provides that Medicare pays 80

percent of the fee schedule amount for physician services. We believe

that implementing separate payment for care plan oversight in a budget-

neutral manner by reducing the RVUs for all other physician services

would reduce coinsurance amounts for the other services and, therefore,

not increase or decrease overall coinsurance liability. We recognize,

however, that for some beneficiaries receiving Medicare-covered home

health or hospice services, particularly those other than the

approximately 75 percent who have some type of supplemental insurance

that will cover the additional coinsurance amount, the required

coinsurance for care plan oversight services will be approximately $12

for each month in which the care plan oversight service is allowed.

We are aware that beneficiaries may not realize that they will be

liable for coinsurance for care plan oversight services. We will work

with the HHA, hospice, and physician groups to encourage providers to

inform beneficiaries that physicians may bill and that Medicare will

pay for these services when the specified conditions are met.

Final Decision: We will allow separate payment for physician care

plan oversight services under the following conditions:

(1) The services are furnished to beneficiaries receiving Medicare-

covered home health and hospice services.

(2) The physician has furnished a service requiring a face-to-face

encounter with the patient in the 6 months before the first billing for

the service.

(3) The physician does not have a significant financial

relationship with the home health agency, is not the medical director

or employee of the hospice, and does not provide services under an

arrangement with the hospice.

If the above conditions are met, we will do the following:

(1) Allow payment to one physician per month for recurrent

physician oversight supervision of therapy involving 30 or more minutes

of the physician's time per month.

(2) Allow payment for care plan oversight to a physician providing

postsurgical care during the postoperative period only if the care plan

oversight is documented to be unrelated to the surgery.

(3) Allow payment during the 30 days following discharge provided

that the other conditions for payment are met.

(4) Allow payment under CPT code 99375 in accordance with the above

rules. That is, for Medicare purposes, CPT code 99375 refers only to

the services furnished to beneficiaries receiving Medicare-covered home

health and hospice services requiring 30 or more minutes per month. We

will not make additional payment for services beyond 60 minutes, and we

will consider CPT code 99376 bundled for Medicare purposes.

(5) Base 1995 payment on 1.61 total RVUs (1.06 work RVUs, 0.51

practice expense RVUs, and 0.04 malpractice expense RVUs); the same as

the 1995 payment for CPT code 99238.

E. Payment for Multiple Surgical Procedures

We proposed to revise our existing multiple surgery reduction

policy for paying multiple surgical procedures performed on the same

patient, on the same day, by the same surgeon. Under that policy, the

procedure with the highest fee schedule payment is paid the lesser of

the actual charge or 100 percent of the fee schedule amount. Payment

for the second highest valued procedure is based on the lesser of the

actual charge or 50 percent of the fee schedule amount. Payment for the

third to fifth highest valued procedures is based on the lesser of the

actual charges or 25 percent of the fee schedule amounts. Claims

involving more than five procedures are priced by Medicare carriers on

a ``by report'' basis.

Our proposal would revise the policy only for the third through the

fifth surgical procedures. We would continue to pay the highest valued

procedure at 100 percent and the second highest valued procedures at 50

percent. For the third through the fifth surgical procedures, we

proposed to increase payment from 25 percent to 50 percent. Thus, the

second through the fifth procedures would be based on the lesser of the

actual charge or 50 percent of the fee schedule amount. We proposed

that surgical procedures beyond the fifth procedure would continue to

be priced by Medicare carriers ``by report'' based on documentation of

the services furnished.

[Budget Neutrality Issues]

Comment: Some commenters objected to our proposal to reduce any

RVUs to ensure the budget neutrality of this change. One commenter

questioned the statutory basis for making this policy change budget

neutral because the authority for maintaining budget neutrality is

found in the section of the law that addresses adjustments to RVUs and

the commenter does not believe that the proposed change to the multiple

surgery policy is a change to RVUs.

Response: We consider the multiple surgery reduction to be an

adjustment to RVUs that is necessary to appropriately reflect the

resources associated with combinations of surgeries performed on the

same date. (We are using the word ``date'' instead of ``day'' to

clarify which 24-hour period is subject to bundling.) Therefore, we

consider changes to the multiple surgery reductions to be subject to

the budget neutrality provisions of the law.

Specifically, the Harvard study, on which the proposed change is

based, included an analysis of the relative value of the work involved

in multiple services. Our application of percentage reductions to the

fee schedule amounts for the services furnished was an expedient means

of adjusting the RVUs for multiple services.

We could have made the multiple surgery adjustment by adjusting

RVUs directly, but this alternative has serious disadvantages. For

example, we could have reduced the RVUs for surgeries by the

percentages supported by the Harvard study based on the number of times

that each surgery was performed as a multiple surgery. This would

average out the efficiency produced by multiple surgeries across all

surgeries. However, this would, by definition, create anomalies in the

scale of RVUs for work because the work RVUs for these surgeries would

no longer represent the work in a service when it is the only service

performed.

Alternatively, we could have implemented the multiple surgery

reductions by adjusting the RVUs for each procedure performed by the

appropriate percentage before applying the GPCIs and CF to create a fee

schedule amount (similar to what we do for the site-of-service

adjustment). This would be much more complex for us and for Medicare

carriers to administer and confusing for physicians. Also, it would

result in the same payments as our applying the reductions to the

payment amounts.

In this particular case, the amount of adjustment attributable to

the change in the multiple surgery policy that would be required to all

RVUs is only 0.10 percent.

Comment: Some commenters supported the proposed change but objected

to our proposal to reduce the RVUs for all procedures to the extent

necessary to make it budget neutral. They argued that the multiple

surgery reduction will benefit only surgeons and that primary care and

nonsurgical specialties should not be adversely affected by an

adjustment to RVUs for the services surgeons provide. The commenters

indicated that this situation is not analogous to the rescaling of all

RVUs to add separate payment for care plan oversight services in a

budget neutral manner. They believed that surgical specialties also

provide evaluation and management services and would be able to bill

and be paid for care plan oversight if they furnish it.

Some commenters supported the proposed change and also supported

our proposal to make it budget neutral by reducing all RVUs for all

services by 0.10 percent.

Response: We have decided to apply the budget neutrality adjustment

of 0.10 percent to all RVUs for the following reasons. The reduction of

RVUs within only surgical services could result in distortions in the

relative relationship of physician work RVUs for surgeries in

relationship to other services. The multiple surgery reduction policy

applies to most of the major surgeries and many of the minor surgeries.

Since the amount of reduction would be greater if we rescaled only

surgical procedures, we believe that such a rescaling carries

considerable risk to the integrity of the scale. When we implemented

the fee schedule, to avoid distortions in the scale for work RVUs, we

chose to have a multiple surgery reduction rather than to incorporate

the multiple surgery reduction in the RVUs for surgical services.

Reducing RVUs only within the surgical services would be

inconsistent with our application of budget neutrality to care plan

oversight services. In both cases, we have proposed a policy change

that will result in increased payment for specified services that are

already included in the fee schedule but that we believe are

undervalued. While physicians who provide mostly primary care object to

the application of budget neutrality to all RVUs for all services

because of the 0.10 percent reduction due to the multiple surgery

policy, we believe primary care physicians will benefit when they

perform multiple minor procedures. Similarly, if surgeons provide care

plan oversight services (that are not part of the routine post-

operative global care related to a surgery), they also may bill and be

paid for the care plan oversight services they furnish. For example, an

orthopaedic surgeon who is the physician of record for a beneficiary

with osteomyelitis who is receiving Medicare-covered home health care

benefits could bill and be paid for care plan oversight if the

surgeon's services meet the criteria for payment. [Relationship of

multiple surgery policy to RVUs for codes that describe multiple

surgeries]

Comment: A commenter stated that the multiple surgery policy we

propose to change was used to establish values for some codes that

describe multiple surgeries and that because we now have evidence that

our policy underpaid the third through fifth procedures, we should

reconstruct the RVUs for multiple surgery procedures based on the

higher payment levels we propose for the third through fifth

procedures.

Another commenter stated that although the use of a standard

percent reduction is required when applying uniform payment policies,

it does not mean that these averages should be applied when valuing an

individual procedure code that, by the language of the code, involves

multiple procedures. In these cases, neither we nor RUC should be bound

by the multiple surgery rule and the average data on which it is based.

The commenter maintained that, instead, work values should be assigned

based on the best available data on the resource costs associated with

the code in question.

Response: We agree that the work values for codes that describe

multiple procedures should be based, when available, on the physician

work described by the procedure code. Otherwise, we believe it is

reasonable to value these codes in a manner consistent with our

multiple surgery payment rules.

There have been a few rare cases in which we have used the multiple

surgery reductions to assign RVUs to a procedure based on information

regarding the work involved in the components of the procedure. These

codes were subject to comment before they were made final; commenters

had an opportunity at that time to challenge the interim value based on

the relationship between the work involved in the service described by

the code to the work involved in other physician services. As described

elsewhere in this final rule, for 1995, all physician work RVUs are

subject to public comment as part of the 5 year refinement process.

Therefore, commenters will have another opportunity to present evidence

to demonstrate that the physician work values for any code are

inappropriate in comparison to the work values for other services.

Final Decision: We will increase the payment for the third through

fifth surgeries performed on the same patient on the same date by the

same surgeon from 25 percent to 50 percent of the global payment. We

will rescale RVUs for all services to ensure budget neutrality.

F. Application of Site-of-Service Payment Differential

In our June 1994 proposed rule, we proposed to update the list of

procedures subject to the site-of-service payment differential using

1993 data to be effective for services furnished beginning January 1,

1995. To avert concern about the statistical validity of the data for

low-volume procedures, we proposed to exclude any procedure performed

fewer than 100 times annually. If the procedure is part of a ``family''

of codes that is otherwise on the site-of-service payment differential

list, we proposed to include it even if the volume is less than the

100-procedure threshold. (The previous list excluded all procedures

with volumes less than 1,000 in 1989.)

In the November 1991 final rule (56 FR 59595), we agreed that the

site-of-service limitation should not be applied to services that were

on the list of approved procedures for ambulatory surgical centers

(ASCs) published in the Federal Register. Therefore, we proposed to add

certain procedures to the list of services subject to the site-of-

service payment differential that we had proposed for removal from the

list of approved ASC procedures. The proposed notice listing the

proposed deletions from the ASC list, ``Proposed Additions to and

Deletions from the Current List of Covered Procedures for Ambulatory

Surgical Centers,'' was published in the Federal Register December 14,

1993 (58 FR 65357).

Comment: A number of commenters objected to the general amount of

the payment for practice expenses. Many believed that the current

payments for practice expenses are undervalued and that the actual

practice costs should be used. Other commenters objected to the

percentage reduction we apply to practice expense for services not

performed in a physician's office, and others objected to the

methodology used to calculate practice expenses in the November 1991

final rule (56 FR 59502). Some commenters requested a review of

practice costs in different settings as a way to determine more

accurately whether a site-of-service reduction should be imposed and to

determine more accurately the percentage reduction. Some commenters

believed that there is no difference in practice costs between the

hospital site-of-service and the office site-of-service.

Response: Section 1848(c)(2)(C) of the Act sets forth the

requirements for the payment for practice expenses. This section of the

Act requires that we derive the practice expenses from average allowed

charge data for CY 1991. The Social Security Act Amendments of 1994,

Public Law 103-432), enacted on October 31, 1994, require us to

determine practice expense components of RVUs according to the relative

resources involved with furnishing the service. Until that system is

implemented in January 1998, we are bound by the current requirements

for payment for practice expenses.

Comment: Several commenters were concerned about the safety of

performing services on the site-of-service payment differential list in

their offices. As evidence, several commenters cited the fact that if

anesthesia is used in some procedures, the procedures should not be

performed in a physician's office. Other commenters believed that our

policy to have a payment reduction based on the site of service would

steer patients to have procedures performed in an inappropriate

setting.

Response: We select the procedures on the site-of-service payment

differential list based on the fact that they are already performed in

a physician office more than 50 percent of the time. We used data from

CY 1993 as the basis for determining whether a procedure met the 50

percent criterion. We recognize that procedures are not always

performed in a physician office, and it is not the purpose of this

policy to dictate where a physician should perform the service. We

anticipate that physicians would consider the welfare of the

beneficiary in selecting the site at which to perform the service.

Some of the commenters cited specific services that they believed

could not be performed in physician offices at any time. Based on those

comments and further review of our data, we have determined that the

following six procedures are not physician office procedures: CPT codes

31040 (pterygomaxillary fossa surgery, any approach), 33415 (resection

or incision of subvalvular tissue for discrete subvalvular aortic

stenosis), 33420 (valvotomy, mitral valve; closed heart), 40700

(plastic repair of cleft lip/nasal deformity; primary, partial or

complete, unilateral), 43420 (closure of esophagostomy or fistula;

cervical approach), and 61000 (subdural tap through fontanelle, or

suture, infant, unilateral or bilateral; initial). Therefore, we are

removing them from the site-of-service payment differential list.

Comment: Several commenters believed that there are inconsistencies

in the application of the site-of-service payment differential to

individual codes within a family of similar services. They noted that,

in some cases, one code in a family is subject to the site-of-service

reduction and other codes in the family are not.

Response: In general, we agree that a consistent application of the

site-of-service payment differential across families of similar

services would reduce what appear to be anomalous payment policies.

However, we do not believe that procedures, particularly high volume

procedures, that are performed more than 50 percent of the time in a

physician's office should be exempted from the list simply because

other procedures in the family are not on the list. Nonetheless, we

have addressed part of the problem of inconsistencies within a family

of services by excluding some of the procedures performed fewer than

100 times during the year from the site-of-service payment differential

list.

Comment: Several commenters objected to the inclusion of the

following codes: CPT codes 95880 (cerebral aphasia testing) and 95881

(cerebral developmental testing) as inconsistent with our policy of

exempting psychotherapy services from the site-of-service payment

differential list.

Response: The commenters correctly stated that psychotherapy codes

are excluded from the site-of-service list; however, the two codes

listed are not psychotherapy codes. They are diagnostic tests.

Therefore, we are retaining CPT codes 95880 and 95881 on the site-of-

service list.

Comment: Commenters questioned specific codes that were proposed

for inclusion on the site-of-service payment differential list. Many of

the commenters referred to codes that are used as miscellaneous codes

or codes for otherwise unidentified services, such as CPT codes 21499

(unlisted musculoskeletal procedure, head), 69949 (unlisted procedure,

inner ear), 69979 (unlisted procedure, temporal bone, middle fossa

approach), and 90749 (unlisted immunization procedure). A number of

commenters believed that carrier-priced codes, that is, codes that do

not have nationally published RVUs, should not be subject to the site-

of-service reduction.

Response: We agree with these commenters and are removing codes

that do not have nationally published RVUs. We inadvertently included

most of those codes in the proposed list of procedures subject to the

site-of-service payment differential. We are, therefore, removing CPT

codes 21499, 69949, 69979, and 90749 from the list.

Comment: One commenter objected to the deletion of the following

CPT codes from the ASC list: CPT codes 11403, 11423, 11443 (excision of

benign skin lesions); CPT codes 11603, 11623, 11643 (excision of

malignant skin lesions); CPT code 12052 (layer of closure of wounds of

face, ears, eyelids, nose, lips and/or mucous membranes, 2.6 cm to 5.0

cm); CPT code 45330 (sigmoidoscopy, flexible; diagnostic, with or

without collection of specimen(s) by brushing or washing (separate

procedure)); and CPT code 65860 (severing adhesions of anterior

segment, laser technique (separate procedure)).

Response: Our proposal concerned only the application of the site-

of-service payment differential, not changes to the ASC list. As

referenced earlier in this section, we published a separate notice on

proposed additions and deletions of procedures on the ASC list in the

December 14, 1993 proposed notice (58 FR 65357).

Final Decision: The site-of-service list for 1995 appears in

Addendum F of this final rule. All additions to the list are identified

by an asterisk.

G. Bundled Services

1. Generation and Interpretation of Automated Data (CPT Codes 78890 and

78891)

We proposed to bundle payment for CPT codes 78890 and 78891 into

the payment for the primary procedure and assign a ``B'' status

indicator to show that payment would be bundled into the payment for

another service. We proposed to redistribute the RVUs associated with

CPT codes 78890 and 78891 across all codes.

Comment: A number of commenters noted that payment for CPT codes

78890 and 78891 should not be allowed when the generation and

interpretation of quantitative data is inherent in the primary

procedure, such as myocardial perfusion imaging. However, they believed

payment for these codes should be allowed when the procedure is

nonquantitative. The commenters maintained that CPT codes clearly

distinguish codes that include quantitative analysis work and codes

that are nonquantitative. Further, the commenters argued that the work

RVUs for primary procedures in which quantitative analysis is not

always done do not include payment for the generation and

interpretation of quantitative data.

Response: We do not agree that the CPT codes clearly distinguish

between codes that include quantitative analysis and codes that do not.

In fact, we believe that the lack of clarity in the CPT codes has

contributed to the incorrect use of these codes in various parts of the

country.

Several commenters identified CPT code 78460 (myocardial perfusion

imaging) as being ``quantitative.'' Thus, commenters believed the

additional reporting of CPT code 78890 or 78891 would be inappropriate.

However, CPT code 78460 and others like it are not defined as

``quantitative.'' Rather, they are defined as ``quantitative or

qualitative.'' Thus, the commenters' belief that we should foreclose

use of CPT codes 78890 and 78891 when a given study is quantitative

cannot be implemented easily if the codes cited by the commenters

describe quantitative or qualitative studies.

In response to commenters' concerns that bundling CPT codes 78890

and 78891 would fail to recognize the added work associated with the

generation of automated data, we note that the work RVUs of these codes

are only 0.05 and 0.10, respectively. We believe this amount of work is

within the range of work associated with the payment for any of the

primary procedures and a policy that would allow CPT codes 78890 and

78891 to be used with some codes but not others is not justified.

Comment: One commenter expressed concern that we did not make

sufficient efforts to investigate and correct inappropriate billing

practices before suggesting that payment for generating and

interpreting quantitative data be bundled into payments for primary

procedures.

Response: Medicare charge data show that the incorrect use of CPT

codes 78890 and 78891 has led to inappropriate claims and duplicate

payments to physicians. It is our responsibility to ensure that

payments under the physician fee schedule are made for distinct

physicians' services. In general, we do not allow separate payment for

calculations or the use of computers to analyze data. Upon review of

the comments received, we believe that there are sufficient reasons to

bundle payment for CPT codes 78890 and 78891 into the payment for the

primary procedure.

Final Decision: We will assign a ``B'' status indicator to CPT

codes 78890 and 78891. Payment for these services will be bundled into

payments for the primary procedure. We will redistribute the RVUs

associated with CPT codes 78890 and 78891 across all other codes in the

nuclear medicine section of the CPT Manual (CPT codes 78000 through

78999).

2. Noninvasive Ear or Pulse Oximetry (CPT Code 94760)

We proposed to bundle payment for CPT code 94760 into the payment

for the larger procedure that required the pulse oximetry test and

assign a ``B'' status indicator to show that payment would be bundled

into the payment for another service. Because pulse oximetry may be

performed in conjunction with a variety of physician services, we

proposed to implement this in a budget-neutral manner by redistributing

the current RVUs across all services.

Comment: Several commenters opposed the proposal not to allow

separate payment for CPT code 94760 (noninvasive ear or pulse oximetry

for oxygen saturation; single determination). These commenters argued

that there are valid situations in which pulse oximetry is performed in

a stand-alone fashion and not as part of a larger procedure.

Response: As a result of our review of the comments on this issue,

we have decided not to implement this proposal. We agree that there are

certain situations in which the measurement of oxygen saturation is

required to demonstrate the need for covered medical therapies. In

these cases, we recognize that noninvasive ear or pulse oximetry may

not be furnished in addition to another service, such as an office

visit or procedure. We believe, however, that noninvasive pulse

oximetry is a simple monitoring test that is sometimes performed as

part of a larger procedure. We may reconsider this proposal in the

future.

Final Decision: We have decided to continue to allow separate

payment for CPT code 94760 under the physician fee schedule.

H. RVUs for Doppler Echocardiography (CPT Code 93325)

As a result of comments received about the distribution of RVUs to

the professional component (PC) that resulted from the 1993 refinement

process, we proposed to redistribute the RVUs assigned to Doppler color

flow velocity mapping (CPT code 93325). The result of our proposal

would be an increase in the practice expense and malpractice expense

RVUs of the technical component of the code and a decrease in the

practice expense RVUs of the professional component of the code.

Comment: Two Medicare carriers agreed with the proposal. Another

carrier had no comment on the specific proposal but indicated that the

RVUs for all echocardiography codes should be reviewed for consistency

with other similar ultrasonography codes. The carrier pointed out that

cardiac ultrasonography (echocardiographs) does not include Doppler

color flow velocity mapping (CPT code 93325) (and, thus, separate

billing for CPT code 93325 is permitted), while the CPT indicates that

duplex scans include this service. The carrier suggested that the RVUs

for CPT code 93325 be bundled into all the appropriate codes that would

then be given a bundled (B) status indicator.

Response: We disagree with the suggestion for bundling the RVUs for

CPT code 93325 into the echocardiography codes at this time because it

would be contrary to the CPT codes and because echocardiography

procedures may be performed without Doppler color flow velocity

mapping. We understand the carrier's point about the technical

component (TC) RVUs assigned to the two groups of procedure codes in

that the assigned RVUs do not clearly reflect which codes include the

Doppler technology; however, these RVUs were established from

historical data in accordance with the statute. We believe that any

changes in TCs generally must await statutory changes. The Social

Security Act Amendments of 1994 require us to establish practice

expense RVUs according to a resource-based methodology. This change

will be effective for services performed on or after January 1, 1998.

Comment: Several commenters, including physician specialty

organizations, objected to our proposal to redistribute a substantial

portion of the practice expense and malpractice expense RVUs assigned

to the PC of CPT code 93325 in 1993 and 1994 to the TC of the procedure

in 1995. The AMA supported the views of the specialty groups. The

commenters made the following observations:

The proposal would result in a significant savings

``windfall'' for HCFA of from $7.4 to $9.4 million in 1995 because

Medicare carriers do not make TC payments for services furnished in

hospital inpatient settings.

The PC payment would be inadequate to compensate

physicians for the time, skill, and effort involved in the procedure.

The proposed 0.04 practice expense RVUs do not compensate

the physician for the cost of equipment, personnel, and supplies. The

ratio between TC and PC should be 60/40.

The majority of the malpractice expense RVUs should be

assigned to the PC.

There should be a 3-year transition to mitigate the effect

of the reallocation.

Any redistribution of practice expense RVUs should await

implementation of a resource-based practice expense methodology.

Response: The circumstances pertaining to changes to the RVUs

assigned to CPT code 93325 are unique. We do not believe that our

proposal to correct a mistake should be used as an opportunity to

attack the general methodology for calculating practice expense and

malpractice expense RVUs. For 1992, CPT code 93325 was designated as a

TC-only code, and the established fee schedule policy was that any

physician work involved in CPT code 93325 was payable through the PC of

the associated echocardiography procedure code.

As part of the 1992 RVU refinement process, we determined that CPT

code 93325 required additional physician work, thus, 0.07 RVUs were

established to recognize this work for the 1993 fee schedule. The

decision reflected a determination that the 1992 policy should be

modified to recognize that some, but not all, of the additional

physician work associated with CPT code 93325 was payable through the

associated echocardiography procedure code. Unfortunately, the practice

expense and malpractice expense RVUs were distributed in the same way

as would have been the case with other procedure codes that have a PC

and a TC. We did not take into account that, in this unique situation,

a very modest PC was created out of what previously had been a TC-only

code. While the change had no effect on global (combined service)

billings for procedures from physicians' offices, it had the

significant, unintended effect of overpaying billers of the PC and

underpaying billers of the TC.

We did not propose this change to achieve ``windfall'' savings.

Rather, after having received no payment for the PC of this code in

1992, PC billers of this service received the ``windfall'' in 1993 and

1994 at the expense of freestanding TC billers. Further, we see no

reason to transition an excessive past payment over 3 years; the TC

billers whose payments were cut in half over the 2-year period did not

receive a similar transition.

In response to the comment that the payment would be inadequate to

compensate physicians for the time, skill, and effort involved in the

procedure, we note that the practice expense and malpractice expense

RVUs are not designed to provide payment for these factors. These are

elements of physician work payable through the 0.07 work RVU component

of CPT code 93325 and the element representing physician work in the

associated echocardiography procedure code.

In response to the comment that the proposed practice expense RVUs

would be insufficient to cover equipment, personnel, and supply costs,

we maintain that, in the case of procedures having TCs, the payment for

these elements are made through the TC, not the PC. These elements of

cost are what the TC represents.

In response to the comment that the majority of the malpractice

expense RVUs should be assigned to the PC, we note that suppliers also

have liability insurance costs, and we believe that, given the

circumstances under which the PC for this code was created, the

appropriate approach is to relate the malpractice RVUs to the

proportion the created physician work element bore to the TC.

Finally, with respect to the comment that any redistribution of

practice expense RVUs should await implementation of a resource-based

practice expense methodology, we believe that we may correct errors

that we have made in calculating the components of the global service.

Final Decision: We are adopting our proposal to redistribute the

RVUs for CPT code 93325 as described in the proposed rule (59 FR 32769)

effective for services furnished beginning January 1, 1995.

I. Nuclear Medicine

Based on recommendations from the American College of Nuclear

Physicians and The Society of Nuclear Medicine we proposed that CPT

modifier -51 for multiple procedures be used when it is necessary to

perform a whole body planar study before a SPECT study is performed,

both to determine if tomography is needed and to deduce the region to

be selectively imaged. This would result in full fee schedule payment

for the procedure with the highest payment level and a 50-percent

payment for the second procedure.

Comment: We received few comments on this proposal. The comments

from individual physicians and physicians' organizations ranged from

support of the proposal to stating that the planar and SPECT studies

involved different equipment that do not produce the type of savings

usually associated with multiple procedures. The commenter making the

latter point indicated that the PCs of these procedures could reflect

some economy of scale but that payment of the full fee schedule amount

was the preferred alternative to the proposed policy.

Response: Under the physician fee schedule policy, surgical

services furnished on the same date are subject to a multiple procedure

payment adjustment and the CPT codes to which this adjustment apply

have a ``1'' indicator in the appropriate field of the physician fee

schedule database. However, in the case of diagnostic tests, that field

generally shows an indicator of ``0,'' indicating that the multiple

procedure adjustment does not apply, and Part B Medicare carriers

generally pay in full for diagnostic tests performed on the same date

as long as each test is medically necessary. If a carrier determined

that a test was not medically necessary because it duplicated another

test previously performed, the payment for the additional test would be

denied in full.

As this proposal was presented to us, there was a need to clarify

to Medicare carriers that these procedures did not necessarily

duplicate one another when performed on the same date because there

were valid medical reasons to perform both of these procedures one

after the other. We agree with the suggestion and are adopting the

proposal. Regarding the comment that there is more reason to apply this

policy to only the PCs of these procedures because the TCs utilize

different technologies, we note that, since approximately 90 percent of

these procedures are performed in a hospital setting, only the

professional component is billable to the carrier. Therefore, although

we are applying this policy to global, PC, and TC billings, the major

impact of the policy will be on PCs.

Comment: A Medicare carrier asked if the instructions implementing

this proposal would require extensive system changes. The carrier

indicated that if these services were assigned a multiple surgery

indicator of ``1'' and the multiple procedure reduction applied when

one service is billed with another procedure with the same indicator,

application of the multiple surgery reduction would be relatively easy.

Response: Our policy will not require extensive systems changes. We

will assign a multiple surgery indicator on our database as suggested

by the commenter.

Final Decision: We are adopting the proposal for services furnished

on or after January 1, 1995. We may wish to consider applying this

``multiple procedure'' policy to other diagnostic tests in the future.

J. End-Stage Renal Disease (ESRD)

1. Hospital Inpatient Dialysis on the Same Date as an Evaluation and

Management Service

We proposed to pay for either an evaluation and management code or

an inpatient dialysis code (CPT codes 90935 through 90947), but not

both, on the same day. We proposed implementing the policy in a budget

neutral manner by redistributing the payment for an evaluation and

management service performed on the same day as dialysis into the

payment for the dialysis service. We proposed to determine the current

evaluation and management payment allowed when dialysis and an

evaluation and management service are performed on the same day. We

would make the appropriate adjustments to the work, practice expense,

and malpractice expense RVUs to each of the four dialysis codes so that

the payments remain budget neutral.

Comment: Most commenters objected to incorporating payment for

evaluation and management services on the same day as inpatient

dialysis into the payment for the dialysis. Most of these commenters

misunderstood our proposal, believing that payment for the evaluation

and management service would be eliminated altogether. Others believed

that we contended that hospital visits are not necessary on the same

day as dialysis. Some commenters indicated that inpatient dialysis is

not an evaluation and management service but a procedure and,

therefore, should not be bundled with other evaluation and management

services. Many commenters described the complex medical details of a

dialysis patient undergoing the dialysis process, yet characterized

their own involvement as medical evaluation and decision-making. Others

said that the other evaluation and management services are not related

to the dialysis service. Commenters also indicated that without clear

evidence of inappropriate billing of excessive, unnecessary hospital

visits, the policy should not be changed. Others said that denying the

nephrologists' hospital visits will only lead to concurrent care

billing by other specialists.

Response: This proposal is consistent with the way other evaluation

and management services for physicians are paid in that we allow

payment for only one subsequent hospital visit code per date regardless

of the number of actual encounters on that day. The RVUs for these

codes were increased in recognition of the fact that some patients need

more than one encounter per day. We are not eliminating payment for

medically necessary physicians' services. We are simply paying for them

in a different way by including these payments in the fee schedule

amount for inpatient dialysis.

We do not agree that the physician's involvement during an

inpatient dialysis is appropriately characterized as a procedure. The

commenters who addressed this indicated that their work during dialysis

was medical evaluation and decision-making. This follows our general

policy of allowing payment for only one inpatient evaluation and

management service furnished by the same physician on the same date of

service.

Comment: Some commenters agreed that subsequent hospital visits

furnished on the same day as inpatient dialysis should not be billed,

but that the following services should be separately billable: an

initial hospital visit, consultations, care furnished on the day of

discharge, and all surgical procedures (for example, the insertion of a

catheter). While most commenters did not agree with our proposal, they

stated that if some of the evaluation and management services are

bundled, we should at least maintain these particular services as

separately billable.

Response: We agree with part of this comment and have decided to

modify our proposal accordingly. We did not propose bundling surgical

procedures and intend for them to remain separately billable.

Final Decision: As a result of our review of the comments on this

issue, we have modified our proposal. Instead of bundling payment for

all evaluation and management services performed on the same date as

inpatient dialysis into the payment for the dialysis service, we will

bundle payment for selected evaluation and management services. We will

bundle payment for subsequent hospital visits (CPT codes 99231 through

99233) and follow-up inpatient consultations (CPT codes 99261 through

99263) into the fee schedule amounts for inpatient dialysis (CPT codes

90935 through 90947). We are implementing this proposal using the

methodology described in the proposed rule (59 FR 32770). We increased

the RVUs of the inpatient dialysis codes in proportion to the dollars

spent for these evaluation and management codes billed on behalf of the

same patient on the same date by the same physician. The adjusted RVUs

are as follows:

------------------------------------------------------------------------

Practice Malpractice

CPT code Work expense expense Total

------------------------------------------------------------------------

90935..................... 1.22 1.49 0.1 2.81

90937..................... 2.11 2.65 0.18 4.94

90945..................... 1.28 1.27 0.08 2.63

90947..................... 2.16 2.09 0.14 4.39

------------------------------------------------------------------------

The practice expense RVUs for CPT code 90937 reflect the adjustment

required by the section 13513 of OBRA '93 that requires us to apply an

adjustment to practice expense RVUs for services for which practice

expense RVUs exceed 128 percent of the work RVUs and that are performed

less than 75 percent of the time in an office setting.

Carriers will be instructed not to pay a physician for both

dialysis and a subsequent hospital visit or a follow-up inpatient

consultation on the same date of service. We will allow separate

billing and payment for an initial hospital visit (CPT codes 99221

through 99223), an initial inpatient consultation (CPT codes 99251

through 99255), and a hospital discharge service (CPT code 99238) when

billed on the same date as an inpatient dialysis service (CPT codes

90935 through 90947). We will continue to prohibit more than one

inpatient dialysis service per date since the codes themselves

recognize that some patients require repeat physician evaluations on a

given date.

2. Payment for Outpatient ESRD-Related Services Under the Physician Fee

Schedule

We proposed to include the monthly capitation payment (MCP) (CPT

codes 90918 through 90921) under the physician fee schedule. We did not

propose RVUs for these codes. Rather, we requested comments from

nephrologists and other interested parties on the work RVU for this

service and the basis for their recommendations. We also requested that

RUC consider the MCP for purposes of recommending a work RVU. We

proposed to base the practice expense and malpractice expense RVUs on

current payment allowances by applying the nephrologists' practice

expense shares to the current allowance. We proposed applying the

nonsurgical update to these codes.

Comment: Most commenters agreed that the MCP should be included in

the physician fee schedule, but supported the values recommended by

RUC.

Response: HCFA's CMD panel considered the RUC recommendation and

adjusted the RUC value to correspond to what the CMDs believed to be

the amount of physician work for the typical chronic outpatient

maintenance dialysis patient. A complete discussion of the development

of RVUs for these codes appears in section V.

Comment: Some commenters stated that the bundle of services

included in the MCP should be specifically defined before final RVUs

for the MCP are assigned.

Response: Services included in the MCP are defined in Sec. 414.314.

This definition of services was first published in the Code of Federal

Regulations (CFR) in the context of the former Alternate Reimbursement

Method (ARM), which was the predecessor of the present MCP, implemented

in 1983. This definition provides that all outpatient services related

to the treatment of the patient's renal (ESRD) condition and any

service furnished during a visit that was necessitated by the patient's

renal condition are included in the MCP. The MCP is intended to be a

global payment including all physicians' services related to the

treatment of the patient's ESRD condition during a month.

Final Decision: We will pay for CPT codes 90918 through 90921 under

the Medicare physician fee schedule for services performed on or after

January 1, 1995, as we proposed in our June 1994 proposed rule. In

addition, we will pay for CPT code 90922 under the physician fee

schedule because it represents the daily equivalent of the monthly MCP

codes. We are establishing the interim values that are discussed in

Section V of this notice.

We will implement this proposal in a budget neutral manner and will

apply the nonsurgical update to these codes. We will transition payment

to the fee schedule over 2 years using a blend in 1995: 50 percent will

be the full physician fee schedule amount and 50 percent will be the

historical payment amount. In 1996, we will base payment on the full

fee schedule amount.

K. Therapeutic Apheresis

We proposed to remove the physician work RVUs for therapeutic

apheresis (CPT code 36520) and consider it an ``incident-to'' service

on the fee schedule because we did not believe this service requires

physician work but rather that it is performed by staff under the

direction of a physician. Moreover, because this procedure is usually

performed in a hospital by hospital staff, payment is part of the

payment to the hospital. We proposed to assign the following RVUs for

this ``incident-to'' service: practice expense--1.87; malpractice

expense--0.12; total RVUs--1.99. Under our proposal, the code could be

billed for the service only if it is performed in the office.

Comment: Several commenters expressed concern that the amount of

physician work involved in treating patients receiving therapeutic

apheresis was unrecognized by HCFA. Commenters gave the following

examples of physician responsibilities associated with therapeutic

apheresis:

Physicians must evaluate the patient and the laboratory

data to determine if the procedure is indicated, educate the patient

regarding treatment, and obtain informed consent.

Physicians are usually present during portions of the

procedure to write orders, decide whether to continue treatment, and to

adjust treatment parameters such as plasma flow, fluid replacement, and

anticoagulation. These services are beyond the current scope of nursing

practice.

Physicians may be present for the entire procedure

depending on the patient's condition, response to treatment, and

whether other therapeutic apheresis team members are present. In

settings in which the technical procedure is performed by a medical

technician, the physician is in continuous attendance.

The physician must be available to intervene in the event

of complications.

Physicians are responsible for the placement of the

vascular access device and for establishing the plan for site and

catheter care.

Physicians must evaluate the patient after the treatment,

document the procedure notes, and plan for subsequent care.

A number of commenters described the work of the physician as

involving evaluation, management, and consultation. A few commenters

noted that the physician work involved with therapeutic apheresis is

similar to the work involved with inpatient dialysis.

Several commenters stated that the Medicare coverage rules require,

for payment to be allowed for services provided in a nonhospital

setting, that a physician be present during therapeutic apheresis to

perform medical services and to respond to medical emergencies, that

each patient be under the care of a physician, and that all

nonphysician services be furnished under the direct, personal

supervision of a physician. The respondents stated that these

requirements demonstrated the physician work required with the

procedure.

Response: As a result of the comments we received on this issue, we

have decided not to remove the physician work RVUs for therapeutic

apheresis. We agree with the commenters that therapeutic apheresis

requires physician work. As described by the commenters, the services

physicians furnish to patients receiving therapeutic apheresis are

generally evaluation and management services. Thus, we believe that the

policy on payment for therapeutic apheresis should be consistent with

our payment policy for inpatient dialysis services. We do not believe

payment should be made for both the therapeutic apheresis code and

certain other evaluation and management codes on the same date.

Final Decision: As a result of our review of the comments on this

issue, we have modified our proposed policy. We will continue to allow

payment for physician work RVUs for therapeutic apheresis under Part B

in the hospital and nonhospital settings. However, we will not permit

payment for both therapeutic apheresis and certain evaluation and

management codes on the same date. Specifically, we will not allow

separate payment for CPT codes 99211 through 99215 (established patient

office or other outpatient visits), 99231 through 99233 (subsequent

hospital care) and 99261 through 99263 (follow-up inpatient

consultations) on the same date that CPT code 36520 (therapeutic

apheresis) is provided. However, physicians furnishing therapeutic

apheresis services may choose to bill for the appropriate evaluation

and management visit or consultation code indicating the level of

services provided rather than billing for the therapeutic apheresis

services. This will permit physicians to be paid for the level of

service furnished. In addition, the time spent in therapeutic apheresis

management may not be counted in determining the duration of time spent

on critical care services (CPT codes 99291 and 99292). Further, we

consider the code for therapeutic apheresis to include payment for all

medical management services for the patient on that date and,

therefore, we will allow payment for only one billing (a single unit)

of CPT code 36520 for the same physician on the same date for the same

patient.

Separate payment is allowed for physician services furnished to

establish the required vascular access if performed by the physician

and if the criteria for payment under the appropriate CPT code are

satisfied. We will also allow separate billing for CPT codes 99221

through 99223 (an initial hospital visit), CPT codes 99241 through

99245 and 99251 through 99255 (initial consultations), and CPT code

99238 (a hospital discharge service) when billed on the same date as

CPT code 36520 (therapeutic apheresis). Our revised policy is

consistent with the policy for inpatient dialysis services described

elsewhere in this final rule.

We will implement this policy in a budget-neutral manner by

bundling the payment for certain evaluation and management services

performed on the same date as therapeutic apheresis into the payment

for the therapeutic apheresis service. We calculated the adjustment

required by dividing the sum of the 1993 allowed charges for

therapeutic apheresis and the appropriate evaluation and management

codes billed in conjunction with therapeutic apheresis by the 1993

allowed charges for therapeutic apheresis. Using this methodology, the

work, practice expense, and malpractice expense RVUs for therapeutic

apheresis have been increased for 1995. The total 1995 RVUs for

therapeutic apheresis are 3.78 (1.74 work RVUs, 1.92 practice expense

RVUs, and 0.12 malpractice expense RVUs.)

III. OBRA '93 Provision--Payment for Antigens (Allergen Immunotherapy)

In the June 1994 proposed rule (59 FR 32770), we explained a number

of steps that we proposed to take to bring payment for antigen services

under the physician fee schedule. As a result of changes made in OBRA

'93, effective for services furnished on or after January 1, 1995,

antigen services must be paid for under the physician fee schedule.

One proposed change was to no longer recognize J codes (that is,

level 2 HCPCS codes) for antigen services. The J codes are seldom used,

primarily because most physicians use the appropriate CPT codes to

report the services. We believe that we should simplify coding, and,

therefore, billing, for antigen services by eliminating use of the J

codes.

Another proposal that we announced was our plan to no longer

recognize the ``complete service'' CPT codes. As we explained in the

proposed rule (59 FR 32771), there are three types of CPT antigen

codes. The first type includes the injection only codes (CPT codes

95115 and 95117). The second type includes the codes representing the

antigen extract itself and the physician's professional service in

creating that extract (CPT codes 95144 through 95149, 95165, and

95170). The third category includes the ``complete service'' codes (CPT

codes 95120 through 95134), which represent both the injection(s) and

the extract and its preparation. Some allergists performing both the

injection and the extract/extract preparation services bill the

components (that is, the injection services and the extract/extract

preparation), while others furnishing both services simply bill the one

complete service code. As we explained in the proposed rule (59 FR

32771), we believe that the use of the complete service codes should be

eliminated. Only component billing should be used by allergists

furnishing both services. In our judgment, accurate payment cannot be

guaranteed under the complete service codes because they can represent

more than one way to deliver antigen services, and those different

methods of delivery have different resource costs.

We proposed accepting the RVUs that have been recommended to us by

the Joint Council of Allergy and Immunology (JCAI) as listed in the

June 1994 proposed rule (59 FR 32772).

Finally, we do not propose to make transition payments for antigen

services. Instead, we plan to go to the full fee schedule amounts

immediately. We made this proposal because there is wide variation in

the way in which Medicare carriers currently pay for antigen services.

Some pay by vial, with a vial representing 10 cc's for some and 7 cc's

for others. Some pay by dose. Still others factor in concentrations of

the antigen. As we stated in the proposed rule (59 FR 32772), we

believe that there should be a transition only when the units of

service are the same, or at least approximately the same, under the old

and new payment systems. Since we have no assurance that most carriers

use the antigen definitions we are employing under the fee schedule, we

propose no transition from our prior carrier payment amounts.

Comment: Some commenters objected to the elimination of the use of

``complete service'' codes (CPT codes 95120 through 95134). According

to these commenters, the complete service codes are the only codes that

accurately describe the provision of antigens through a treatment

board. When a treatment board is used, according to the commenters, the

various allergenic extracts are drawn directly from the bottle into the

syringe for injection. Thus, no vial is created. This means that the

treatment board allergists' use of component billing (that is, the

injection code (CPT codes 95115 or 95117) plus the extract/extract

preparation code (for example, CPT code 95165)) would not be

technically accurate. This is because the extract/extract preparation

codes are described in terms of vials and, as noted above, treatment

board physicians do not create vials when they furnish antigen therapy.

One commenter suggested that if we pursue the elimination of the

use of the complete codes, we should clarify that physicians may use

the extract/extract preparation vial codes when using a treatment

board, even though no vial is created.

Response: We continue to believe that use of the complete service

codes will not permit accurate Medicare payment. Because it is possible

for a complete service to equal an injection code plus a dose or doses

from multiple or single dose vials, we cannot establish one accurate

price for the complete service code. That inability stems from the fact

that resource costs are higher for a dose from a single dose vial than

from a multiple dose vial. This is evidenced in the per dose RVU

differential between the single dose vial (CPT code 95144) and the

multiple dose vial (CPT code 95165) extract/extract preparation codes.

Therefore, we have decided to adopt our proposal to eliminate use of

CPT codes 95120 through 95134. (We recognize that some commenters have

stated that single dose vials (CPT code 95144) are not used by

allergists who are also going to inject the antigen. Those allergists

supposedly use only multiple dose vials. The language of the single

dose vial code, however, does not limit the use of single dose vials to

allergists who are not performing the injection service.)

Also, in general, we believe that it is best to have only one way

to bill for a service. To have only one billing method, in terms of the

appropriate codes to use, avoids confusion on the part of both carriers

and physicians.

We agree with the commenter who suggested that, if we eliminate use

of the complete service codes, we clarify that the allergists who use

treatment boards, who formerly used the complete service codes, are to

use the extract/extract preparation vial codes (for example, CPT codes

95145 through 95149, 95165, and 95170) even though they prepare no

vials. They would also bill the appropriate injection code (CPT codes

95115 or 95117). Therefore, like all other allergists furnishing a

complete service, they would bill for it on a component basis. We would

not expect treatment board allergists to use extract/extract

preparation CPT code 95144, the code representing single dose vials.

They should bill the appropriate injection code plus CPT code 95165.

We will request changes to the CPT, effective January 1996, so that

the language describing the extract/extract preparation codes clearly

permits their use by allergists who use treatment boards. We will also

seek a change in the descriptor for the single dose vial code (CPT code

95144). We will suggest that it be changed to reflect that it is a vial

being injected by a physician other than the one who prepared the

antigen.

Comment: One commenter believed that our proposed per dose pricing

is inappropriate. The commenter pointed out that 1 cc can represent one

dose for patient A, but two doses for patient B. She, therefore,

recommended that we not use the CPT code and that we instead establish

a HCPCS code to pay in a manner other than on the basis of doses.

Pricing could be, for example, on a cc basis.

Response: We share the concern expressed by the commenter that

doses, as the unit of service chosen for payment purposes, not be

abused. To avoid confusion and disruption, however, we believe that we

should adhere to the current codes' use of doses. We plan to monitor

our payment for antigen services to determine whether there is a

pattern of physicians inappropriately increasing the number of doses

they furnish from a vial of extract and, therefore, ultimately

increasing the number of doses for which they bill.

Final Decision: We have deleted the J codes for antigen services

(J0220, J0230, J0240, J7010, and J7020). We will no longer recognize

the complete service codes. The RVUs for CPT codes 95115, 95117, and

95144 through 95170 that we proposed have been appropriately adjusted

for budget neutrality and appear in Addendum B of this final rule.

Payment for these codes will be based on the full fee schedule amounts.

For CPT codes 95144 through 95170, we will adhere to doses as the unit

of service for payment purposes.

IV. Provisions of This Final Rule

The provisions of this final rule, for the most part, restate the

provisions of the June 1994 proposed rule. This section lists all the

provisions of this final rule and includes changes from the proposed

rule. This final rule makes the following amendments to 42 CFR:

Simplifies the authority citations for parts 410 and 414.

Adds section 1881 of the Act to Sec. 410.1 (``Basis and

scope'') as the authority for Medicare coverage for end-stage renal

disease patients.

Revises Sec. 410.152(b)(4) (``Amounts of payment'') to

recognize that payment may be based on 80 percent of the payment amount

computed on any other payment methodologies (for example, the physician

fee schedule) than simply on a reasonable charge basis.

Adds the definition of ``antigens'' under the definition

of ``physicians' services'' under Sec. 414.2 (``Definitions'').

Revises Sec. 414.4 (``Fee schedule areas'') by removing

specific references to States identified as statewide fee schedule

areas and clarifying that we will announce proposed and final changes

in the Federal Register. This is a change from the proposed rule in

which we identified Iowa as a statewide fee schedule area effective

January 1, 1995.

Adds new Sec. 414.39 (``Special rules for payment of care

plan oversight''). We changed the policy in the proposed rule to state

that we will pay for care plan oversight services for beneficiaries

receiving hospice services as well as home health services. Also, we

decided to permit a physician to receive payment for services furnished

during a calendar month period rather than for a 30-day period.

Revises Sec. 414.314 (``Monthly capitation payment

method'') by specifying in paragraph (c) (``Determination of payment

amount'') that the MCP is paid under the Medicare physician fee

schedule described in part 414. Also, we are removing paragraph (d)

(``Publication of payment amount'') because the MCP rate will be

published with all other physician services paid under the physician

fee schedule.

In addition, the final rule differs from the proposed rule in that

we have revised our proposed payment policies as a result of public

comments for the following physician services:

We are not adopting our proposal to bundle payment for

noninvasive ear or pulse oximetry into the payment for the larger

procedure with which it is performed.

Instead of bundling payment for all evaluation and

management services performed on the same day as inpatient dialysis

into the payment for the dialysis service, we will bundle payment for

only selected evaluation and management services that are furnished on

the same date inpatient dialysis is furnished. We are requiring that

the services furnished on the same date (rather than day) be bundled to

clarify which 24-hour period is subject to bundling.

Instead of removing the physician work RVUs for

therapeutic apheresis, we will pay physicians for either selected

evaluation and management services or therapeutic apheresis, but not

both, in inpatient and outpatient settings.

V. Refinement of RVUs for CY 1995 and Responses to Public Comments on

Interim RVUs for 1994

A. Summary of Issues Discussed Related to the Adjustment of RVUs

Section V.B. of this final rule describes the methodology used to

review the comments received on the RVUs for physician work and the

process used to establish RVUs for new and revised CPT codes. (The CPT,

which is published annually by the AMA, is a listing of descriptive

terms and identifying codes for reporting medical services and

procedures performed by physicians.) In section V.C., we discuss

adjustments due to limitations on annual expenditures. We summarize

changes for the 1995 physician fee schedule in section V.D. of this

final rule. Changes to codes on the physician fee schedule reflected in

Addendum B are effective for services furnished beginning January 1,

1995.

B. Process for Establishing Work RVUs for the 1995 Fee Schedule

Our December 2, 1993 final rule on the 1994 physician fee schedule

(58 FR 63626) announced the final RVUs for Medicare payment for

existing procedure codes under the physician fee schedule and interim

RVUs for new and revised codes. The RVUs contained in the rule apply to

physician services furnished beginning January 1, 1994. We announced

that we would accept comments on interim RVUs for new or revised codes

and for codes previously designated as carrier-priced codes. We

announced that we considered the RVUs for the remaining codes to be

final and not subject to further public comment.

In this section, we summarize the refinements to the interim work

RVUs that have occurred since publication of the December 1993 final

rule and our establishment of the work RVUs for new and revised codes

for the 1995 fee schedule.

1. Work RVU Refinements of Interim RVUs

a. Methodology (Includes table 2--work RVU refinements of interim

and related RVUs). Although the RVUs in the December 1993 final rule

were used to calculate 1994 payment amounts, we considered the RVUs for

the new or revised codes to be interim. We accepted comments for a

period of 60 days. We received approximately 35 substantive comments

from 27 specialty

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Medicare Program; Refinements to Geographic Adjustment Factor Values, Revisions to Payment Policies, Adjustments to the Relative Value Units (RVUs) Under the Physician Fee Schedule for Calendar Year 1995, and the 5-Year Refinement of RVUs | Frix