# 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

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## Record

- **Collection:** Federal Register
- **Document type:** Uncategorized Document
- **Published:** December 8, 1994

## Text

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).
Copies: To order copies of the Federal Register containing this
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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-29916. Public record. Not legal advice.