# Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 1996

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A95-18144

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** July 26, 1995
- **Citation:** 60 FR 38400

## Text

SUMMARY: This proposed rule discusses several policy changes affecting
payment for physician services including:
Medicare payment for physician services in teaching
settings.
Changes in calculating the default Medicare volume
performance standard beginning in fiscal year 1996.
Our efforts to implement the statutory requirement in the
Social Security Act Amendments of 1994 to develop a resource-based
system for practice expenses.
The rule would redesignate current regulations on teaching
hospitals, on the services of physicians to providers, on the services
of physicians in providers, and on the services of interns and
residents. This redesignation would consolidate related rules affecting
a specific audience in a separate part and, thereby, make them easier
to use.

DATES: Comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on
September 25, 1995.

ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: BPD-827-P, P.O. Box 7519,
Baltimore, MD 21207-0519.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses: Room 309-G, Hubert H.
Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201,
or

Before August 4, 1995

Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,
MD 21207.

After August 6, 1995

Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPD-827-P. 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
document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date
of the issue requested and enclose a check or money order payable to
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number and expiration date. Credit card orders can also be placed by
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
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libraries throughout the country that receive the Federal Register.

FOR FURTHER INFORMATION CONTACT: Elizabeth Holland, (410) 966-1309
(after September 1, 1995, (410) 786-1309) (for all issues except those
related to physician services in teaching settings). William Morse,
(410) 966-4520 (after September 1, 1995, (410) 786-4520) (for issues
related to physician services in teaching settings).

SUPPLEMENTARY INFORMATION: To assist readers in referencing sections
contained in this preamble, we are providing the following table of
contents. Some of the issues discussed in this preamble affect the
payment policies but do not require changes to the regulations in the
Code of Federal Regulations (CFR).

Table of Contents

I. Background
A. Legislative History
B. Published Changes to the Fee Schedule
II. Specific Proposals for Calendar Year (CY) 1996
A. Budget-Neutrality Adjustments for Relative Value Units (RVUs)
B. Bundled Services
1. Hydration Therapy and Chemotherapy
2. Evaluation of Psychiatric Records and Reports and Family
Counseling Services
3. Fitting of Spectacles
C. X-Rays and Electrocardiograms (EKGs) Taken in the Emergency
Room
D. Extension of Site-of-Service Payment Differential to Services
in Ambulatory Surgical Centers (ASCs)
E. Services of Teaching Physicians
1. General Background
2. Payment for Physician Services Furnished in Teaching Settings
3. Payments for Supervising Physicians in Teaching Settings and
for Residents in Certain Settings
F. Unspecified Physical and Occupational Therapy Services (HCPCS
Codes M0005 Through M0008 and H5300)
G. Transportation in Connection With Furnishing Diagnostic Tests
H. Maxillofacial Prosthetic Services
I. Coverage of Mammography Services
J. Use of Category-Specific Volume and Intensity (VI) Growth
Allowances in Calculating the Default Medicare Volume Performance
Standard (MVPS)
III. Issue for Change in Calendar Year (CY) 1998--Two Anesthesia
Providers Involved in One Procedure
IV. Issues for Discussion
A. Resource-Based Practice Expense (PE) Relative Value Units
(RVUs)
B. Primary Care Case Management and Other Managed Care
Approaches
V. Collection of Information Requirements
VI. Response to Comments
VII. Regulatory Impact Analysis
A. Regulatory Flexibility Act
B. Budget-Neutrality Adjustments for Relative Value Units
C. Bundled Services
1. Hydration Therapy and Chemotherapy
2. Evaluation of Psychiatric Records and Reports and Family
Counseling Services
3. Fitting of Spectacles
D. X-Rays and Electrocardiograms (EKGs) Taken in the Emergency
Room
E. Extension of Site-of-Service Payment Differential to Services
in Ambulatory Surgical Centers (ASCs)
F. Services of Teaching Physicians
G. Unspecified Physical and Occupational Therapy Services (HCPCS
Codes M0005 Through M0008 and H5300)
H. Transportation in Connection With Furnishing Diagnostic Tests
I. Maxillofacial Prosthetic Services
J. Coverage of Mammography Services
K. Use of Category-Specific Volume and Intensity (VI) Growth
Allowances in Calculating the Default Medicare Volume Performance
Standard (MVPS)
L. Two Anesthesia Providers Involved in One Procedure
M. Rural Hospital Impact Statement

In addition, because of the many organizations and terms to which
we refer by acronym in this final rule, we are listing these acronyms
and their corresponding terms in alphabetical order below:

AMA American Medical Association
ASC Ambulatory surgical center
CF Conversion factor
CFR Code of Federal Regulations
COBRA Consolidated Omnibus Budget Reconciliation Act
CPEP Clinical Practice Expert Panel
CPT [Physicians'] Current Procedural Terminology [4th Edition,
1994,

[[Page 38401]]
copyrighted by the American Medical Association]
CRNA Certified Registered Nurse Anesthetist
CY Calendar year
DEFRA Deficit Reduction Act
EKG Electrocardiogram
ESRD End-stage renal disease
FQHC Federally Qualified Health Centers
FTE Full-Time Equivalent
FY Fiscal year
GAF Geographic adjustment factor
GPCI Geographic practice cost index
GPVS Group-Specific Volume Performance Standards
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
I.L. Intermediary Letter
IPL Independent Physiological Laboratory
MAC Maryland Access to Care
ME Malpractice Expense
MVPS Medicare volume performance standards
NCI National Cancer Institute
OBRA Omnibus Budget Reconciliation Act
OMB Office of Management and Budget
ORA Omnibus Reconciliation Act
OTIP Occupational Therapists in Independent Practice
PE Practice Expense
PMP Primary Medical Provider
PPS Prospective Payment System
PTIP Physical Therapists in Independent Practice
RCE Reasonable compensation equivalency
RFA Regulatory Flexibility Act
RFP Request for Proposal
RHC Rural Health Clinics
RUC [AMA Specialty Society] Relative [Value] Update Committee
RVU Relative Value Unit
SNF Skilled Nursing Facility
TEFRA Tax Equity and Fiscal Responsibility Act
TEG Technical Expert Group
VI Volume and Intensity

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). Since January 1,
1992, Medicare pays for physician services under section 1848 of the
Act, ``Payment for Physicians' Services.'' This section contains three
major elements: (1) A fee schedule for the payment of physician
services; (2) a Medicare volume performance standard (MVPS) for the
rates of increase in Medicare expenditures for physician 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 relative value units (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 (PE), and malpractice expense (ME).
Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments
in RVUs because of changes resulting from a review of those RVUs may
not cause total physician fee schedule payments to differ by more than
$20 million from what they would have been had the adjustments not been
made. If this tolerance is exceeded, we must make adjustments to
preserve budget neutrality.

B. Published Changes to the Fee Schedule

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
physician services furnished on or after January 1, 1992. 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's) Physicians' Current Procedural Terminology (CPT)
through an ``interim RVU'' process every year. The updates to the RVUs
and fee schedule policies follow:
November 25, 1992, as a final notice with comment period
on new and revised RVUs only (57 FR 55914).
December 2, 1993, as a final rule with comment period (58
FR 63626) to revise the refinement process used to establish physician
work RVUs and to revise payment policies for specific physician
services and supplies. (We solicited comments on new and revised RVUs
only.)
December 8, 1994, as a final rule with comment period (59
FR 63410) to revise the geographic adjustment factor (GAF) values, fee
schedule payment areas, and payment policies for specific physician
services. The final rule also discussed 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 Act.
This proposed rule would affect the regulations set forth at 42 CFR
part 400, which consists of an introduction to, and definitions for,
the Medicare and Medicaid programs; part 405, which encompasses
regulations on Federal health insurance for the aged and disabled; part
410, which consists of regulations on supplementary medical insurance
benefits; part 414, which covers regulations on payment for Part B
medical and other health services; and new part 415, which contains
regulations on services of physicians in providers, supervising
physicians in teaching settings, and residents in certain settings. We
are making technical and conforming amendments to parts 411, 412, 413,
417, and 489.
II. Specific Proposals for Calendar Year (CY) 1996

A. Budget-Neutrality Adjustments for Relative Value Units (RVUs)

We make annual adjustments to RVUs for the physician fee schedule
to reflect changes in CPT codes and changes in estimated physician
work. As stated earlier, the statute requires that these revisions may
not change physician expenditures by more than $20 million compared to
estimated expenditures that would have occurred if the RVU adjustments
had not been made. To maintain this statutorily-mandated budget
neutrality, we make an adjustment across all RVUs in the physician fee
schedule.
We have received a number of suggestions (including those from the
American Medical Association (AMA), private payers, and State Medicaid
programs that base payments on the Medicare RVUs) that we apply these
adjustments to the conversion factors (CFs) rather than across all
RVUs. This would reduce the number of billing system changes required
by the annual revisions to the physician fee schedule.
We agree with the commenters that it would be administratively
simpler to apply the adjustments to the CFs rather than the RVUs. We
propose that these budget-neutrality adjustments be applied to the
physician fee schedule CFs. The impact on payment amounts would be
minimal (slight differences could be caused by rounding). This
alternative approach would be administratively simpler for Medicare and
other payers that base payments on the Medicare RVUs, including many
State Medicaid programs. In addition, this change would provide for
consistent RVUs from year to year, thus making it easier to analyze
payment and policy changes. For example, CPT code 99215 had 1.53 work
RVUs in 1994. Because of the 1.1 percent budget-neutrality adjustment
in 1995, this code has 1.51 work RVUs this year. If the proposed policy
had been in effect in 1995, the work RVUs for CPT code 99215 would have
remained at 1.53, but all 1995 CFs would have been reduced 1.1 percent.
Therefore, in Sec. 414.28 (``Conversion factors''), we propose to
revise paragraph (b) (``Subsequent CFs'') to state that beginning
January 1, 1996, the

[[Page 38402]]
CF for each CY may be further adjusted to maintain budget neutrality.

B. Bundled Services

1. Hydration Therapy and Chemotherapy
Hydration therapy intravenous (IV) infusion is billed under CPT
codes 90780 (up to 1 hour) and 90781 (each additional hour, up to 8
hours). The saline solution used in hydration therapy IV infusion is
billed and paid separately under the appropriate HCFA Common Procedure
Coding System (HCPCS) ``J'' code. Chemotherapy IV infusion is billed
under CPT codes 96410 (up to 1 hour), 96412 (each additional hour, up
to 8 hours), and 96414 (more than 8 hours). The chemotherapy drug is
billed and paid separately under the appropriate HCPCS ``J'' code.
Hydration therapy IV infusion may be administered at the same time
as chemotherapy. In some cases, the saline solution is mixed with the
chemotherapy drug. We believe that paying for hydration therapy IV
infusion and chemotherapy IV infusion administered at the same time
represents duplicate payment. Therefore, we propose not paying
separately for CPT codes 90780 and 90781 when billed on the same day as
CPT codes 96410, 96412, and 96414. We would continue to pay separately
for the saline solution and the chemotherapy drug. This proposal
reflects a policy change that is not explicitly addressed in our
regulations.
2. Evaluation of Psychiatric Records and Reports and Family Counseling
Services
At present, we allow separate payment for the following codes:
CPT code 90825 (Psychiatric evaluation of hospital
records, other psychiatric reports, psychometric and/or projective
tests, and other accumulated data for medical diagnostic purposes).
CPT code 90887 (Interpretation or explanation of results
of psychiatric, other medical examinations and procedures, or other
accumulated data to family or other responsible persons, or advising
them how to assist the patient).
We believe that these activities are generally performed as part of
the prework and postwork of other physician services. For example, the
work involved in a psychiatric evaluation of records and tests as
described by CPT code 90825 is a fundamental element of the prework and
postwork of other psychiatric services, such as individual
psychotherapy (CPT codes 90842 through 90844). The interpretation or
explanation of the results of medical examinations or procedures as
described by CPT code 90887 is also an integral part of the prework and
postwork of other physician services. Counseling of the family is part
of the postwork of evaluation and management services.
When these types of activities are performed in conjunction with
evaluation and management services or with surgical services, payment
for them is included in the prework and postwork components of the
visit or procedure. The psychiatric evaluation of hospital records and
the interpretation or explanation of psychiatric examinations are not
significantly different from other types of medical evaluations of
records or interpretation of other examinations. With the exception of
family counseling services, the RVUs for psychiatric services (CPT
codes 90801 and 90835 through 90857) already include the prework and
postwork activities described by CPT codes 90825 and 90887. Thus,
continuing to allow separate payment for these procedures, in addition
to payment for other psychiatric services, results in duplicate
payments and is inconsistent with our policy for other services. (We
also note that the times associated with the individual medical
psychotherapy CPT codes 90842 through 90844 are face-to-face times.
While payment for the review and preparation of records is included in
the fee schedule payment for these codes, the time spent in those
activities should not be counted for purposes of determining and
reporting the level of the individual psychotherapy code.)
With respect to family counseling services, Medicare has a
longstanding policy of covering these services if they are needed to
assess the capability of the family in, and to assist family members
in, managing the patient. The service must relate primarily to the
management of the beneficiary's problems and not to the treatment of
problems of the family member. Counseling principally concerned with
the effects of the beneficiary's condition on the family member is not
considered part of the physician's personal service to the beneficiary;
thus, it is not covered under Medicare. While we have always considered
counseling activities to be included in the evaluation and management
services, such as office and hospital visits that are described by CPT
codes 99201 through 99353, we have not had the same policy for the
psychotherapy codes. We believe it is appropriate to bundle covered
family counseling procedures into the other psychiatric codes so that
our policy is consistent with our policy on services furnished by other
physician specialties.
Therefore, we propose to change the status indicator for CPT codes
90825 and 90887 to ``B'' to show that payment for these codes is
bundled into the payment for another service, and separate payment
would not be allowed. We would implement this change in a budget-
neutral manner by redistributing the RVUs for CPT codes 90825 and 90887
across the following psychiatric codes: 90801, 90820, 90835, 90842
through 90847, and 90853 through 90857. This proposal reflects a policy
change that is not explicitly addressed in our regulations.
3. Fitting of Spectacles
The fitting, repair, and adjustment of prosthetic devices
(including spectacles) are covered under section 1861(s)(8) of the Act.
Services under section 1861(s)(8) are not included in the definition of
physician services as defined in section 1848(j)(3) of the Act and
should not be payable under the physician fee schedule. Nevertheless,
we inadvertently established payment amounts for the fitting of
spectacles and low vision systems under the physician fee schedule.
Payment for the fitting of spectacles is included in the payment for
the spectacles in the same way that payment for other prosthetic
fitting services is included in the payment for the prosthetic device.
Therefore, we propose to cease paying separately for the fitting of
spectacles and low vision systems to end this duplicate payment for the
fitting service. We propose to assign a ``B'' status indicator for the
following CPT codes to indicate that the services are covered under
Medicare, but payment for them is bundled into the payment for the
spectacles:

------------------------------------------------------------------------
CPT code Description
------------------------------------------------------------------------
92352....... Fitting of spectacle prosthesis for aphakia; monofocal.
92353....... Fitting of spectacle prosthesis for aphakia; multifocal.
92354....... Fitting of spectacle mounted low vision aid; single
element system.
92355....... Fitting of spectacle mounted low vision aid; telescopic or
other compound lens system.
92358....... Prosthesis service for aphakia, temporary (disposable or
loan, including materials).
92371....... Repair and refitting spectacles; spectacle prostheses for
aphakia.
------------------------------------------------------------------------

This proposed change clarifies both the coverage and payment
policies. The

[[Page 38403]]
coverage policy is clarified in that the fitting service is clearly
covered as part of the prosthesis. The payment policy is clarified in
that the payment for the spectacles includes the fitting services. This
proposal reflects a policy change that is not explicitly addressed in
our regulations.

C. X-Rays and Electrocardiograms (EKGs) Taken in the Emergency Room

This issue concerns our policy regarding the interpretation of x-
rays or electrocardiograms (EKGs) by a hospital emergency room
physician and a second interpretation by a hospital's radiologist or
cardiologist. The emergency room physician may be an emergency medicine
specialist, a physician covering the emergency room, or the patient's
personal physician.
Our current national policy, issued in 1981 in section 2020G of the
Medicare Carriers Manual, states that when a hospital radiologist
interprets an x-ray that has already been interpreted by another
physician, the service of the radiologist almost always constitutes a
physician service and should be paid by the Medicare carrier. The
instruction also states that any interpretation performed by the
physician in the emergency room is paid through his or her emergency
room visit fee. (This manual section also applies this policy to the
interpretation of EKGs by cardiologists.)
Some Medicare carriers are paying separately for the
interpretations of both the emergency room physician and the
radiologist or cardiologist.
In our deliberations about the nature of the appropriate Medicare
policy on payments for these interpretations, we have taken into
account the following factors:
The statement in the existing manual instruction about the
inclusion of the x-ray interpretation in the emergency room visit is
inconsistent with the AMA's CPT coding system that we use to describe
and process claims for physician services. In discussing the guidelines
for the evaluation and management service codes, the CPT states on page
2 of the 1995 Edition:

The actual performance of diagnostic tests/studies for which
specific CPT codes are available is not included in the levels of E/
M [evaluation and management] services. Physician performance of
diagnostic tests/studies for which specific CPT codes are available
should be reported separately, in addition to the appropriate E/M
code.

We note that the AMA has not distinguished between the evaluation
and management codes applicable to the emergency room and other
evaluation and management codes in this regard.
Somewhat differently, the questionnaire used by the
Harvard School of Public Health (in a cooperative agreement with us) to
develop work RVUs for the physician fee schedule specifically indicates
that the interpretation of x-rays is included in the emergency room
codes (but not in the other evaluation and management codes). However,
we do not believe that the use of the term ``interpretation'' in this
context indicates that the emergency room physician has furnished an
in-depth interpretation with a report analogous to an interpretation
and a report performed by a radiologist. We believe it is common
practice for an emergency room physician to ``review'' x-rays and use
the information gained in diagnosing and treating the patient, but that
this review, without a report for inclusion in the patient's medical
record maintained by the hospital, does not meet the requirement for
payment of a professional component radiologic service.
Section 13514 of the Omnibus Reconciliation Act of 1993,
Public Law 103-66, enacted on August 10, 1993, requires us to make
separate payment for EKG interpretations and to exclude the RVUs for
EKG interpretations from the RVUs for visits and consultations.
In a July 1993 report entitled, ``Medicare's Reimbursement
for Interpretations of Hospital Emergency Room X-rays,'' the Office of
Inspector General (OIG) recommended that we pay for a reinterpretation
of x-rays only if the attending physician specifically requests a
second physician's interpretation to furnish appropriate medical care
before the patient is discharged. The report stated that any other
reinterpretation of the attending physician's original interpretation
should be treated and paid as part of the hospital's quality assurance
program. (We note that the costs of quality control activities as
discussed above are taken into account in determining payments made to
the hospital by the hospital's Medicare fiscal intermediary.) The net
effect of the OIG's proposal would be that, in many cases, Medicare
carriers would not pay separately for the interpretation of x-rays by
either the radiologist or the emergency room physician since the OIG
operated on the assumption (as set forth in the Medicare Carriers
Manual) that the emergency room physician is paid for the
interpretation through the emergency room visit charge.
The CPT coding system differs in its treatment of EKGs and
x-rays. For EKGs, there is a separate code for the taking of an EKG
tracing (CPT code 93005) and for the interpreting and reporting of the
procedure (CPT code 93010). For x-rays, the code represents all aspects
of the procedure, and a CPT modifier -26 is used when only the
professional component is billed. On page 230 of the 1995 Edition, the
CPT states: ``A written report, signed by the interpreting physician,
should be considered an integral part of a radiologic procedure or
interpretation.''
Under Sec. 405.550(b)(2) (proposed to be redesignated as
Sec. 415.100(b)(2)), the Medicare carrier pays for services of
physicians to patients of hospitals only if the services contribute
directly to the diagnosis and treatment of an individual patient.
There is no legal basis for a Medicare carrier to deny
payment to any physician for the interpretation of a reasonable and
necessary diagnostic test if payment for the interpretation is not made
in some other way.
We believe that, in any situation in which the interpretation of
the radiologist or cardiologist is furnished contemporaneously with the
diagnosis and treatment of the patient, the Medicare carrier should pay
for the interpretation made by the radiologist or cardiologist and deny
any claim submitted by an emergency room physician for the x-ray
interpretation. However, in the case of emergency room services, the
specialist often does not perform the interpretation and prepare the
report until a significant period of time (days in some situations)
after the patient has been diagnosed, treated, and discharged. We
believe that there are situations in which an emergency room physician
performs the interpretation and report required by the patient and that
a later interpretation furnished by the cardiologist or radiologist is
essentially a quality control activity, the costs of which may be taken
into account by Medicare fiscal intermediaries in their payments to
hospitals. Nevertheless, if the hospital elects to have the
cardiologist or radiologist perform and receive payment for the
interpretation in every emergency room case, the hospital should ensure
that other physicians who practice on its premises do not also bill for
the same interpretation.
We believe that when a physician bills for the interpretation of an
EKG or the professional component of an x-ray furnished to a
beneficiary in an emergency room, the physician is indicating that he
or she has prepared a written report of the findings for inclusion in
the patient's medical record maintained by the hospital. We note that
this also means the physician is

[[Page 38404]]
assuming legal responsibility for the interpretation and report.
We believe that, in most situations, the Medicare carrier should
receive only one claim for an interpretation of each procedure.
However, when multiple claims are received for the interpretation and
report or professional component of an x-ray or an EKG, the carrier
should pay for the service that directly contributed to the diagnosis
and treatment of the beneficiary.
We will provide further guidance to the Medicare carriers through
operating instructions. However, in practice, the carrier would almost
always pay the first claim received (since the carrier would not know
if a second bill will arrive). If a second bill is received, the
Medicare carrier would suspend the claim to determine whether to pay
the claim.
Listed below are the elements of our proposed policy. If the policy
is adopted, we will incorporate the policy in a new Medicare Carriers
Manual instruction.
The carrier should generally pay separately for only one
interpretation of an EKG or x-ray procedure furnished to an emergency
room patient. However, there should be provision for an additional
interpretation under unusual circumstances such as a questionable
finding for which the physician performing the initial interpretation
believes another physician's expertise is needed.
The professional component of a diagnostic procedure
furnished to a beneficiary in a hospital includes an interpretation and
written report for inclusion in the beneficiary's medical record
maintained by the hospital. We propose to place this requirement in the
radiology section of the regulations on services of physicians in
providers at Sec. 405.554(a). (Under the recodification proposed in
this regulation, this section would become 415.120(a).)
We would distinguish between an ``interpretation and
report'' of an x-ray or an EKG procedure and a ``review'' of the
procedure. An interpretation and report of the procedure is separately
payable by the carrier. A review of the findings of these procedures,
without a written report, does not meet the conditions for separate
payment of the service since the review is already included in the
emergency room visit payment.
In the case of multiple bills for the same interpretation
and report, we would instruct the carriers to adopt the following
procedures:
+ End the policy of considering physician specialty to be the prime
consideration in deciding which interpretation and report to pay
regardless of when the service is performed.
+ Pay for the interpretation and report that directly contributed
to the diagnosis and treatment of the individual patient.
+ Pay for the interpretation billed by the cardiologist or
radiologist if the interpretation of the procedure is performed
contemporaneously with the diagnosis and treatment of the beneficiary.
(This interpretation may be a verbal report conveyed to the treating
physician that will be written in a report at a later time.)
We propose to minimize the carrier's need to make
decisions about which claim to pay when multiple claims for the
interpretation and report of the same procedure are received by--
+ Encouraging hospitals to exercise their authority over the
medical staff to ensure that only one claim per interpretation is
submitted;
+ Advising hospitals that if they allow a physician to perform and
bill for a medically necessary service (the interpretation and report)
in an emergency room and permit another physician to perform and bill
for the same service, the Medicare carrier will not pay two claims;
+ Advising hospitals that the Medicare carrier may determine that
the hospital's ``official interpretation'' is for quality control and
liability purposes only and is a service to the hospital rather than to
an individual beneficiary; and
+ Advising hospitals that Medicare fiscal intermediaries consider
costs incurred for quality control activities in determining payments
to hospitals.
When the Medicare carrier receives only one claim for an
interpretation and the procedure is reasonable and necessary, the
carrier will pay the claim. When the claim is from a cardiologist or
radiologist, we will not require the Medicare carrier to make a
determination of whether the service is a quality control service. We
will presume that the one service billed was a service to the
individual beneficiary.

D. Extension of Site-of-Service Payment Differential to Services in
Ambulatory Surgical Centers (ASCs)

Services that are performed more than 50 percent of the time in
office settings are subject to a site-of-service payment differential
if they are performed in hospital outpatient departments and inpatient
settings. For these procedures, the PE RVUs are reduced by 50 percent.
We base the PE RVUs on charge data from the office setting. We assume
that office charge data accurately reflect physician PEs in the office
setting. Therefore, for office-based services, the PE RVUs reflect
office practice costs. The payment differential reflects the fact that
PEs are lower for services performed in hospital settings using
hospital equipment, personnel, and space. We developed the site-of-
service payment differential under the authority of section 1848(c)(4)
of the Act, which permits the Secretary to establish ancillary policies
necessary to implement the physician fee schedule. Services furnished
in ASCs were originally exempt from the site-of-service payment
differential because ASC-approved procedures were performed less than
50 percent of the time in a physician's office, that is, the ASC list
and site-of-service payment differential were mutually exclusive.
However, now a procedure furnished more than 50 percent of the time
in a physician's office may be an ASC-approved procedure, for example,
when the ASC setting is more appropriate in cases when a patient needs
anesthesia. Therefore, we propose extending the site-of-service payment
differential to office-based services if those services are performed
in an ASC.
We see no reason for exempting these procedures from the site-of-
service payment differential because payments for overhead and other
expenses included in the PE RVUs duplicate the expenses paid in the ASC
facility payment rate, that is, the physician does not bear these
expenses himself as he would in his own office. Therefore, in
Sec. 414.32 (``Determining payments for certain physician services
furnished in facility settings''), we propose to remove from paragraph
(d) (``Services excluded from the reduction'') the subordinate
paragraph (d)(2), which would have the effect of applying the site-of-
service payment differential to ASC services.
The following procedure codes currently on the ASC list are
furnished more than 50 percent of the time in a physician's office.
Therefore, we propose adding them to the list of services subject to
the site-of-service payment differential.

Procedure Codes To Be Added to the Site-of-Service Differential List
------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
11042.......... Cleansing of skin/tissue.
11404.......... Removal of skin lesion.
11424.......... Removal of skin lesion.
11444.......... Removal of skin lesion.
11446.......... Removal of skin lesion.
11604.......... Removal of skin lesion.
11624.......... Removal of skin lesion.

[[Page 38405]]

11644.......... Removal of skin lesion.
12021.......... Closure of split wound.
13100.......... Repair of wound or lesion.
13101.......... Repair of wound or lesion.
13120.......... Repair of wound or lesion.
13121.......... Repair of wound or lesion.
13131.......... Repair of wound or lesion.
13132.......... Repair of wound or lesion.
13150.......... Repair of wound or lesion.
13151.......... Repair of wound or lesion.
13152.......... Repair of wound or lesion.
14000.......... Skin tissue rearrangement.
14020.......... Skin tissue rearrangement.
14040.......... Skin tissue rearrangement.
14041.......... Skin tissue rearrangement.
14060.......... Skin tissue rearrangement.
14061.......... Skin tissue rearrangement.
15740.......... Island pedicle flap graft.
19100.......... Biopsy of breast.
20670.......... Removal of support implant.
21025.......... Excision of bone, lower jaw.
21026.......... Excision of facial bone(s).
21040.......... Removal of jaw bone lesion.
21041.......... Removal of jaw bone lesion.
21208.......... Augmentation of facial bones.
21210.......... Face bone graft.
21215.......... Lower jaw bone graft.
21248.......... Reconstruction of jaw.
21249.......... Reconstruction of jaw.
21440.......... Repair dental ridge fracture.
21485.......... Reset dislocated jaw.
21550.......... Biopsy of neck/chest.
21920.......... Biopsy soft tissue of back.
23066.......... Biopsy shoulder tissues.
23330.......... Remove shoulder foreign body.
23620.......... Treat humerus fracture.
23931.......... Drainage of arm bursa.
24065.......... Biopsy arm/elbow soft tissue.
24362.......... Reconstruct elbow joint.
25065.......... Biopsy forearm soft tissues.
25624.......... Treat wrist bone fracture.
25635.......... Treat wrist bone fracture.
26070.......... Explore/treat hand joint.
26432.......... Repair finger tendon.
26605.......... Treat metacarpal fracture.
26645.......... Treat thumb fracture.
27086.......... Remove hip foreign body.
27323.......... Biopsy thigh soft tissues.
27520.......... Treat kneecap fracture.
27604.......... Drain lower leg bursa.
27613.......... Biopsy lower leg soft tissue.
27760.......... Treatment of ankle fracture.
27780.......... Treatment of fibula fracture.
27786.......... Treatment of ankle fracture.
27788.......... Treatment of ankle fracture.
28003.......... Treatment of foot infection.
28030.......... Removal of foot nerve.
28043.......... Excision of foot lesion.
28092.......... Removal of toe lesions.
28222.......... Release of foot tendons.
28261.......... Revision of foot tendon.
28313.......... Repair deformity of toe.
28400.......... Treatment of heel fracture.
28635.......... Treat toe dislocation.
28665.......... Treat toe dislocation.
29850.......... Knee arthroscopy/surgery.
30124.......... Removal of nose lesion.
30560.......... Release of nasal adhesions.
30580.......... Repair upper jaw fistula.
30801.......... Cauterization inner nose.
31233.......... Nasal/sinus endoscopy, dx.
31235.......... Nasal/sinus endoscopy, dx.
31237.......... Nasal/sinus endoscopy, surg.
31238.......... Nasal/sinus endoscopy, surg.
31525.......... Diagnostic laryngoscopy.
31570.......... Laryngoscopy with injection.
33011.......... Repeat drainage of heart sac.
38300.......... Drainage lymph node lesion.
38505.......... Needle biopsy, lymph node(s).
40510.......... Partial excision of lip.
40801.......... Drainage of mouth lesion.
40814.......... Excise/repair mouth lesion.
40816.......... Excision of mouth lesion.
40819.......... Excise lip or cheek fold.
40820.......... Treatment of mouth lesion.
41000.......... Drainage of mouth lesion.
41008.......... Drainage of mouth lesion.
41105.......... Biopsy of tongue.
41110.......... Excision of tongue lesion.
41112.......... Excision of tongue lesion.
41113.......... Excision of tongue lesion.
41800.......... Drainage of gum lesion.
41805.......... Removal foreign body, gum.
41806.......... Removal foreign body, jawbone.
41827.......... Excision of gum lesion.
42000.......... Drainage mouth roof lesion.
42104.......... Excision lesion, mouth roof.
42106.......... Excision lesion, mouth roof.
42107.......... Excision lesion, mouth roof.
42160.......... Treatment mouth roof lesion.
42300.......... Drainage of salivary gland.
42310.......... Drainage of salivary gland.
42335.......... Removal of salivary stone.
42340.......... Removal of salivary stone.
42405.......... Biopsy of salivary gland.
42408.......... Excision of salivary cyst.
42700.......... Drainage of tonsil abscess.
45305.......... Proctosigmoidoscopy; biopsy.
45308.......... Proctosigmoidoscopy.
45309.......... Proctosigmoidoscopy.
46050.......... Incision of anal abscess.
46220.......... Removal of anal tab.
46610.......... Anoscopy; remove lesion.
46611.......... Anoscopy.
51710.......... Change of bladder tube.
51725.......... Simple cystometrogram.
51726.......... Complex cystometrogram.
51772.......... Urethra pressure profile.
51785.......... Anal/urinary muscle study.
52000.......... Cystoscopy.
52010.......... Cystoscopy & duct catheter.
52281.......... Cystoscopy and treatment.
52285.......... Cystoscopy and treatment.
53420.......... Reconstruct urethra, stage 1.
54065.......... Destruction, penis lesion(s).
55700.......... Biopsy of prostate.
56405.......... I & D of vulva/perineum.
56605.......... Biopsy of vulva/perineum.
57180.......... Treat vaginal bleeding.
57800.......... Dilation of cervical canal.
60000.......... Drain thyroid/tongue cyst.
61070.......... Brain canal shunt procedure.
63600.......... Remove spinal cord lesion.
64420.......... Injection for nerve block.
65270.......... Repair of eye wound.
65805.......... Drainage of eye.
66030.......... Injection treatment of eye.
66762.......... Revision of iris.
67031.......... Laser surgery, eye strands.
67101.......... Repair, detached retina.
67105.......... Repair, detached retina.
67141.......... Treatment of retina.
67208.......... Treatment of retinal lesion.
67921.......... Repair eyelid defect.
69424.......... Remove ventilating tube.
------------------------------------------------------------------------

E. Services of Teaching Physicians

1. General Background
The focus of this proposal is Medicare payment for those services
furnished under graduate medical education (GME) programs that are not
payable through the mechanisms established for direct GME costs by
section 1886(h) of the Act. Section 1886(h) addresses Medicare payments
to hospitals and hospital-based providers for the costs of approved GME
programs in medicine, osteopathy, dentistry, and podiatry. These costs
include residents' salaries and fringe benefits, physician compensation
costs for GME program activities that are not payable on a fee schedule
basis, and other GME program costs.
Medicare intermediary expenditures under section 1886(h) of the Act
for fiscal year (FY) 1996 are estimated to be approximately $1.9
billion. In addition, under section 1886(d)(5)(B) of the Act, Medicare
makes additional payments to teaching hospitals under the prospective
payment system (PPS) for the higher indirect operating costs hospitals
incur by having GME programs. (These are costs other than direct GME
costs.) Medicare indirect GME payments for FY 1996 are estimated to be
approximately $4.9 billion. Medicare also supports GME programs in
teaching hospitals through billings for the services of attending
physicians who involve residents in the care of their patients. The
amount of Medicare expenditures for these services is not known since
attending physicians are not required to distinguish between services
they personally furnish and those they furnish as attending physicians
in claims submitted to the part B carriers.
This proposal addresses services of teaching physicians that are
payable on a fee schedule basis, services of residents in settings that
are not payable under section 1886(h), and services of moonlighting
residents. In addition, the proposed rule addresses, but does not
substantially change, existing rules on related issues on Medicare
payments for the services of residents in approved

[[Page 38406]]
GME programs furnished in certain freestanding skilled nursing
facilities (SNFs) and home health agencies (HHAs), and services of
residents who are not in approved GME programs. We refer to the section
1886(h) mechanisms to distinguish between that payment methodology and
other payment mechanisms.
Title XVIII of the Act provides separate coverage and payment bases
for provider services and physician services. Under Medicare, provider
services, such as inpatient hospital services and SNF services, are
covered under Hospital Insurance (Part A) and are paid from the Part A
Trust Fund. Outpatient hospital services are covered under
Supplementary Medical Insurance (Part B) and are paid from the Part B
Trust Fund. Provider services are paid on a prospective payment,
reasonable cost, or other payment mechanism through Medicare
contractors called ``fiscal intermediaries.'' Physician services and
other ``medical and other health services,'' as defined in section
1861(s) of the Act are generally paid under Part B through Medicare
contractors called ``carriers.'' To administer the Medicare program, we
must distinguish clearly between provider services and physician
services to determine the appropriate payment methodology and the
appropriate Trust Fund that is liable for payment.
In part 405 (``Federal Health Insurance for the Aged and
Disabled''), subpart D (``Principles of Reimbursement for Services by
Hospital-Based Physicians''), regulations beginning with Sec. 405.480
set forth the basic principles regarding payment for services of
physicians who practice in providers. Additional principles applicable
to payment for physician services in teaching hospitals appear in
subpart E (``Criteria for Determination of Reasonable Charges; Payment
for Services of Hospital Interns, Residents, and Supervising
Physicians'') in Secs. 405.520 and 405.521. Principles applicable to
services of interns and residents appear in Secs. 405.522 through
405.525. Sections 405.465 and 405.466 address the payment methodology
for teaching hospitals that elect reasonable cost payments for
physician services. (See sections 1832(a)(2)(B)(i)(II) and 1861(b)(7)
of the Act.) Since the publication of these regulations, the Congress
has enacted a series of legislative changes that affect payments for
these services, and we propose to revise the regulations to conform to
these statutory changes and to clarify current policy.
Section 948 of the Omnibus Reconciliation Act of 1980 (ORA '80)
(Pub. L. 96-499), enacted on December 5, 1980, as amended by section
2307 of the Deficit Reduction Act of 1984 (DEFRA '84) (Pub. L. 98-369),
enacted on July 18, 1984, addressed payments for physician services in
teaching settings. (See section 1842(b)(7) of the Act.) Another
pertinent legislative change, section 108 of the Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA '82) (Pub. L. 97-248), enacted on
September 3, 1982, added a new section 1887 to the Act. That
legislation dealt explicitly with distinguishing between the
professional services physicians furnish to individual patients in a
provider and services physicians furnish to the provider itself. While
section 1887 of the Act does not specifically address teaching
physicians or GME issues, it is consistent with Medicare policy on
classifying the activities in which physicians in teaching hospitals
are engaged.
We published a final rule with comment period in the Federal
Register on March 2, 1983 (48 FR 8902), which implemented the
provisions of section 1887 of the Act. That final rule revised the
regulations that govern Medicare payment for services of physicians who
practice in providers such as hospitals, SNFs, and comprehensive
outpatient rehabilitation facilities. As a part of that final rule, we
revised Secs. 405.480 through 405.482, removed Secs. 405.483 through
405.488, and added new Secs. 405.550 through 405.557. Those
regulations--
Set forth basic criteria for distinguishing those
physician services furnished in providers that are payable by Part B
carriers as physician services to individual patients from those
services that are payable by fiscal intermediaries as physician
services to the provider itself;
Set limits on the amounts payable on a reasonable cost
basis to providers for physician services to the provider; and
Established more specific criteria for determining the
basis and amount of payment for physician services in the specialties
of anesthesiology, radiology, and pathology.
In the preamble to the March 1983 final rule (48 FR 8906), we
stated that because of problems related to applying portions of the
revised regulations to teaching hospitals and to implement sections
1842(b)(6) and 1861(b)(7) of the Act for physician payment (as amended
by section 948 of ORA '80), we planned to publish, in a separate
document, proposed regulations that would establish special rules
governing payment for services of physicians in teaching hospitals.
These rules would have superseded Secs. 405.520 and 405.521 if they
became effective. Subsequently, however, the Congress passed DEFRA '84,
which further amended section 1842(b)(6) of the Act and redesignated it
as section 1842(b)(7).
Another statutory change that affected payments to teaching
hospitals was section 9202 of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA '85) (Pub. L. 99-272), enacted on
April 7, 1986, as amended by section 9314 of the Omnibus Budget
Reconciliation Act of 1986 (OBRA '86) (Pub. L. 99-509), enacted on
October 21, 1986, which added a new section 1886(h) to the Act. Section
1886(h) of the Act revised the method of calculating Medicare payment
for the direct costs of approved GME activities such as residents'
salaries and fringe benefits, from reasonable cost payment to payments
based on hospital-specific per-resident amounts multiplied by the
number of full-time equivalent (FTE) residents working in the hospital
during a hospital's cost reporting period.
A major change in the Medicare payment rules for physician services
in general was enacted as part of the Omnibus Budget Reconciliation Act
of 1989 (OBRA '89) (Pub. L. 101-239), enacted on December 19, 1989,
which added section 1848 to the Act. Section 1848 replaced the
reasonable charge payment mechanism with a fee schedule for physician
services. The Omnibus Budget Reconciliation Act of 1990 (OBRA '90)
(Pub. L. 101-508), enacted on November 5, 1990, contained several
modifications and clarifications to the OBRA '89 provisions that
established the physician fee schedule.
2. Payment for Physician Services Furnished in Teaching Settings
a. Current Practices. Of the nearly 7,000 hospitals that
participate in Medicare, approximately 1,200 have GME programs that are
approved for residency training by the appropriate accrediting
organization. (We are using the term ``residents'' in this preamble to
include residents, interns, and fellows who are in formally organized
and approved GME programs.)
For hospital cost reporting periods beginning on or after July 1,
1985, the costs of residents' compensation (representing payment for
the residents' services), certain physician compensation costs related
to GME programs, and other GME program costs are payable based on
hospital-specific per-resident amounts as described in

[[Page 38407]]
Sec. 413.86, in accordance with section 1886(h) of the Act. Physician
compensation costs for administrative and supervisory services
unrelated to the GME program or other approved educational activities
are payable as operating costs through diagnosis-related group payments
under PPS for inpatient services and on a reasonable cost basis for
inpatient services in hospitals excluded from PPS and for outpatient
services.
In the case of those few teaching hospitals that elect reasonable
cost payments for physician direct medical and surgical services under
section 1861(b)(7) of the Act instead of billing for services to
Medicare beneficiaries on a fee-for-service basis, the election and
payment mechanisms described in current Secs. 405.465 and 405.466 would
be set forth in this proposed rule in new Sec. 415.160 and in
redesignated Secs. 415.162 and 415.164.
Practices vary widely among and within teaching hospitals with
respect to the degree of physician involvement in the care of patients.
In some cases, teaching physicians personally direct residents in
furnishing patient care services. In others, residents assume a greater
degree of responsibility for the care patients receive, and the
teaching physicians exercise only general control over the residents'
activities.
b. Statutory and Other Developments Pertaining to Teaching
Physician Services. (1) Original Medicare Law and Regulations. As
originally enacted, title XVIII of the Act excluded the services of
physicians, interns, and residents from the definition of ``inpatient
hospital services,'' except for the services of interns and residents
in approved training programs. The services of residents in an approved
program of a hospital with which an SNF has a transfer agreement are
included in the definition of ``extended care services'' and in the
definition of ``home health services'' in the case of an HHA that is
affiliated with or under common control of a hospital having the
program. These provisions established the costs of approved GME
programs for provider services payable by intermediaries on a
reasonable cost basis. The Act did not include special rules for
payment of physician services in teaching hospitals.
Under Secs. 405.520 and 405.521 for teaching physician services,
and Secs. 405.522 through 405.525 for residents' services, a physician
in a teaching setting is considered the attending physician for a
Medicare patient, and thereby qualifies for Part B payment, only if he
or she furnishes ``personal and identifiable direction'' to the interns
and residents who provide the actual services to the patient. Before
January 1, 1992, Part B physician services were paid under the
reasonable charge payment system. As of January 1, 1992, these
physician services are paid under the physician fee schedule set forth
in part 414 (56 FR 59502).
Although Sec. 405.521(b) lists examples that illustrate the types
of responsibilities attending physicians typically carry out, the list
is not exhaustive. In individual cases, it may be difficult to
determine, by referring to Sec. 405.521, whether a physician in a
teaching setting is the ``attending physician'' for a Medicare patient.
It may be necessary for the carrier to review hospital charts to see if
the attending physician requirements were met; however, the involvement
of the teaching physician in individual services is often unclear from
a review of the charts.
It became apparent, shortly after Secs. 405.520 and 405.521 were
issued, that some Medicare carriers were paying charges for physician
services in some teaching hospitals, even though interns and residents
were primarily responsible for the care of the patients. The physicians
who were billing for these services were often assuming only limited
responsibility for the medical management of the patients' treatment.
It also became clear that some physicians were submitting charges for
services furnished to Medicare patients even though non-Medicare
patients were not billed for similar services, and patients generally
were not obligated to pay for these physician services.
In April 1969, these problems led to the issuance of Intermediary
Letter (I.L.) 372, which sets forth specific conditions that physicians
in teaching settings must meet to be considered attending physicians
and, thus, qualify to charge the carrier for services in which they
involve residents. It also specifies how carriers must determine the
reasonable charges for these services. Although I.L. 372, which is
still in effect, has provided guidance to Medicare carriers and
intermediaries on payment for these services, it has not been applied
uniformly by all Medicare carriers.
(2) 1972 Amendments. On October 30, 1972, the Congress amended the
Act to provide rules on payment for physician services (as
distinguished from the services of interns and residents) furnished in
teaching hospitals. Section 227 of the Social Security Amendments of
1972 (Pub. L. 92-603) amended section 1861(b) of the Act to require
that Medicare treat these services as hospital services and pay for
them on a reasonable cost basis, except under certain specific
circumstances. Section 227 also made certain incentives available to
hospitals that elected to be paid for physician services on a
reasonable cost basis.
In subsequent legislation (section 15 of Pub. L. 93-233, enacted on
December 31, 1973, and section 7 of the End-Stage Renal Disease Program
Amendments of 1978 (Pub. L. 95-292), enacted on June 13, 1978), the
Congress deferred implementation of all provisions of section 227 of
the 1972 amendments except for the incentives to elect reasonable cost
payment for physician direct medical and surgical services. The cost
reimbursement provisions were implemented through Sec. 405.465, as
published in a final rule on August 8, 1975 (40 FR 33440). The
statutory provisions for which the Congress deferred implementation
were eventually replaced by new provisions passed by the Congress in
ORA '80. ORA '80 reaffirmed, but did not otherwise affect, the
provisions of section 227 of the 1972 amendments authorizing cost
reimbursement incentives.
(3) ORA '80. Section 948 of ORA '80 made several important changes
in the sections of the Medicare statute that address payment for
physician services in teaching hospitals. Specifically, section 948--
Repealed the provisions of the 1972 Amendments that
required Medicare to pay for these services (with certain exceptions)
on a reasonable cost basis;
Amended section 1861(b) of the Act to allow hospitals with
approved teaching programs to elect to be paid on a reasonable cost
basis for physician direct medical and surgical services furnished to
their Medicare patients and for the supervision of interns and
residents in the care of individual patients if all physicians in the
hospital agree not to bill charges for their services furnished to
Medicare patients; and
Added section 1842(b)(6) of the Act (now section
1842(b)(7)) to specify the conditions that must be met to permit
payment under Part B for physician services in teaching hospitals that
do not elect cost reimbursement, and to provide special payment rules
for determining the customary charges applicable in this situation.
In the Conference Report accompanying ORA '80 (H.R. Rep. No. 1479,
96th Cong., 2d Sess. 145 (1980)), the Conference Committee stated that
its intention was to permit payment for physician services in a
teaching hospital on a reasonable charge basis only if the physician is
the patient's ``attending physician.'' The conferees also endorsed

[[Page 38408]]
the attending physician criteria in I.L. 372.
The Conference Report further states that ``[t]he conferees intend
(without precluding reasonable changes in the future) that in
determining the amount payable on a charge basis under Medicare Part B
for services of physicians in teaching hospitals, the policies
contained in I.L. 372 should be generally followed where these are not
inconsistent with the provisions of the conference agreement.'' Ibid.
p. 146.
(4) DEFRA '84. Subsequently, section 2307(a) of DEFRA '84 further
amended section 1842(b)(7) of the Act concerning conditions for payment
for physician services furnished in teaching hospitals that do not
elect cost reimbursement. Section 2307(a) was later amended by sections
3(b) (5) and (6) of the DEFRA Technical Amendments (Pub. L. 98-617),
enacted on November 8, 1984. As revised, section 1842(b)(7) of the Act
(which was redesignated from section 1842(b)(6) of the Act by section
2306 of DEFRA '84) provides that--
The customary charge of a physician qualifying as a
teaching physician is set no lower than 85 percent of the prevailing
charge paid for similar services in the same locality; and
If all the teaching physicians in a teaching hospital
agree to accept assignment for all the services they furnish to
Medicare patients in that hospital, the customary charge is set at 90
percent of the prevailing charge paid for similar services in the same
locality.
(5) 1989 Proposed Rule. On February 7, 1989, we published a
proposed rule that would have implemented the teaching physician
payment provisions of both ORA '80 and DEFRA '84 (54 FR 5946). In that
document, we proposed the following changes relating to teaching
physicians:
Revise the regulations governing the conditions under
which Medicare payment is made for the services of physicians in
teaching settings and implement a special methodology for determining
customary charges for the services of teaching physicians.
Revise the regulations governing Medicare payment to
providers for compensation paid to physicians who furnish services that
are of general benefit to patients in the provider.
That proposed rule was never published in final because legislation
enacted in 1989 and 1990 that mandated the implementation of the
Medicare physician fee schedule had the effect of replacing the payment
methodology of the proposed rule.
3. Payments for Supervising Physicians in Teaching Settings and for
Residents in Certain Settings
We propose to revise the regulations because of the substantial
changes that have taken place in the way Medicare payments for
physician services are determined (that is, the replacement of the
reasonable charge system with the physician fee schedule); the length
of time since the publication of the February 1989 proposed rule; and
our decision to propose to replace the attending physician criteria of
that proposed rule.
We propose to change the attending physician criteria from those of
I.L. 372 to make the criteria more flexible in terms of the individual
teaching physician who may serve as the responsible physician for a
particular service while ensuring that a physician is present during at
least some portion of each service payable by the carrier. We also
propose rules based on other Medicare policies that have been in effect
for years but have never been explicitly addressed in the regulations.
a. Distinction Between Teaching Hospital and Teaching Setting. We
propose to distinguish between ``teaching hospital'' and ``teaching
setting,'' because the former is more directly related to intermediary
payments, and the latter (although defined in terms of intermediary
payments) is more directly related to carrier payments. We propose to
define ``teaching hospital'' as a hospital engaged in an approved GME
residency program in medicine, osteopathy, dentistry, or podiatry. We
propose to define ``teaching setting'' as a provider or freestanding
setting in which Medicare payment for the services of residents is made
under the direct GME payment provisions of Sec. 413.86 (hospitals,
hospital-based providers, and settings, including nonprovider settings,
meeting the requirements for residents in Sec. 413.86(f)(1)(iii)), or
on a reasonable cost basis under the provisions of Sec. 409.26 or
Sec. 409.40(f) for residents' services furnished in freestanding SNFs
or HHAs, respectively.
b. Statutory Requirements for Payment in Teaching Hospitals Not
Electing Reasonable Costs for Physician Services to Individual
Patients. Section 1842(b)(7) of the Act is generally premised on the
use of customary charges, that is, the reasonable charge system, as the
basis for Medicare payments for the services of physicians in teaching
hospitals. Section 1848 of the Act, however, established the physician
fee schedule as the payment methodology for physician services
furnished beginning January 1, 1992 without any exception for physician
services furnished in teaching settings. Therefore, we based the
policies in this proposed rule on principles established in legislation
on payment for physician services generally under the physician fee
schedule, on payment for physician services furnished in providers, and
on payment to hospitals for GME programs. With regard to payment to
hospitals for GME programs, this proposal addresses activities
associated with GME programs that are not payable through fiscal
intermediary payment mechanisms.
c. Intermediary Letter (I.L.) 372 Attending Physician Criteria. The
I.L. 372 attending physician criteria and related policy were developed
by Medicare in 1969 as a means of documenting the involvement of
teaching physicians in patient care services furnished in teaching
hospitals and have been controversial ever since. It was recognized
then and now that residents must furnish patient care services to
develop their skills as physicians or other types of practitioners. The
``attending physician'' policy was developed as a mechanism to make
Part B fee schedule payments for services in which residents were
involved. The main requirement of the policy was that there would be a
single attending physician who personally examined the beneficiary
within a reasonable time after admission, confirmed the diagnosis and
course of treatment, and was continuously involved in the care of the
beneficiary throughout the stay. The attending physician policy as set
forth in I.L. 372 and related issuances specifically stated that the
attending physician had to be present when a major surgical procedure
or a complex or dangerous medical procedure was performed, but was
vague, perhaps necessarily, on the matter of the presence of the
physician during other occasions of inpatient service. There was less
ambiguity with regard to hospital outpatients. Part A I.L. No. 70-7/
Part B I.L. No. 70-2 (issued in January 1970), a question-and-answer
I.L. on I.L. 372, indicated that the supervising physician must either
personally perform the service or function as the attending physician
and be present while a service is being furnished (question 14).
Medicare carriers were directed to periodically review the hospital
charts for verification of the establishment of attending physician
relationships and their involvement in individual services. If the
chart did not substantiate a sufficient level of involvement in the
care furnished, the teaching physician role was seen as supervisory in
nature,

[[Page 38409]]
rather than as an attending physician, even though the teaching
physician may have had legal responsibility for the care furnished to
the patient. Consequently, the fiscal intermediary for the hospital
would pay Medicare's share of the salary costs of the teaching
physician attributable to the supervision of residents, but the
Medicare carrier would not make payment for the physician services on
the basis of reasonable charges.
We believe, after years of working experience with the I.L. 372
attending physician policy, that we should replace it. The amount of
postpayment review necessary to verify the establishment and continuity
of the attending physician relationship from patient charts has become
impractical given reductions in contractor budgets and is inconsistent
with more recent congressional action. While the Congress endorsed the
attending physician policy in the Conference Report accompanying ORA
'80, the I.L. 372 policy may be viewed as not entirely consistent with
the payment mechanism enacted in OBRA '86 under section 1886(h) of the
Act for payment of direct GME costs in teaching hospitals. For example,
I.L. 372 indicates that, if a physician is not an attending physician
but supervises a resident who furnishes a service, the costs of the
physician services are payable by the intermediary. Under section
1886(h) of the Act, if a service is determined not to be an attending
physician service billable under Part B, the service cannot become a
provider service for purposes of additional payments made under Part A
since the GME payments are prospectively determined amounts that cannot
be adjusted based on the individual circumstances of the delivery of
individual services. Further, allocation agreements between physicians
and hospitals identifying the various activities in which the
physicians are involved for purposes of determining the appropriate
payment amounts have no effect on GME payments in an individual
hospital cost reporting period. The costs that were allocated during
the GME base period are carried forward regardless of changes in the
physician activities.
Moreover, the I.L. 372 policy left it to individual carriers to
determine coverage of the services based on customary practices in the
area or on the competence of individual residents. For example, a
sentence in I.L. 372.A. reads as follows:

If the supervising physician was present at surgery, and the
surgery was performed by a resident acting under his close
supervision and instruction, he would not be the attending surgeon
unless it were customary in the community for such services to be
performed in a similar fashion to private patients who pay for
services rendered by a private physician.

While this policy might have been appropriate 30 years ago in the
early days of Medicare, we now believe it is inappropriate to base the
determination of whether a carrier will pay several thousand dollars or
zero dollars for a surgical procedure on this standard, which could
result in a wide disparity of policy from area to area regarding when
payment is made.
Another problem with the I.L. 372 policy is reliance on a single
physician to be the attending physician for the beneficiary throughout
the inpatient stay. The only exception permitting an attending
physician relationship for only a portion of a stay was if the portion
was a distinct segment of the patient's course of treatment, such as
the postoperative period. Another example from I.L. 372 reads as
follows:

A group of physicians share the teaching and supervision of the
house staff on a rotating basis. Each physician sees patients every
third day as he makes rounds. No physician can be held to be one of
these patients' attending physician for any portion of the hospital
care although consultations and other services they personally
perform for the patient might be covered.

We now believe that this emphasis on a single teaching physician
serving as the attending physician through the stay is no longer
necessary, and that we should provide teaching hospitals and GME
programs with flexibility in the determination of the responsible
teaching physician in an individual case. We no longer believe the I.L.
372 requirement that a single physician be recognized by the
beneficiary as his or her personal physician through a period of
hospitalization reflects current realities. Further, the existing
attending physician regulation may operate at cross-purposes with
managed care arrangements that often employ treatment teams.
The I.L. 372 requirements for continuity of care may be difficult
for carriers to verify from reviews of medical records, may be
interpreted in different ways by different carriers, and may be
counterproductive and burdensome in the delivery of services to the
patient. We believe the proposed policy would address potential sources
of misunderstanding and abuse that have been longstanding Medicare
program concerns. For example, I.L. 372 requires the attending
physician to personally examine the patient, review the history and
record of test results, etc. From discussions with carrier medical
directors, it is our understanding that some carriers consider the
requirements to be met if the responsible physician first sees the
patient 1 or 2 days after admission. In these situations, the carrier
might pay for an admission history and physical performed by a resident
on Saturday while the responsible physician does not actually see and
examine the patient until Monday. Other carriers would maintain that,
to pay for the admission history and physical as an attending
physician, the teaching physician would have to see the patient on the
day the service was performed.
We now believe that the most important consideration should be the
presence of the teaching physician during the key portion of the
service or procedure being furnished by the resident, and that
requiring both an attending physician relationship and the presence of
that same physician during every billable service is not warranted.
Thus, under our proposal, carriers would no longer pay for services
such as admission evaluation and management services unless a teaching
physician was present during the key portion of the service.
d. Carrier Payment for Services of Teaching Physicians--General. We
propose to eliminate the I.L. 372 attending physician criteria from the
determination of whether payment should be made for the services of
physicians in teaching settings. We recognize that the term ``attending
physician'' is used in academic medicine to denote the responsible
physician, and we believe that hospitals and GME programs should be
free to designate any physician to be the attending physician of the
patients in the teaching setting. We propose to require the following
conditions for services of teaching physicians (physicians who involve
residents in the care of their patients) in both inpatient and
outpatient settings to be payable under the physician fee schedule:
A teaching physician (a physician other than a resident or
fellow in an approved program) must be present for a key portion of the
time during the performance of the service for which payment is sought.
In the case of surgery or a dangerous or complex
procedure, the teaching physician must be present during all critical
portions of the procedure and must be immediately available to furnish
services during the entire service or procedure. We would specify that
the teaching physician presence requirement is not met when

[[Page 38410]]
the presence of a teaching physician is required in two places for
concurrent major surgeries. The operative notes must indicate when the
teaching physician presence in individual procedures began and ended.
In the case of minor procedures, such as an endoscopy in which a body
area, rather than a representation, is viewed, we would not make
payment if the teaching physician was not present during the viewing. A
discussion of the findings with a resident would not be sufficient. The
situation is contrasted with a diagnostic procedure, such as an x-ray,
in which the physician would not be expected to be present during the
performance of a test and could bill for an interpretation by reviewing
the film with the resident (or by performing an independent
interpretation).
In the case of services such as evaluation and management
services (for example, visits and consultations), for which there are
several levels of service available for reporting purposes, the
appropriate payment level must reflect the extent and complexity of the
service if the service had been fully furnished by the teaching
physician. In other words, if the medical decisionmaking in an
individual service is highly complex to an inexperienced resident, but
straightforward to the teaching physician, payment is made at the lower
payment level reflecting the involvement of the teaching physician in
the service. We intend to promote flexibility and leave the decision to
the teaching physician as to whether the teaching physician should
perform hands-on care, in addition to the care furnished by the
resident in the presence of the teaching physician. However, in the
case of both hospital inpatient and outpatient evaluation and
management services, the teaching physician must be present during the
key portion of the visit.
The presence of the physician during the service or
procedure must be documented in the medical records.
The proposal eliminates the I.L. 372 requirement that the attending
physician personally examine the patient and leaves the decision to the
teaching physician as to whether he or she should perform an
examination in addition to the resident's examination based on medical
and risk management considerations rather than Medicare payment rules.
For example, a beneficiary may be admitted to the hospital on a
Saturday and be examined by a resident in the presence of a teaching
physician on duty at the time. On Monday, another teaching physician
might be designated to be the attending physician in the case. Under
the proposal to eliminate the I.L. 372 attending physician criteria,
the services of both teaching physicians in this example would be
payable (as long as distinct services are furnished).
Under our proposal, we are clarifying that services of teaching
physicians that involve the supervision of residents in the care of
individual patients are payable under the physician fee schedule only
if the teaching physician is present during the key portion of the
service. If a teaching physician is engaged in such activities as
discussions of the patient's treatment with a resident but is not
present during any portion of the session with the patient, we believe
that the supervisory service furnished is a teaching service as
distinguished from a physician service to an individual patient.
We believe that this clarification is consistent with existing
policy. Part A I.L. No. 70-7/Part B I.L. No. 70-2, issued in January
1970 and still in effect, contains a series of questions and answers
about the attending physician policy set forth in I.L. No. 372.
Question 14 of that issuance addresses services furnished in emergency
rooms and outpatient departments and states the following:

Q. Intermediary letter No. 372 states, ``An emergency room
supervising physician may not customarily be considered to be the
attending physician of patients cared for by the house staff, etc.''
Is this also true in the hospital's outpatient department?
A. Yes, because an attending physician relationship is not
normally established with anyone other than the treating physician
in an outpatient department. If the Part B bills are submitted for
services performed by a physician in either the emergency room or in
any part of the outpatient department, the hospital records should
clearly indicate either that: The supervising physician personally
performed the service; or he functioned as the patient's attending
physician and was present at the furnishing of the service for which
payment is claimed.

At the same time we are concerned about the integrity of the
Medicare payment process, we recognize that application of this policy
to the reimbursement of teaching physicians in family practice
residency programs raises special concerns about the viability of these
programs. Family practice residency programs are different from other
programs because training occurs primarily in an outpatient setting,
known as a family practice center. In these centers, residents are
assigned a panel of patients for whom they will provide care throughout
their 3 years of training. While teaching physicians supervise this
care and, indeed, are present during the actual furnishing of services
in some circumstances (most notably with first year residents and for
more complex patient cases) a general requirement that teaching
physicians be physically present during all visits to the family
practice center would undermine the development of this physician/
patient relationship. This requirement also would be incompatible with
the way family practice centers are organized and staffed and could
require the hiring of additional teaching physicians when the faculty
are already in short supply.
We are willing to develop a special rule for paying teaching family
physicians that takes into account the unique nature of these training
programs while clarifying the appropriate level of involvement of the
teaching physician in patient care in family practice centers. We
invite comments on the structure and content of such a rule, or a
legislative proposal, along with any supportive data. We also invite
comments on whether and how such a rule might be applied to other
primary care training programs.
e. Special Treatment--Psychiatric Services. During the period in
which we were developing the February 1989 proposed rule, we met with
representatives of psychiatric GME programs who indicated that it was
inappropriate for a physician other than the treating resident to be
viewed by psychiatric patients as their physician. In psychiatric
programs, the teaching physician may observe a resident's treatment of
patients only through one-way mirrors or video equipment. We have
accepted this position and propose that, with respect to psychiatric
services (including evaluation and management services) furnished under
an approved psychiatric GME program, the teaching physician would be
considered to be ``present'' during each visit for which payment is
sought as long as the teaching physician observes the visit through
visual devices and meets with the patient after the visit.
f. Physician Services Furnished to Renal Dialysis Patients in
Teaching Hospitals. Effective for services furnished on or after August
1, 1983, Medicare pays for physician services to end-stage renal
disease (ESRD) patients on the basis of the physician monthly
capitation payment method described in Sec. 414.314. This payment
method generally applies to renal-related physician services furnished
to outpatient maintenance dialysis patients, regardless of where the
services are furnished (that is, in an independent ESRD facility, a
hospital-based ESRD facility, or in the patient's home). Physician
services furnished to ESRD patients on or after August 7,

[[Page 38411]]
1990 may also be paid on the basis of the initial method as described
in Sec. 414.313. We would continue application of these physician
payment methods to teaching hospitals with ESRD facilities. We would
not impose any special medical record documentation requirements solely
because the ESRD facility is based in a teaching hospital.
Physician fee schedule payments for covered physician services
furnished to inpatients in a hospital by a physician who elects not to
continue to receive payment on a monthly capitation basis through the
period of the inpatient stay, or who is paid based on the initial
method, would be determined according to the rules described in
proposed Sec. 415.170. Physicians would have to either personally
furnish the services, or furnish the services as a teaching physician
as described in proposed Sec. 415.172.
g. Special Criteria for Anesthesia Services and Interpretation of
Diagnostic Tests. Special criteria for anesthesia services involving
residents appear in Sec. 414.46(c)(2)(iii). In the case of diagnostic
radiology and other diagnostic tests, we make payment for the
interpretation if the physician either personally performs the
interpretation or reviews the resident's interpretation.
h. Services of Residents. We propose to incorporate into the
regulations longstanding Medicare coverage and payment policy regarding
the circumstances under which the services of residents are payable as
physician services. These policies are currently in operating
instructions and other issuances.
Generally, the services of residents in approved GME programs
furnished in hospitals and hospital-based providers are payable through
the direct GME payment methodology in Sec. 413.86. For hospital cost
reporting periods beginning on or after July 1, 1985, a teaching
hospital is entitled to include residents working in the hospital and
hospital-based providers in the FTE count used to compute direct GME
payments. These payments are based on per-resident amounts reflecting
GME costs incurred during a base period and updated by the Consumer
Price Index. Further, effective July 1, 1987, under the conditions set
forth in Sec. 413.86(f)(1)(iii), a teaching hospital may elect to enter
into a written agreement with another entity for the purpose of
including the time spent by residents in furnishing patient care
services in a setting outside the hospital in the hospital's FTE count
of residents for GME purposes. The agreement must specify that the
hospital compensate the resident for the services in the nonhospital
setting. When an agreement is in effect, the teaching setting
guidelines of proposed Secs. 415.170 through 415.184 would apply to
services in which physicians involve residents in the nonhospital
setting. The services of residents in these settings are payable as
hospital services rather than physician services. Proposed Sec. 415.200
would replace the current Sec. 405.522.
The current Sec. 405.523 addresses payment for the services of
residents who are not in approved programs. The section is applicable
to the services of a physician employed by a hospital who is authorized
to practice only in a hospital setting and to residents in an
unapproved program. We propose to replace this rule with proposed
Sec. 415.202. The proposed rule incorporates the policy currently in
section 404.1.B of the Provider Reimbursement Manual (HCFA Pub. 15-1)
which provides that only the costs of the residents' services are
allowable as Part B costs, and that other costs, such as teaching
costs, of an unapproved program are not allowable.
The current Sec. 405.524 (``Interns' and residents' services
outside the hospital'') provides for reasonable cost payments for the
services of residents in freestanding SNFs and HHAs. We propose to
rename this section to clarify that its scope is limited to these types
of providers and to include it with only minor changes into a new
Sec. 415.204.
We propose to establish a new Sec. 415.206 to address payment
issues relating to the services of residents in nonprovider settings,
such as freestanding clinics that are not part of a hospital. Paragraph
(a) addresses situations when a teaching hospital and another entity
have entered into a written agreement under which the time the
residents spend in patient care activities in these nonhospital
settings is included in the hospital's FTE count used to compute direct
GME payments. If an agreement is in force, the carrier would make
payments for teaching physician and other physician services under the
rules in Secs. 415.170 through 415.190.
If a nonprovider entity, such as a freestanding family practice or
multispecialty clinic, does not enter into this type of agreement for
residency training with a teaching hospital, the payment mechanism in
proposed Sec. 415.206(b) would apply in the case of services furnished
by certain residents. We modified the policy on Part B billings for
services furnished by licensed residents in the late 1970's in an
action designed to enhance the ability of primary care residency
programs to finance their training activities outside the teaching
hospital setting. We revised the Medicare Carriers Manual (HCFA Pub.
14-3) to cover residents' services furnished in a setting that is not
part of a hospital as physician services if the resident was fully
licensed to practice by the State in which the service was performed.
This policy applies whether or not the residents are functioning within
the scope of their approved GME program. Under these circumstances, the
resident is functioning in the capacity of a physician, and the
teaching physician guidelines do not apply.
Additionally, the services of residents practicing in freestanding
Federally qualified health centers (FQHCs) and rural health clinics
(RHCs) who meet the requirements of proposed Sec. 415.206(b) would be
eligible for payment under the FQHC payment methodology. (We would make
payments for residents' services in a hospital-based entity under the
provisions of Sec. 413.86 for direct GME payments.) We propose to allow
freestanding FQHCs and RHCs to include the costs of a service performed
by a resident meeting those requirements as an allowable cost on the
entity's cost report. We propose to amend Sec. 405.2468(b)(1), which
sets forth allowable costs for FQHC and RHC services, to recognize
these costs. Further, a resident is considered to be a physician as
defined in revised Sec. 405.2401(b) for the purpose of determining
payments to the FQHC or RHC. Consistent with the FQHC and RHC payment
method, payments for FQHC and RHC services furnished by residents in
FQHCs and RHCs would be paid under Sec. 405.2462 rather than under the
physician fee schedule. In other words, services of the resident would
be treated in exactly the same manner as services of other physicians
who are not residents in the FQHC or RHC. We believe that recognizing
the costs of these residents in FQHC and RHC settings would create more
uniformity in the way these costs are treated by the Medicare program.
We propose to establish a new Sec. 415.208 to address carrier
payments for the services of ``moonlighting'' residents. Paragraph (a)
defines these services as referring to services that licensed residents
perform that are outside the scope of an approved GME program.
Paragraph (b) reflects the policy set forth in section 2020.8.C. of the
Medicare Carriers Manual under which carriers may pay under the
physician fee schedule for the services of moonlighting residents in
the outpatient department or emergency

[[Page 38412]]
department of a hospital in which they have their training program if
there is a contract between the resident and the hospital indicating
that the following criteria are met:
The services are identifiable physician services and meet
the criteria in Sec. 415.100(b) (currently Sec. 405.550(b)).
The resident is fully licensed to practice medicine,
osteopathy, dentistry, or podiatry in the State in which the services
are performed.
The services can be separately identified from those
services that are required as part of the approved GME program.
Paragraph (c) indicates that the moonlighting services of a
resident furnished outside the scope of an approved GME program in a
hospital or other setting that does not participate in the GME program
are payable as physician services under the physician fee schedule.
i. Redesignation of Regulations on Teaching Hospitals, Teaching
Physicians, and Physicians Who Practice in Providers. As a part of this
rulemaking process, we would redesignate the regulations currently set
forth in Secs. 405.465 and 405.466, 405.480 through 405.482, 405.522
through 405.524, 405.550, 405.551, 405.554, 405.556, and 405.580 into a
new part 415, along with the new regulations proposed in this rule.
This redesignation is part of our continuing effort to improve the
overall organization of title 42 of the CFR and, in this case,
specifically, the organization of the regulations on teaching
hospitals, teaching physicians, and physicians who practice in
providers.
Except as indicated below, we are making only technical changes to
conform cross-references, and no substantive changes are included. We
would remove Secs. 405.520 and 405.521 because the applicable rules for
payment of services are obsolete. We would also remove the chart for
payment to interns and residents in Sec. 405.525 as obsolete. In
addition, we would remove Sec. 405.552 because the applicable payment
rules for anesthesia services are set forth in Sec. 414.46.
We intend this redesignation to make these regulations easier to
use. Following is a distribution table that indicates where each
section of the original material would be moved or why it would no
longer be needed, and the new section numbers that would result from
the redesignation:

Distribution Table
------------------------------------------------------------------------
Old section New section
------------------------------------------------------------------------
405.465............................ 415.162.
405.466............................ 415.164.
405.480............................ 415.55.
405.481............................ 415.60.
405.482............................ 415.70.
405.520............................ Removed.
405.521............................ Removed.
405.522............................ 415.200.
405.523............................ 415.202.
405.524............................ 415.204.
405.525............................ Removed.
405.550............................ 415.100.
405.551............................ 415.105.
405.552............................ Removed.
405.554............................ 415.120.
405.556............................ 415.130.
405.580............................ 415.190.
------------------------------------------------------------------------

Following is a derivation table that shows the origin of each
section of the new material:

Derivation Table
------------------------------------------------------------------------
Old
New section section
------------------------------------------------------------------------
415.1........................................................
415.50.......................................................
415.55....................................................... 405.480
415.60....................................................... 405.481
415.70....................................................... 405.482
415.100...................................................... 405.550
415.105...................................................... 405.551
415.120...................................................... 405.554
415.130...................................................... 405.556
415.150......................................................
415.152......................................................
415.160......................................................
415.162...................................................... 405.465
415.164...................................................... 405.466
415.170......................................................
415.172......................................................
415.176......................................................
415.178......................................................
415.180......................................................
415.184......................................................
415.190...................................................... 405.580
415.200...................................................... 405.522
415.202...................................................... 405.523
415.204...................................................... 405.524
415.206......................................................
415.208......................................................
------------------------------------------------------------------------

F. Unspecified Physical and Occupational Therapy Services (HCPCS Codes
M0005 Through M0008 and H5300)

We propose to eliminate HCPCS codes M0005 through M0008 and H5300
and redistribute the RVUs to the codes in the physical medicine section
of the CPT (CPT codes 97010 through 97799). This proposal represents a
single way of reporting and paying for a service for which there are
now two ways to report and would be a payment policy change. We propose
no change to what services may be covered, only to how covered services
would be billed and paid.
We propose this change because HCPCS codes M0005 through M0008 and
H5300 fail to accurately describe the services furnished. Therefore, we
are unable to establish resource-based work RVUs for them as the
statute requires. Moreover, because the codes do not accurately
describe the services being furnished, they preclude effective review
to determine that the services being paid are covered by Medicare.
We believe that the CPT codes and the remaining HCPCS codes provide
a sufficient means for physicians, physical therapists in independent
practice (PTIPs), and occupational therapists in independent practice
(OTIPs) to bill and be paid for the covered services they furnish. In
1995, the AMA revised the codes in the Physical Medicine and
Rehabilitation section of the CPT to better reflect the provision of
physical and occupational therapy services. The American Physical
Therapy Association and the American Occupational Therapy Association
are members of the Health Care Professional Advisory Committee (HCPAC)
of the AMA's Relative Value Update Committee (RUC) and participated in
the creation of new codes for 1995 and in the RUC's recommendations to
us for the assignment of work RVUs for these codes.
As a result of these coding changes, we established interim
resource-based work RVUs for the services described by the new CPT
codes. We will consider public comments received on the interim RVUs
and establish final RVUs for these new codes for 1996. The CPT and RUC
processes of the AMA provide for the opportunity to include all codes
necessary to bill physical and occupational therapy services listed in
the CPT, should further changes to the CPT be necessary.
In addition to the new CPT codes for physical medicine services,
HCPCS codes Q0103, Q0104, Q0109, and Q0110 describe the evaluation and
management work of PTIPs and OTIPs when they establish a plan of care
and periodically review that plan. While physicians may bill the CPT
evaluation and management codes, PTIPs and OTIPs may not bill these
codes because, unlike physicians, the evaluation and management
services PTIPs and OTIPs furnish do not include consideration of
chemotherapeutic or surgical alternatives to physical or occupational
therapy. We understand that the HCPAC will be considering creation of
codes to describe the evaluation and management services furnished by

[[Page 38413]]
PTIPs and OTIPs for 1997, at which time we expect to eliminate the Q
codes that currently serve this purpose.
We believe that each unit of service currently billed under the
codes we propose to delete will be billed under a CPT or HCPCS code and
that the total amount of Medicare payment for physical medicine
services will not change significantly as a result of the elimination
of these codes. This proposal reflects a policy change that is not
explicitly addressed in our regulations.

G. Transportation in Connection With Furnishing Diagnostic Tests

We have received a number of inquiries about the conditions under
which carriers should pay for the transportation of diagnostic
equipment used to furnish procedures payable under the physician fee
schedule. Medicare carriers have been told for years that, in the
absence of specific instructions from us, it was within their
discretion to determine when payment for the transportation of
diagnostic equipment should be made. We are proposing to enunciate a
national policy now. Under our proposal, Medicare carriers would apply
the general physician fee schedule policy on additional payments for
travel expenses to transportation services except as indicated below.
Section 1861(s)(3) of the Act establishes the coverage of
diagnostic x-rays furnished in a place of residence used as the
patient's home if the performance of the tests meets health and safety
conditions established by the Secretary. This provision is the basis
for payment of x-ray services furnished by approved portable suppliers
to beneficiaries in their homes and in nursing facilities.
Although the Congress did not explicitly so state, we determined
that, because there were increased costs in transporting the x-ray
equipment to the beneficiary, the Congress intended that we pay an
additional amount for the transportation expenses. Therefore, we
established HCPCS codes R0070 and R0075 (for single-patient and
multiple-patient trips, respectively) to pay approved portable x-ray
suppliers a transportation ``component'' when they furnish the services
listed in section 2070.4.C of the Medicare Carriers Manual.
We later added the taking of an EKG tracing to the list of services
approved suppliers of portable x-ray services may furnish (section
2070.4.F. of the Medicare Carriers Manual) and established HCPCS code
R0076 to pay for the transportation of EKG equipment. Many Medicare
carriers have limited the use of HCPCS code R0076 to approved portable
x-ray suppliers, but some Medicare carriers permit other types of
entities, such as independent physiological laboratories (IPLs), to use
the code.
Further, section 2070.1.G of the Medicare Carriers Manual provides
for the coverage of an EKG tracing by an independent laboratory--
In a home if the beneficiary is a ``homebound patient'';
or
In an institution used as a place of residence if the
patient is confined to the facility and the facility does not have on-
duty personnel qualified to perform the service.
The Act does not make specific provision for furnishing
diagnostic procedures payable under the physician fee schedule, other
than portable x-rays, to beneficiaries in their residences. We have
received inquiries from our regional offices regarding payment for the
transportation of diagnostic equipment that have generally involved the
equipment used to furnish ultrasound and cardiography procedures. We
have also received complaints from suppliers of these types of services
about variations in individual Medicare carrier policies on
transportation payments. We have little information about the amounts
of payments; however, in the case of portable x-ray services (which
would not be affected by this proposal), the transportation payment is
often several times higher than the payment for the procedure
furnished.
As discussed in the preamble to our November 1991 final rule (56 FR
59605), the physician fee schedule policy includes travel in the PE of
a medical practice; therefore, travel is compensated through the PE
component of the RVUs for a service. The preamble of the November 1991
final rule further states that CPT code 99081 may be used to bill for
unusual travel in unusual cases and that carriers would handle these
billings on a ``by report'' basis. Section 15026 of the Medicare
Carriers Manual adds the stipulation that CPT code 99082 is payable
only when the travel is ``very unusual.''
The scope of this proposal is limited to transportation expenses
associated with diagnostic tests that are payable under the physician
fee schedule. It would apply both to payments made in connection with
the transportation of diagnostic equipment to the beneficiary and to
the transportation of equipment to a site, such as a physician's
office, for use in furnishing tests to beneficiaries. We are not
proposing to place this policy in regulations, but we would change the
applicable sections of the Medicare Carriers Manual.
Under our proposal, Medicare carriers would continue to pay for the
transportation of x-ray and EKG equipment in some cases. The following
exceptions to the general rule on payment for travel are based on our
interpretation of statutory requirements in the case of x-rays and
specific longstanding policy in the case of EKGs.
Medicare carriers would continue to make transportation
payments under HCPCS codes R0070 and R0075 in connection with portable
x-ray procedures if approved suppliers furnish the services described
in section 2070.4.C. of the Medicare Carriers Manual:
+ Skeletal films involving arms and legs, pelvis, vertebral column,
and skull.
+ Chest films that do not involve the use of contrast media (except
routine screening procedures and tests in connection with routine
physical examinations).
+ Abdominal films that do not involve the use of contrast media.
Medicare carriers would make transportation payments under
HCPCS code R0076 in connection with standard EKG procedures if the
approved portable x-ray supplier furnishes the service described by CPT
code 93005 (or CPT 93000, if the interpretation is billed with the
tracing).
Medicare carriers would make transportation payments under
HCPCS R0076 in connection with standard EKG procedures (CPT code 93005)
furnished by an IPL when--
+ The IPL meets applicable State and local licensure laws;
+ The EKG is ordered by a referring physician; and
+ The carrier determines the service to be reasonable and
necessary. (See section 2070.5. of the Medicare Carriers Manual.)
We would delete the reference to EKGs in the existing
section 2070.1.G. of the Medicare Carriers Manual and place the policy
in a revised section 2070.5 of the Medicare Carriers Manual. However,
we would remove the requirement that the beneficiary be confined to his
or her home or to an institution for the EKG tracing to be covered
since this requirement does not apply to EKG tracings taken by portable
x-ray suppliers.
For all other types of diagnostic tests payable under the
physician fee schedule, Medicare carriers would pay for the
transportation of equipment only on a ``by report'' basis under CPT
code 99082 if a physician submits documentation to justify the ``very
unusual'' travel as set forth in section

[[Page 38414]]
15026 of the Medicare Carriers Manual. An example of such a
circumstance could be when a beneficiary in a nursing facility is in
immediate need of a diagnostic test and there is a problem, such as
extreme obesity, with transporting the individual to a facility.

H. Maxillofacial Prosthetic Services

At present, payment amounts for the maxillofacial prosthetic
services (CPT codes 21079 through 21087 and HCPCS codes G0020 and
G0021) are determined by individual Medicare carriers. We propose to
eliminate the carrier-priced status and establish RVUs for these codes
effective for services performed on or after January 1, 1996. We
propose to determine fee schedule payment amounts based on the RVUs
shown in the table below.

Proposed Relative Value Units For Maxillofacial Prosthesis Services
----------------------------------------------------------------------------------------------------------------
Proposed Proposed PE Proposed ME
CPT code Description work RVUs RVUs RVUs
----------------------------------------------------------------------------------------------------------------
21079........... Impression and custom preparation; interim obturator 20.88 27.93 2.25
prosthesis.
21080........... Impression and custom preparation; definitive obturator 23.46 31.38 2.52
prosthesis.
21081........... Impression and custom preparation; mandibular resection 21.38 28.59 2.30
prosthesis.
21082........... Impression and custom preparation; palatal augmentation 19.50 26.08 2.10
prosthesis.
21083........... Impression and custom preparation; palatal lift 18.04 24.13 1.94
prosthesis.
21084........... Impression and custom preparation; speech aid 21.04 28.14 2.28
prosthesis.
21085........... Impression and custom preparation; oral surgical splint 8.41 11.25 0.90
21086........... Impression and custom preparation; auricular prosthesis 23.29 31.15 2.51
21087........... Impression and custom preparation; nasal prosthesis.... 23.29 31.15 2.51
G0020........... Impression and custom preparation; surgical obturator 12.54 16.77 1.35
prosthesis.
G0021........... Impression and custom preparation; orbital prosthesis.. 31.54 42.18 3.39
----------------------------------------------------------------------------------------------------------------

The work RVUs that we propose were developed by the American
Academy of Maxillofacial Prosthetics. We believe they appropriately
represent the work involved in these procedures. Because the CPT codes
were new in 1991 and the Level 2 HCPCS codes are new in 1995, we have
little or no charge data on which to base PE and ME RVUs in accordance
with section 1848(c)(2)(C) of the Act. Therefore, we have imputed the
PE and ME RVUs from the work RVUs based on the practice cost shares
provided by the American Association of Oral and Maxillofacial
Surgeons. Those shares are 54.7 percent for PE and 4.4 percent for ME.
We would establish a 90-day global period for these services with
the exception of CPT code 21085 and HCPCS code G0020, which we believe
require only a 10-day global period. (Under a global period, a single
fee is billed and paid for all necessary services normally furnished by
the surgeon before, during, and after the procedure within the time
period assigned to the service.)
CPT codes 21079 through 21087 and HCPCS codes G0020 and G0021
should be used only if the physician actually designs and prepares the
prosthesis. If the physician has designed and prepared the prosthesis
and bills a CPT code in the range of 21079 through 21087 and HCPCS
codes G0020 and G0021, we will not pay the physician separately for the
prosthesis. We consider the cost of the materials used in preparing the
prosthesis to be included in the PE portion of the codes.
HCPCS codes L8610 through L8618 identify prostheses that are
prepared by an outside laboratory. Payment for HCPCS codes L8610
through L8618 is not made under the physician fee schedule. Payment is
made on an individual consideration basis.
CPT codes 21079 through 21087 and HCPCS codes G0020 and G0021 are
on the list of codes subject to the site-of-service payment
differential since they are predominantly office-based services.
While we welcome any written public comments, we have found from
past experience that the most useful comments have followed a
particular pattern. They include the CPT code, a clinical description
of the service, and a discussion of the work of that service.
Physician work has two components: time and intensity. The clinical
analogy for many services can be strengthened by dividing the service
into the following three time segments:
Preservice work--Work performed before the actual
procedure such as review of records, solicitation of informed consent,
and preparation of equipment. Time spent by the physician dressing,
scrubbing, and waiting for the patient should be identified. Preservice
work also includes the time spent scrubbing, positioning, or otherwise
preparing the patient. For surgical procedures with global periods,
commenters should include estimates of the number, time, and type of
visits from the day before surgery until the time the patient enters
the operating room. The visit when the physician decides to operate and
the visits preceding it should not be included in the estimate of
preservice work since these services are not included in the Medicare
definition of global period.
Intraservice work--The actual performance of the
procedure. For evaluation and management services, this would be
described as ``face-to-face'' time in the office setting and ``unit/
floor'' time in the inpatient setting. For surgical procedures, the
customary term would be ``skin-to-skin'' time or its equivalent for
those procedures not beginning with incisions.
Postservice work--Analysis of data collected from the
encounter, preparation of a report, and communication of the results.
For procedures with global periods, commenters should identify the time
spent by the physician with the patient after the procedure on the same
day and whether the patient typically goes home, to an ordinary
hospital bed, or goes to the intensive care unit. Commenters should
describe the number, time, and type of physician visits from the day
after the procedure until the end of the global period.
They should also distinguish inpatient from outpatient visits.
We encourage commenters, in making these estimations, to provide
detailed clinical information such as data derived from operating logs,
operative reports, and medical charts concerning the length of service,
the amount of work performed before and after the service, and the
length of stay in the hospital. The usefulness of these data is greatly
increased if the data are presented with comparable data for reference
services and evidence that justifies that the data presented are
nationally representative of the average work involved in furnishing
the service. We often receive data that are not helpful to us because
the data are not representative of national practices. In

[[Page 38415]]
addition, some commenters have presented a lengthy and elaborate
description of the work in the service, but omitted, or provided an
incomplete description of, the comparability of the work in the service
to the work in a reference procedure or procedures identified.
Intensity of the work in the service is best compared by breaking
the intensity into the following elements:
Mental effort and judgment--Commenters should compare the
service in question with a reference service as to the amount of
clinical data that needs to be considered, the depth of knowledge
required, the range of possible decisions, the number of factors
considered in making a decision, and the degree of complexity of the
interaction of these factors.
Technical skill and physical effort--One useful measure of
skill is the point in training when a resident is expected to be able
to perform the procedure. Physical effort can be compared by dividing
services into tasks and making the direct comparison of tasks. In
making the comparison, it is necessary to show that the differences in
physician effort are not reflected accurately by differences in the
time involved; if they are, considerations of physician effort amount
to double counting of physician work in the service.
Psychological stress--Two kinds of psychological stress
are usually associated with physician work. The first is the pressure
involved when the outcome is heavily dependent upon skill and judgment
and a mistake has serious consequences. The second is related to
unpleasant conditions connected with the work that are not affected by
skill or judgment. These circumstances would include situations with
high rates of mortality or morbidity regardless of the physician's
skill or judgment, difficult patients or families, or physician
physical discomfort. Of the two forms of stress, only the former is
fully accepted as an aspect of work; many consider the latter to be a
highly variable function of physician personality.
Intensity often varies significantly in the course of furnishing a
service. Sometimes commenters ``anchor'' the value of the service to a
point of maximum intensity during the service as the basis for
comparing services. It is unlikely that the maximum intensity is an
accurate reflection of the average intensity of a service; a lengthy
procedure that is simple except for a few moments of extreme intensity
is probably less work than one of equal length during which a fairly
high level of intensity is maintained throughout.
This proposal reflects a policy change that is not explicitly
addressed in our regulations.

I. Coverage of Mammography Services

In the December 31, 1990 interim final rule (55 FR 53510) and the
September 30, 1994 final rule (59 FR 49808), we based our present
definitions of ``diagnostic'' and ``screening'' mammography and related
provisions on advice from the Food and Drug Administration (FDA), the
National Cancer Institute (NCI), our own medical consultants, and other
components of HHS.
These definitions are important because of the impact they can have
on how frequently mammograms are covered under the Medicare program.
The Medicare law and current regulations limit the frequency of
coverage for ``screening'' mammography services according to the
patient's age and for women over age 39 but under age 50 based on
whether she is considered at high risk of developing breast cancer. On
the other hand, coverage of ``diagnostic'' mammography is not
restricted by specific statutory frequency limitations but depends on
whether the examination has been (1) ordered by the patient's
physician, and (2) is determined by the local Medicare contractor to be
medically necessary for the patient.
In response to inquiries from beneficiaries, practicing physicians,
and others in the medical community, we have reexamined our definitions
of ``diagnostic'' and ``screening'' mammography in Sec. 410.34
(Mammography services: Conditions for and limitations on coverage'').
In addition, we have consulted further with FDA, NCI, and a Medicare
Carrier Medical Director workgroup regarding the appropriateness of the
definitions. We have also reexamined the current definitions in view of
our previous Medicare policy on diagnostic mammograms as described in
section 50-21 of the Coverage Issues Manual (HCFA Pub. 6) that permits
coverage for diagnostic mammograms for patients with a personal history
of breast cancer and certain other patients, even though they are not
symptomatic (that is, they do not have any signs or symptoms of a
medical problem with their breasts).
Based on our reexamination of this issue, we propose to revise the
definitions of ``diagnostic'' and ``screening'' mammography in
Sec. 410.34 to make them consistent with previous Medicare coverage
policy regarding ``diagnostic'' mammography, and with the way these
terms are used in general clinical practice in the United States.
Some clinicians and mammography experts consider patients with a
personal history of breast disease, such as breast cancer and chronic
fibrocystic disease, to be candidates for diagnostic mammography for a
period following treatment of the disease and then candidates for
screening mammography thereafter. However, most clinicians and
mammography experts in the United States consider patients with a
personal history of breast disease to be candidates for diagnostic
mammography for the rest of their lives, following the onset of their
disease and its treatment.
In view of the above information, we propose to expand the
definition of ``diagnostic'' mammography to include patients with a
personal history of breast disease; however, we propose to leave the
definition of ``screening'' mammography unchanged so that patients with
a personal history of breast cancer can be considered candidates for
the ``screening'' examination, if the patients and their physicians
decide that this is appropriate.
We propose that the present definition of ``diagnostic''
mammography in paragraph (a)(1) of Sec. 410.34 be expanded to include
also, as a candidate for this service, a patient who does not have
signs or symptoms of breast disease but who has a personal history of
biopsy-proven breast disease.
The present regulations include as candidates for ``screening''
mammography all asymptomatic women regardless of whether they have had
a personal history of biopsy-proven breast disease. We propose to leave
unchanged the substance of the present definition of ``screening''
mammography in paragraph (a)(2) of Sec. 410.34 but clarify it to read
as follows: ``Screening mammography means a radiological procedure
furnished to a woman without signs or symptoms of breast disease, for
the purpose of early detection of breast cancer, and includes a
physician's interpretation of the results of the procedure.'' This
might include an asymptomatic woman (that is, a woman without signs or
symptoms of breast disease) with a history of biopsy-proven breast
disease who might otherwise qualify for a diagnostic mammography as
defined in the current Sec. 410.34(a)(1). The woman and her physician
would determine which examination to request (that is, either a
diagnostic or a screening mammography). Although a history of biopsy-
proven breast disease would ordinarily require recurrent diagnostic
examinations, in some cases, when the

[[Page 38416]]
breast disease is no longer present, screening mammography might be
appropriate.
We also propose that certain minor and technical changes be made in
the limitations on coverage of screening mammography services to make
them consistent with the proposed revisions to the definitions in
``diagnostic'' and ``screening'' mammography in Sec. 410.34(a)(1) and
(a)(2), respectively, and to simplify the language in Sec. 410.34(d)(1)
regarding the postmastectomy patient.

J. Use of Category-Specific Volume and Intensity (VI) Growth Allowances
in Calculating the Default Medicare Volume Performance Standard (MVPS)

Currently, the default formula uses an estimate of the average
annual percentage growth in the VI of physician services that is the
same for all categories of physician services. Although historically
the data available to us allowed an accurate estimate of the overall
growth in the VI of physician services, they did not allow us to
estimate the VI growth for each individual category of service with the
degree of accuracy required for the MVPS calculation. More recent data
now allow us to do this. We propose to calculate the MVPS for FY 1996
and all future years based on estimates of the average VI growth
specific to each category. This would be consistent with our use of
category-specific estimates of the MVPS factors for

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A95-18144. Public record. Not legal advice.