Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2000

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 410, 411, 414, and 415

[HCFA-1065-P]

RIN 0938-AJ61

Medicare Program; Revisions to Payment Policies Under the

Physician Fee Schedule for Calendar Year 2000

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make several changes affecting

Medicare Part B payment. The changes include: implementation of

resource-based malpractice insurance relative value units (RVUs);

refinement of resource-based practice expense RVUs; payment for

physician pathology and independent laboratory services, RVUs related

to ventricular assist devices, percutaneous thrombectomy of an

arteriovenous fistula, pulse oximetry, temperature gradient studies,

venous pressure determinations, and pulmonary stress testing;

discontinuous anesthesia time; optometrist services; prostate

screening; diagnostic tests; the use of an operating microscope; use of

CPT modifier -25; qualifications for nurse practitioners; an increase

in the work RVUs for pediatric services; removal of the x-ray as a

prerequisite for chiropractic manipulation; the exclusion of payment

for assisted suicide; adjustments to the practice expense RVUs for

physician interpretation of Pap smears; and revisions to the work RVUs

for new and revised CPT codes for calendar year 1999. In addition,

since we established the physician fee schedule on January 1, 1992, our

experience indicates that some of our Part B payment policies need to

be reconsidered. This proposed rule would correct inequities in

physician payment and solicits public comments on specific proposed

policy changes.

DATES: Comments will be considered if we receive them at the

appropriate address, as provided below, no later than 5 p.m. on

September 20, 1999.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: HCFA-1065-P, P.O. Box, 9013

Baltimore, MD 21244-9013.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,

Washington, DC 20201, or

Room C5-16-03, 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 HCFA-1065-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 443-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) 690-7061).

FOR FURTHER INFORMATION CONTACT:

Bob Ulikowski, (410) 786-5721 (for issues related to the resource-based

malpractice relative value units).

Carolyn Mullen, (410) 786-4589 (for issues related to resource-based

practice expense relative value units).

Jim Menas, (410) 786-4507 (for issues related to physician pathology

services and independent labs and discontinuous anesthesia time).

Ken Marsalek, (410) 786-4502 (for issues related to optometrist

services).

Bill Larson, (410) 786-4639 (for issues related to the coverage of

prostate screening).

Regina Walker-Wren, (410) 786-9160 (for issues related to nurse

practitioner qualifications).

Dorothy Honemann, (410) 786-5702 (for issues related to x-ray

requirement for chiropractic services).

Bill Morse, (410) 786-4520 (for issues related to diagnostic tests).

Diane Milstead, (410) 786-3355 (for all other issues).

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.

Table of Contents

I. Background

A. Legislative History

B. Published Changes to the Fee Schedule

II. Specific Proposals for Calendar Year 1999

A. Resource-Based Malpractice Relative Value Units

1. Current Relative Value Unit System

2. Proposed Methodology for Developing Resource-Based Relative

Value Units

B. Resource-Based Practice Expense Relative Value Units

C. Practice Expense Relative Value Units for a Physician's

Interpretation of Abnormal Papanicolaou Smears

D. Physician Pathology Services and Independent Laboratories

E. Discontinuous Anesthesia Time

F. Optometrist Services

G. Assisted Suicide

H. CPT Modifier -25

I. Nurse Practitioner Qualifications

J. Relative Value Units for Pediatric Services

K. Percutaneous Thrombectomy of an Arteriovenous Fistula

L. Pulse Oximetry, Temperature Gradient Studies, and Venous

Pressure Determinations

M. Removal of Requirement for x-ray Before Chiropractic

Manipulation

N. Coverage of Prostate Cancer Screening Tests

O. Diagnostic Tests

1. Supervision of Diagnostic Test

2. Independent Diagnostic Testing Facilities

P. New and Revised Relative Value Units for Calendar Year 1999

1. Ventricular Assist Device Implantations (CPT Codes 33975 and

33976)

2. Use of Operating Microscope (CPT Code 69990)

3. Pulmonary Stress Testing (CPT Codes 94620 and 94621)

III. Collection of Information Requirements

IV. Response to Comments

V. Regulatory Impact Analysis

A. Resource-Based Malpractice Relative Value Units

B. Resource-Based Practice Expense

C. Practice Expense for Physician Interpretation of Abnormal

Papanicolaou Smears

D. Technical Component of Physician Pathology Services and

Independent Laboratories

E. Discontinuous Anesthesia Time

F. Optometrist Services

G. Assisted Suicide

H. CPT Modifier -25

I. Nurse Practitioner Qualifications

J. Relative Value Units for Pediatric Services

K. Percutaneous Thrombectomy of an Arteriovenous Fistula

L. Pulse Oximetry, Temperature Gradient Studies, and Venous

Pressure Determinations

M. Removal of Requirement for X-ray Before Chiropractic

Manipulation

N. Coverage of Prostate Cancer Screening Tests

O. Diagnostic Tests

1. Supervision of Diagnostic Test

2. Independent Diagnostic Testing Facilities

P. New and Revised Relative Value Units for Calendar Year 1999

1. Ventricular Assist Device Implantations

2. Use of Operating Microscope

3. Pulmonary Stress Testing

Q. Budget Neutrality

[[Page 39609]]

R. Impact on Beneficiaries

Addendum A--Explanation and Use of Addenda B

Addendum B--2000 Relative Value Units and Related Information Used

in Determining Medicare Payments for 2000

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

we refer by acronym in this proposed rule, we are listing these

acronyms and their corresponding terms in alphabetical order below:

AANA American Association of Nurse Anesthetists

AMA American Medical Association

ASA American Society of Anesthesiologists

BBA Balanced Budget Act of 1997

CF Conversion factor

CFR Code of Federal Regulations

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

1997, copyrighted by the American Medical Association]

CRNA Certified Registered Nurse Anesthetist

E/M Evaluation and management

GAF Geographic adjustment factor

GPCI Geographic practice cost index

HCFA Health Care Financing Administration

HCPCS HCFA Common Procedure Coding System

HHS [Department of] Health and Human Services

HMO Health maintenance organization

IDTFs Independent Diagnostic Testing Facilities

JUAs Joint Underwriting Associations

MEDPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

MGMA Medical Group Management Association

NPI National provider identifier

OBRA Omnibus Budget Reconciliation Act

PC Professional component

PCF Patient Compensation Fund

RUC [AMA's Specialty Society] Relative [Value] Update Committee

RVU Relative value unit

TC Technical component

I. Background

A. Legislative History

Since January 1, 1992, Medicare has paid for physician services

under section 1848 of the Social Security Act (the Act), ``Payment for

Physicians'' Services.'' This section contains three major elements:

(1) A fee schedule for the payment of physician services; (2) a

sustainable growth rate 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, and malpractice

expense.

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 the

conversion factors (CFs) 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 are as follows:

November 25, 1992, a final notice with comment period on

new and revised RVUs only (57 FR 55914).

December 2, 1993, 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, 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.

December 8, 1995, a final rule with comment period (60 FR

63124) to revise various policies affecting payment for physician

services including Medicare payment for physician services in teaching

settings, the RVUs for certain existing procedure codes, and to

establish interim RVUs for new and revised procedure codes. The rule

also included the final revised 1996 geographic practice cost indices

(GPCIs).

November 22, 1996, a final rule with comment period (61 FR

59490) to revise the policy for payment for diagnostic services,

transportation in connection with furnishing diagnostic tests, changes

in geographic payment areas (localities), and changes in the procedure

status codes for a variety of services.

October 31, 1997, a final rule with comment period (62 FR

59048) to revise the geographic practice cost index (GPCI), physician

supervision of diagnostic tests, establishment of independent

diagnostic testing facilities, the methodology used to develop

reasonable compensation equivalent limits, payment to participating and

nonparticipating suppliers, global surgical services, caloric

vestibular testing, and clinical consultations. The final rule also

implemented certain provisions of the Balanced Budget Act of 1997 (the

BBA) (Public Law 105-33), enacted on August 5, 1997, and implemented

the RVUs for certain existing procedure codes and established interim

RVUs for new and revised procedure codes.

November 2, 1998, a final rule with comment period (63 FR

58814) to revise the policy for resource-based practice expense RVUs,

medical direction rules for anesthesia services, and payment for

abnormal Pap smears. Also, we rebased the Medicare Economic Index from

a 1989 base year to a 1996 base year. Under the law, we are required to

develop a resource-based system for determining practice expense RVUs.

The BBA delayed, for 1 year, implementation of the resource-based

practice expense RVUs until January 1, 1999. Also, the BBA revised our

payment policy for nonphysician practitioners, for outpatient

rehabilitation services, and for drugs and biologicals not paid on a

cost or prospective payment basis. In addition, the BBA permits certain

physicians and practitioners to opt out of Medicare and furnish covered

services to Medicare beneficiaries through private contracts and

permits payment for professional consultations via interactive

telecommunication systems. Furthermore, we finalized the 1998 interim

RVUs and issued interim RVUs for new and revised codes for 1999. This

final rule also announced the calendar year 1999 Medicare physician fee

schedule conversion factor under the Medicare Supplementary Medical

Insurance (Part B) program as required by section 1848(d) of the Act.

The 1999 Medicare physician fee schedule conversion factor was

$34.7315.

This proposed rule would affect the regulations set forth at--

Part 410, Supplementary medical insurance benefits;

Part 411, Exclusions from Medicare and limitations on

Medicare payment;

Part 414, Payment for Part B medical and other services;

and

[[Page 39610]]

Part 415, Part B carrier payments for physicians' services

to beneficiaries in providers.

II. Specific Proposals for Calendar Year 1999

A. Resource-Based Malpractice Relative Value Units

1. Current Relative Value Unit System

Section 1848(c)(2)(C) of the Act requires each service paid under

the physician fee schedule be comprised of three components: work,

practice expense, and malpractice. The practice expense and malpractice

expense RVUs equal the product of the base allowed charges and the

practice expense and malpractice percentages for the service. Base

allowed charges are defined as the national average allowed charges for

the service furnished during 1991, as estimated using the most recent

data available. For most services, we used 1989 charge data ``aged'' to

reflect the 1991 payment rules, since those were the most recent data

available for the 1992 fee schedule. The work RVUs have been resource-

based since the inception of the fee schedule in 1992. They are

primarily based on a study of physician work conducted by researchers

at the Harvard School of Public Health. The work values for new and

revised codes added since 1992 are primarily based on the

recommendations of the American Medical Association's Relative Value

Update Committee (RUC). For detailed descriptions of the establishment

of resource-based work RVUs, see the June 5, 1991 proposed rule (56 FR

25792) and the November 25, 1991 final rule (56 FR 59502) on the

original fee schedule and the May 3, 1996 proposed rule (61 FR 19992)

on the five-year refinement of resource-based work RVUs.

The practice expense RVUs were not resource-based but were rather

charge-based from 1992 to 1998. In most cases, the practice expense

RVUs were calculated on a statutory formula. They were derived from the

product of ``base allowed charges'' and service-specific practice

expense percentages. The base allowed charge is the national average

allowed charge for the service furnished in 1991. The service-specific

practice expense percentage is a weighted average of the practice

expense percentages of the specialties performing the service. For new

codes after 1991, the practice expense RVUs were extrapolated from the

values for existing similar codes or from the work RVUs.

Section 121 of the Social Security Act Amendments of 1994 (Public

Law 103-432), enacted on October 31, 1994 and amended by the BBA,

required us to develop a methodology and implement resource-based

practice expense RVUs effective for services furnished in 1998. Section

4505 of the BBA postponed implementation of resource-based practice

expense RVUs until 1999 and provided for a gradual four-year

transition, with resource-based practice expense RVUs becoming fully

effective in 2002. For a detailed explanation of resource-based

practice expense RVUs see the June 5, 1998 proposed rule (63 FR 30818)

and the November 2, 1998 final rule (63 FR 58814) on the fee schedule.

Malpractice RVUs are currently charge-based, using the same

statutory formula discussed above for practice expense RVUs but using

weighted specialty-specific malpractice expense percentages and 1991

average allowed charges. As with practice expense RVUs, malpractice

RVUs for new codes after 1991 were extrapolated from similar existing

codes or from work RVUs. Section 4505(f) of the BBA requires us to

implement resource-based malpractice RVUs for services furnished

beginning in 2000. With the implementation of resource-based

malpractice RVUs and full implementation of resource-based practice

expense RVUs in 2002, all physician fee schedule RVUs will be resource-

based, thus eliminating the last vestiges of payment inequities that

resulted from charges that did not accurately reflect the relative

resources involved in providing a service.

2. Proposed Methodology for Developing Resource-Based Malpractice RVUs

The resource-based malpractice RVUs are based on actual malpractice

premium data and current Medicare payment data on allowed services and

charges, RVUs, and specialty payment percentages. Subjective judgment

is primarily limited to the mapping of Medicare specialties to the

various insurer premium risk groups.

We decided to use malpractice premium data because they represent

the actual malpractice expense to the physician. In addition,

malpractice premium data are widely available. We also considered using

procedure-specific actual malpractice claims paid data as recommended

by the Medicare Payment Advisory Committee (MEDPAC). However, we do not

believe that such an approach is viable because inquiries to

malpractice insurance experts revealed that the data are not available

in sufficient quantity and breadth to be useful. Consultation with

insurers informed us that they do not track malpractice payments on an

individual CPT procedure code basis. If any such data did exist, we

believe that they would likely be limited to a few very high-risk

procedures and not be widely and consistently available on a national

basis. Constructing national RVUs requires consistent national data for

all procedures.

Moreover, even if such data existed on a consistent national basis,

it is virtually impossible to determine which specific procedure

performed in treating an illness produced the adverse outcome leading

to the settlement or award or to accurately apportion the settlement or

award among the procedures. For example, in the case of cancer, a

symptom missed during a visit or a faulty x-ray or MRI could all

contribute to a late diagnosis. Similarly, the cause of the claim could

be the chemotherapy, the radiation therapy, the surgery, or any

combination thereof.

Discussions with the industry lead us to conclude that the primary

determinants of malpractice liability costs are physician specialty,

level of surgical involvement, and the individual physician's

malpractice history.

Actual malpractice premium data were collected for the top 20

Medicare physician specialties measured by dollars of reimbursement.

Premiums were for a $1 million/$3 million mature claims-made-policy (a

policy covering claims made rather than services provided during the

policy term). Data were collected from all 50 States, Washington, D.C.,

and Puerto Rico. Data were collected from commercial and physician-

owned insurers and from joint underwriting associations or JUAs,

typically, State government administered risk pooling insurance

arrangements in areas where commercial insurers have left the market.

Adjustments were made to reflect mandatory patient compensation fund or

PCF (a fund to pay for any claim beyond the statutory amount thereby

limiting an individual physician's liability in cases of a large suit)

surcharges in States where PCF participation is mandatory. The premium

data collected represent at least 50 percent of physician malpractice

premiums paid in each State, with the average being 77 percent.

Malpractice insurers generally use five-digit codes developed by

the Insurance Services Office (ISO), an advisory body serving property

and casualty insurers, to classify physician specialties into different

risk classes for premium rating purposes. ISO codes classify physicians

not only by specialty, but in many cases also by whether or not the

specialty performs

[[Page 39611]]

surgical procedures. A given specialty could thus have two ISO codes,

one for use in rating a member of that specialty who performs surgical

procedures and another for rating a member of that specialty who does

not perform surgery. Medicare uses its own system of specialty

classification for payment and data purposes. It was therefore

necessary to map Medicare specialties to ISO codes and insurer risk

classes. Different insurers, while using ISO codes, have their own risk

class categories. To assure consistency, we used the risk classes of

St. Paul Companies, one of the oldest and largest malpractice insurers.

Table 1 crosswalks Medicare specialties to ISO codes and St. Paul risk

classes used.

Table 1.--Crosswalk of Medicare Specialty Code To Malpractice ISO Code and St. Paul's Risk Class

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ISO code Risk class

Medicare code Medicare -------------------------------------------------------- St. Paul's description

description Surgery Other Surgery Other

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01............ General practice. 80117 80420 4 1 Family/Gen. Practitioners--No Obstetrical.

02............ General surgery.. 80143 80143 5 5 Surgery-General.

03............ Allergy/ 80254 80254 1A 1A Allergy.

Immunology.

04............ Otolaryngology... 80159 80265 3 1 Otarhinolaryngology.

05............ Anesthesiology... 80151 80151 5A 5A Anesthesiology.

06............ Cardiology....... 80150 80255 6 1 Cardiovascular Disease.

07............ Dermatology...... 80282 80256 2 1A Dermatology.

08............ Family practice.. 80117 80420 4 1 Family/Gen. Practitioners--No Obstetrical.

10............ Thoracic surgery. 80104 80241 3 1 Gastroenterology.

11............ Internal medicine 80284 80257 2 1 Internal medicine.

13............ Neurology........ 80152 80261 8 2 Neurology.

14............ Neurosurgery..... 80152 80261 8 2 Neurology.

16............ Obstetrics/ 80167 80244 2 1 Gynecology.

Gynecology.

18............ Ophthalmology.... 80114 80263 2 1 Ophthalmology.

20............ Orthopedic 80501 80501 5 5 Surgery Orthopedic--excluding Spinal Surgery.

surgery.

22............ Pathology........ 80292 80266 2 1A Pathology.

24............ Plastic and 80156 80156 5 5 Surgery Plastic.

reconstructive

surgery.

25............ Physical medicine 80235 80235 1 1 Physical medicine and rehab.

and rehab.

26............ Psychiatry....... 80249 80249 1A 1A Psychiatry.

29............ Pulmonary disease 80269 80269 1 1 Pulmonary Disease.

30............ Diagnostic 80280 80253 2 2 Radiology.

radiology.

33............ Thoracic surgery. 80144 80144 6 6 Surgery Thoracic.

34............ Urology.......... 80145 80145 3 3 Urological Surgery.

36............ Nuclear medicine. 80262 80262 1 1 Nuclear medicine.

37............ Pediatric 80293 80267 2 1 Pediatrics.

medicine.

38............ Geriatric 80105 80243 1 1 Geriatrics.

medicine.

39............ Nephrology....... 80108 80260 3 3 Nephrology.

40............ Hand surgery..... 80169 80169 5 5 Hand Surgery.

44............ Infectious 80279 80246 1 1 Infectious disease.

disease.

46............ Endocrinology.... 80103 80238 3 1 Endocrinology.

65............ Physical 80235 80235 1 1 Physical medicine and rehab.

therapist

(independently

practice.

66............ Rheumatology..... 80252 80252 1 1 Rheumatology.

67............ Occupational 80233 80233 1A 1A Occupational Med.

therapist

(independently

practice.

77............ Vascular surgery. 80146 80146 6 6 Vascular Surgery.

78............ Cardiac surgery.. 80141 80141 6 6 Cardiac Surgery.

82............ Hematology....... 80278 80245 2 1 Hematology.

83............ Hematology/ 80278 80245 2 1 Hematology.

oncology.

84............ Preventive 80231 80231 1 1 General Preventive Medicine.

medicine.

93............ Emergency 80157 80102 5 4 ER Physician.

medicine.

98............ Gynecologist/ 80167 80244 4 1 Gynecology.

oncologist.

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Some physician specialties, nonphysician practitioners, and other

entities (for example, independent diagnostic testing facilities) paid

under the physician fee schedule could not be assigned an ISO code. We

crosswalked these specialties to physician specialties assigned an ISO

code and a risk class. The unassigned specialties and the specialty to

which they were assigned are shown in Table 2.

Table 2.--Crosswalk for Unassigned Specialties

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Unassigned speciality Cross walk speciality

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

Addiction Medicine.................. Psychiatry.

Chiropractor, Licensed.............. Internal Medicine.

Clinical Nurse Practitioner......... Internal Medicine.

Clinic or Other Group............... All Physicians.

Clinical Psychologist............... Psychiatry.

Clinical Social Worker.............. Psychiatry.

Colorectal Surgery.................. General Surgery.

Critical Care (intensivists)........ All Physicians.

CRNA/AA............................. Family Practice.

Independent Lab..................... All Physicians.

Independent Physiological Lab....... All Physicians

Interventional Radiology............ Radiology.

Manipulative Therapy................ All Physicians.

[[Page 39612]]

Maxillofacial Surgery............... Plastic Surgery.

Medical Oncolgy..................... Gynecology.

Neuropsychiatry..................... Psychiatry.

Nurse Practitioners................. Internal Medicine.

Optometrist......................... All Physicians.

Oral Surgery........................ All Physicians.

Peripheral Vascular Disease......... All Physicians.

Physician Assistants................ Family Practice.

Podiatry............................ All Physicians.

Psychologist (Billing Indep.)....... Psychiatry.

Radiation Oncology.................. Radiology.

Surgical Oncology................... All Physicians.

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

We originally considered two malpractice premium-based alternatives

for resource-based malpractice RVUs. One was based solely on specialty

premium differences and did not reflect differences in risk-of-service

among procedures provided by the specialty. Risk-of-service reflects

how services differ in their contributions to professional malpractice

liability. For example, if a physician often performs a complex,

difficult surgical procedure, this would have a larger effect on the

physician's premium risk classification than a simple office visit. We

realized that if we did not account for risk-of-service differences all

procedures that might be performed exclusively by a given specialty

would have the same resource-based malpractice RVUs, even though they

might vary considerably in effort, difficulty, total payment, and their

contribution to that specialty's malpractice liability.

The alternative which we are proposing, uses the same basic

methodology with one added computation. In order to reflect differences

in risk-of-service, in step (3) below we propose to multiply the

specialty premium-based malpractice RVUs by the procedure's work RVUs.

We believe that time, intensity, and difficulty of services are

correlated with malpractice risk. Since the work RVUs reflect

differences in time, intensity, and difficulty among procedures and are

generally accepted as accurate, we believe that they are the best

available proxy for determining risk-of-service.

Our proposed methodology is as follows:

(1) Compute a national average premium for each specialty.

Insurance rating area malpractice premiums for each specialty were

mapped to the county level. The specialty premium for each county was

then multiplied by the county total RVUs, which had been divided by the

county malpractice geographic practice cost index (GPCI) to normalize

the data for geographical differences. (Since malpractice RVUs are

multiplied by locality malpractice GPCIs in calculating fee schedule

payments, if the locality RVUs are not ``deflated'' by the malpractice

GPCIs, the locality cost differences as reflected by the GPCIs would be

counted twice.) The product of premiums and RVUs was then summed for

all counties by specialty. This number was divided by the total RVUs

for all counties for each specialty. This yields a national average

premium for each specialty.

Table 3 shows the national average premiums for the years 1990-95

for the 20 specialties on which we collected premium data. We used an

average of the 3 most recent years, 1993-95, in our calculation. We

plan to collect more recent data (1996-1998) to use in future

refinement of malpractice RVUs, but do not expect that these more

recent data will result in any significant changes since Table 3 shows

that on a national average basis malpractice premiums have been

remarkably stable in recent years.

Table 3.--National Average Premiums (1990-1995) Calculated Using 1997 RVU Weights

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Annual

ISO Specialy 1990 avg 1991 avg 1992 avg 1993 avg 1994 avg 1995 avg trend

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

80114....................... Ophthalmology.................. 11,538 11,098 10,637 10,747 10,773 11,359 -0.3

80143....................... General surgery................ 28,231 26,683 25,405 25,896 26,876 28,286 0.0

80144....................... Thoracic surgery............... 37,740 37,123 35,439 37,045 38,320 41,001 1.7

80145....................... Urology........................ 16,798 16,285 15,432 15,161 15,669 16,620 -0.2

80151....................... Anesthesiology................. 23,437 20,986 19,536 17,406 17,409 16,877 -6.4

80152....................... Neurosurgery................... 50,743 45,248 48,788 52,124 54,027 57,679 2.6

80154....................... Orthopedic surgery............. 40,312 39,145 36,734 37,455 38,607 40,569 0.1

80156....................... Plastic and reconstructive 32,951 31,062 30,087 29,193 30,056 32,594 -0.2

surgery.

80159....................... Ootolaryngology................ 23,697 21,369 20,146 18,926 19,661 20,657 -2.7

80244 *..................... OB/GYN......................... 46,724 44,726 43,300 12,676 13,264 N/A N/A

80249....................... Psychiatry..................... 5,662 5,597 5,574 6,748 7,204 7,766 6.5

80269....................... Pulmonary disease.............. 7,807 7,675 7,202 8,068 8,517 9,198 3.3

80274....................... Gastroenterology............... 9,985 9,754 9,709 10,468 10,944 11,612 3.1

80280....................... Diagnostic radiology........... 9,748 9,496 9,404 10,280 10,675 11,394 3.2

80281....................... Cardiology..................... 10,437 10,225 10,187 11,895 12,360 13,138 4.7

80282....................... Dermatology.................... 9,004 8,768 8,750 10,392 10,905 11,541 5.1

80284....................... Internal medicine.............. 10,349 10,093 9,905 10,931 11,421 12,122 3.2

80288....................... Neurology...................... 10,613 10,479 10,789 11,721 12,289 13,179 4.4

80292....................... Pathology...................... 8,332 7,868 7,482 8,554 8,818 9,369 2.4

80423....................... General practice............... 10,081 9,777 9,662 10,006 10,399 10,989 1.7

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

* 1990-92 data reflects Obsterical malpractice premium. 93-94 is for Geneologist. 95 premium not available.

(2) Calculate a risk factor for each specialty. Differences among

specialties in malpractice premiums reflect differences in their

malpractice exposure or risk. Relative differences among specialties in

national average malpractice premiums can be expressed as specialty

risk factors. These risk factors are an index calculated by dividing

the national average premium for each specialty by the national average

premium for the specialty with the lowest average premium, psychiatry.

Table 4 shows the risk factors, surgical and non-surgical, by

specialty.

[[Page 39613]]

Table 4.--Medicare Specialties and Risk Factor Assignment

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Non-Surgical Risk Factors Surgical Risk Factors

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

Code Medicare description Risk factor Code Medicare description Risk factor

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

0.................... All Physicians.......... 1.50 0 All Physicians.......... 2.53

01................... General practice........ 1.21 01 General practice........ 3.10

02................... General surgery......... 3.99 02 General surgery......... 3.99

03................... Allergy/Immunology...... 1.00 03 Allergy/Immunology...... 1.00

04................... Otolaryngology.......... 1.21 04 Otolaryngology.......... 2.83

05................... Anesthesiology.......... 2.34 05 Anesthesiology.......... 2.34

06................... Cardiology.............. 1.21 06 Cardiology.............. 5.84

07................... Dermatology............. 1.00 07 Dermatology............. 1.51

08................... Family practice......... 1.21 08 Family practice......... 3.10

10................... Gastroenterology........ 1.21 10 Gastroenterology........ 2.64

11................... Internal medicine....... 1.21 11 Internal medicine....... 1.58

12................... Osteopathic manipulative 1.50 12 Osteopathic manipulative 2.53

therapy. therapy.

13................... Neurology............... 1.61 13 Neurology............... 8.16

14................... Neurosurgery............ 1.61 14 Neurosurgery............ 8.16

16................... Obstetrics/Gynecology... 1.21 16 Obstetrics/Gynecology... 3.10

18................... Ophthalmology........... 1.21 18 Ophthalmology........... 1.54

19................... Oral surgery (dentists 1.50 19 Oral surgery (dentists 2.53

only). only).

20................... Orthopedic surgery...... 4.28 20 Orthopedic surgery...... 4.28

22................... Pathology............... 1.00 22 Pathology............... 1.28

24................... Plastic and 4.35 24 Plastic and 4.35

reconstructive surgery. reconstructive surgery.

25................... Physical medicine and 1.21 25 Physical medicine and 1.21

rehab. rehab.

26................... Psychiatry.............. 1.00 26 Psychiatry.............. 1.00

28................... Colorectal surgery 4.28 28 Colorectal surgery 4.28

(formerly proctology). (formerly proctology).

29................... Pulmonary disease....... 1.21 29 Pulmonary disease....... 1.21

30................... Diagnostic radiology.... 1.54 30 Diagnostic radiology.... 1.54

31................... Roentgenology, radiology 1.54 31 Roentgenology, radiology 1.54

(osteopaths only). (osteopaths only).

33................... Thoracic surgery........ 5.54 33 Thoracic surgery........ 5.54

34................... Urology................. 2.26 34 Urology................. 2.26

35................... Chiropractic............ 1.21 35 Chiropractic............ 1.61

36................... Nuclear medicine........ 1.21 36 Nuclear medicine........ 1.21

37................... Pediatric medicine...... 1.21 37 Pediatric medicine...... 1.61

38................... Geriataric medicine..... 1.21 38 Geriataric medicine..... 1.21

39................... Nephrology.............. 2.64 39 Nephrology.............. 2.64

40................... Hand surgery............ 4.28 40 Hand surgery............ 4.28

44................... Infectious disease...... 1.21 44 Infectious disease...... 1.21

46................... Endocrinology........... 1.21 46 Endocrinology........... 2.64

48................... Podiatry................ 1.50 48 Podiatry................ 2.53

62................... Psychologist (billing 1.00 62 Psychologist (billing 1.00

independently). independently).

65................... Physical therapist 1.21 65 Physical therapist 1.21

(independently (independently

practicing). practicing).

66................... Rheumatology............ 1.21 66 Rheumatology............ 1.21

67................... Occupational therapist 1.00 67 Occupational therapist 1.00

(independently (independently

practicing). practicing).

68................... Clinical psychologist... 1.00 68 Clinical psychologist... 1.00

70................... Multispecialty clinic or 1.50 70 Multispecialty clinic or 2.53

group practice. group practice.

71................... Diagnostic x-ray........ 1.54 71 Diagnostic x-ray........ 1.54

76................... Peripheral vascular 1.50 76 Peripheral vascular 2.53

disease. disease.

77................... Vascular surgery........ 5.84 77 Vascular surgery........ 5.84

78................... Cardiac surgery......... 5.84 78 Cardiac surgery......... 5.84

79................... Addiction medicine...... 1.00 79 Addiction medicine...... 1.00

81................... Critical care........... 1.50 81 Critical care........... 2.53

82................... Hematology.............. 1.21 82 Hematology.............. 1.61

83................... Hematology/oncology..... 1.21 83 Hematology/oncology..... 1.61

84................... Preventive medicine..... 1.21 84 Preventive medicine..... 1.21

85................... Maxillofacial surgery... 4.28 85 Maxillofacial surgery... 4.28

86................... Neuropsychiatry......... 1.00 86 Neuropsychiatry......... 1.00

90................... Medical oncology........ 1.21 90 Medical oncology........ 3.10

91................... Surgical oncology....... 1.50 91 Surgical oncology....... 2.53

92................... Radiation oncology...... 1.54 92 Radiation oncology...... 1.54

93................... Emergency medicine...... 3.10 93 Emergency medicine...... 4.28

94................... Interventional Radiology 1.54 94 Interventional Radiology 1.54

98................... Gynecologist/oncologist. 1.21 98 Gynecologist/oncologist. 3.10

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

(3) Calculate malpractice RVUs for each code. Resource-based

malpractice RVUs were calculated for each procedure. First, the

percentage of a specific service provided by each specialty was

determined from payment records. This percentage was then multiplied by

the specialty's risk factor. The products for all specialties for the

[[Page 39614]]

procedure are then summed, yielding a specialty-weighted malpractice

RVU reflecting the weighted malpractice costs across all specialties

for that procedure. This number was then multiplied by the procedure's

work RVUs to account for differences in risk-of-service. We realize

that adjusting for risk-of-service using work RVUs may not exactly

reflect risk-of-service differences because certain procedures with

relatively high work RVUs may have low malpractice claim frequencies

while certain procedures with relatively low work RVUs may have high

malpractice claim frequencies. We were unable to find an acceptable

alternative to work RVUs for determining risk-of-service and would

welcome any suggestions.

As mentioned above, certain specialties may have more than one IOS

rating class and risk factor. The surgical risk factor for a specialty

was used for surgical services and the non-surgical risk factor for

evaluation and management services. Also, for obstetrics/gynecology,

the lower gynecology risk factor was used for all codes except those

obviously surgical services, in which case the higher surgical risk

factor was used.

Certain codes have no physician work RVUs. The overwhelming

majority of these codes are the technical components (TCs) of

diagnostic tests, such as x-rays and cardiac catheterization, that have

a distinctly separate technical component (the taking of an x-ray by a

technician) and professional component (the interpretation of the x-ray

by a physician). Examples of other codes with no work RVUs are

audiology tests and injections and infusions. These codes are usually

done by nonphysicians, for example, audiologists and nurses,

respectively. In many cases, the non-physician or entity furnishing the

TC is distinct and separate from the physician ordering and

interpreting the test. We believe it appropriate for the malpractice

RVUs assigned to TCs to be based on the malpractice costs of the non-

physician or entity, not the professional liability of the physician.

Our proposed methodology, however, would result in zero malpractice

RVUs for codes with no physician work since we propose the use of

physician work RVUs to adjust for risk-of-service, as explained

earlier. We believe that zero malpractice RVUs may be inappropriate

because nonphysician health practitioners and entities such as IDTFs

also have malpractice liability and carry malpractice insurance.

Therefore, we are proposing to retain the current malpractice RVUs for

all services with zero work RVUs. We are open to comments and

suggestions for constructing malpractice RVUs for codes with no

physician work.

(4) Rescale for budget neutrality. The law requires that changes to

fee schedule RVUs be budget neutral. The current malpractice RVUs and

the proposed resource-based malpractice RVUs were constructed using

entirely different methodologies and data and are not directly related

to each other. Thus, the last step is to adjust for budget neutrality

by rescaling the proposed malpractice RVUs so that the total proposed

resource-based malpractice RVUs equals the total current malpractice

RVUs. The new resource-based malpractice RVUs for each procedure were

multiplied by the frequency count for that procedure to determine the

total resource-based malpractice RVUs for each procedure. This was

summed for all procedures to determine the total fee schedule resource-

based malpractice based RVUs. This was compared to the total current

charge-based malpractice RVUs, and the appropriate adjustment was made

to attain budget neutrality. The raw unadjusted resource-based

malpractice RVUs were multiplied by 0.0291 so that the conversion to

resource-based malpractice RVUs maintains the same level of

expenditures for the malpractice component.

The proposed resource-based malpractice RVUs are shown in Addendum

B. These values have been adjusted for budget neutrality on the basis

of the most recent available data. They do not reflect the final budget

neutrality adjustment, which we will make for the final rule on the

basis of more recent data. We do not believe, however, that the values

will change significantly as a result of the final budget-neutrality

adjustment.

Because of the differences in the sizes of the three fee schedule

components, implementation of the resource-based malpractice RVUs will

have much smaller payment effects than the previous implementations of

resource-based work RVUs and resource-based practice expense RVUs. On

average, work represents about 54.5 percent of payment for a procedure

under the fee schedule, practice expense about 42.3 percent, and

malpractice about 3.2 percent. Thus, a 20 percent change in practice

expense or work RVUs would yield a change in payment of about 8 to 11

percent. In contrast, a corresponding 20 percent change in malpractice

values would yield a change in payment of only about 0.6 percent. The

mean frequency-weighted current malpractice RVU is about 0.08 which

equates to about $2.78 in 1999. Estimates of the effects on payment by

specialty and selected high-volume procedures can be found in the

impact section of this rule.

We are requesting comments on our proposed methodology and

resource-based malpractice RVUs.

We are proposing to add a new Sec. 414.22(c)(3) (Relative value

units (RVUs)) to specify that, for services furnished in the year 2000

and subsequent years, the malpractice RVUs are based on the relative

malpractice insurance resources for each service.

B. Resource-Based Practice Expense Relative Value Units

1. Resource-Based Practice Expense Legislation

Section 121 of the Social Security Act Amendments of 1994 (Public

Law 103-432), enacted on October 31, 1994, requires us to develop a

methodology for a resource-based system for determining practice

expense RVUs for each physician's service beginning in 1998. In

developing the methodology, we must consider the staff, equipment, and

supplies used in providing medical and surgical services in various

settings.

The legislation specifically requires that, in implementing the new

system of practice expense RVUs, we must apply the same budget-

neutrality provisions that we apply to other adjustments under the

physician fee schedule.

The BBA was enacted on August 5, 1997, before publication of the

October 1997 (62 FR 59103) final rule. Section 4505(a) of the BBA

delayed the effective date of the resource-based practice expense RVUs

until January 1, 1999. In addition, the BBA provided for the following

revisions in the requirements to change from charge-based practice

expense RVUs to resource-based RVUs.

Instead of paying for all services entirely under a resource-based

RVU system in 1999, section 4505(b) of the BBA provided for a 4-year

transition period. The practice expense RVUs for the year 1999 will be

the sum of 75 percent of charge-based RVUs and 25 percent of the

resource-based RVUs. For the year 2000, the percentages will be 50

percent charge-based RVUs and 50 percent resource-based RVUs. For the

year 2001, the percentages will be 25 percent charge-based RVUs and 75

percent resource-based RVUs. For subsequent years, the RVUs will be

totally resource-based.

Section 4505(e) of the BBA provided that, in 1998, the practice

expense RVUs would be adjusted for certain services in anticipation of

the implementation of resource-based practice expenses

[[Page 39615]]

beginning in 1999. Thus, practice expense RVUs for office visits were

increased. For other services whose practice expense RVUs exceeded 110

percent of the work RVUs and which were furnished less than 75 percent

of the time in an office setting, the 1998 practice expense RVUs were

reduced to a number equal to 110 percent of the work RVUs. This

limitation did not apply to services that had proposed resource-based

practice expense RVUs in the June 18, 1997 proposed rule (62 FR 33196)

that increased from their 1997 practice expense RVUs. The procedure

codes affected and the final RVUs for 1998 were published in the

October 31, 1997 final rule (62 FR 59103).

Section 4505(d)(3) also required that a proposed rule be published

by May 1, 1998, with a 90-day comment period. A final rule was

published on November 2, 1998 and the transition began on January 1,

1999.

The BBA also required that we develop new resource-based practice

expense RVUs. In developing these new practice expense RVUs, section

4505(d)(1) required us to--(1) use, to the maximum extent practicable,

generally accepted accounting principles that recognize all staff,

equipment, supplies, and expenses, not just those that can be tied to

specific procedures, and use actual data on equipment use and other key

assumptions; (2) consult with organizations representing physicians

regarding the methodology and data to be used; and (3) develop a

refinement process to be used during each of the four years of the

transition period.

2. Current Methodology for Computing Practice Expense Relative Value

Units

Effective with services furnished after January 1, 1999, we

established a new methodology for computing resource-based practice

expense RVUs that uses the two significant sources of actual practice

expense data we have available--the Clinical Practice Expert Panel

(CPEP) data and the American Medical Association's (AMA's)

Socioeconomic Monitoring System (SMS) data. This methodology is based

on an assumption that current aggregate specialty practice costs are a

reasonable basis for establishing initial estimates of relative

resource costs of physicians' services across specialties. It then

allocates these aggregate specialty practice costs to specific

procedures and, thus, can be seen as a ``top-down'' approach. The

following summarizes the general methodology used. (For more specific

information refer to the June 5, 1998 proposed rule (63 FR 30826) and

the November 2, 1998 final rule with comment (63 FR 58816).)

Practice Expense Cost Pools

We used actual practice expense data by specialty, derived from the

1995 through 1997 SMS survey data, to create six cost pools:

administrative labor, clinical labor, medical supplies, medical

equipment, office supplies, and all other expenses. There were three

steps in the creation of the cost pools. They are as follows:

Step (1) We used the AMA's SMS survey of actual cost data to

determine practice expenses per hour by cost category. The practice

expense per hour for each physician respondent's practice was

calculated as the practice expenses for the practice divided by the

total number of hours spent in patient care activities by the

physicians in the practice. The practice expenses per hour for the

specialty are an average of the practice expenses per hour for the

respondent physicians in that specialty.

Step (2) We determined the total number of physician hours, by

specialty, spent treating Medicare patients. This was calculated from

physician time data for each procedure code and the Medicare claims

data. The primary sources for the physician time data were surveys

submitted to the AMA's RUC and surveys performed and developed by a

research team at the Harvard School of Public Health in a cooperative

agreement with us for the initial establishment of the work RVUs.

Step (3) We then calculated the practice expense pools by specialty

and by cost category by multiplying the practice expenses per hour for

each category by the total physician hours.

For services with work RVUs equal to zero (including the TC of

services with PC and TC), we created a separate practice expense pool

using the average clinical staff time from the CPEP data (since these

codes by definition do not have physician time), and the ``all

physicians'' practice expense per hour.

Cost Allocation Methodology

For each specialty, we separated the six practice expense pools

into two groups, direct costs and indirect costs, and used a different

allocation basis for each group.

For direct costs, which include clinical labor, medical

supplies, and medical equipment, we used the CPEP data as the

allocation basis. The CPEP data for clinical labor, medical supplies,

and medical equipment were used to allocate the clinical labor, medical

supplies, and medical equipment cost pools, respectively.

For the separate practice expense pool for services with work RVUs

equal to zero, we are using, as an interim measure, 1998 practice

expense RVUs to allocate the direct cost pools (clinical labor, medical

supplies and medical equipment).

Also, for all radiology services that are assigned work RVUS, we

used the 1998 practice expense RVUs as an interim measure to allocate

the direct practice expense cost pool for the specialty of radiology.

For all other specialties that perform radiology services that are

assigned work RVUs, we used the CPEP data for radiology services in the

allocation of that specialty's direct practice expense cost pools.

For indirect costs, which include administrative labor,

office expenses, and all other expenses, we used the total direct costs

or the 1998 practice expense RVUs, as described above, in combination

with the physician fee schedule work RVUs, to allocate the cost pools.

We converted the work RVUs to dollars using the Medicare CF (expressed

in 1995 dollars for consistency with the SMS survey years).

For procedures performed by more than one specialty, the

final procedure code allocation was a weighted average of allocations

for the specialties that perform the procedure, with the weights being

the frequency with which each specialty performs the procedure on

Medicare patients.

Other Methodological Issues

Global Practice Expense Relative Value Units.

For services with the PC and TC paid under the physician fee

schedule, the global practice expense RVUs are set equal to the sum of

the PC and TC.

Practice Expenses per Hour Adjustments and Specialty

Crosswalks

Since many specialties identified in our claims data did not

correspond exactly to the specialties included in the practice expenses

tables from the SMS survey data, it was necessary to crosswalk these

specialties to the most appropriate SMS specialty category. We also

made the following adjustments to the practice expense per hour data

(For the rationale for these adjustments, see the November 2, 1998

proposed rule):

+ We set the medical materials and supplies practice expenses per

hour for the specialty of ``oncology'' equal to the ``all physician''

medical materials and supplies practice expenses per hour.

+ We based the administrative payroll, office, and other practice

expenses per hour for the specialties of ``physical therapy'' and

``occupational therapy'' on data used to develop the salary equivalency

guidelines for these

[[Page 39616]]

specialties. We set the practice expense per hour for the direct cost

categories equal to the ``all physicians'' practice expense per hour

from the SMS survey data.

+ Due to uncertainty concerning the appropriate crosswalk and time

data for the nonphysician specialty ``audiologist,'' we derived the

resource-based practice expense RVUs for codes performed by

audiologists from the practice expenses per hour of the other

specialties that perform these codes.

+ For the specialty ``emergency medicine'' we used the ``all

physician'' practice expense per hour to create practice expense cost

pools for the categories ``clerical payroll'' and ``other expenses.''

+ For the specialty ``podiatry'' we used the ``all physician''

practice expenses per hour to create the practice expense pool.

+ For the specialty ``pathology'' we removed the supervision and

autopsy hours reimbursed through Part A of the Medicare program from

the practice expense per hour calculation.

+ For the specialty ``maxillofacial prosthetics'' we used the ``all

physician'' practice expenses per hour to create practice expense cost

pools and, as an interim measure, allocated these pools using the 1998

practice expense RVUs.

+ We split the specialty ``radiology'' practice expense per hour

into ``radiation oncology'' practice expense per hour and ``radiology

other than radiation oncology'' practice expense per hour and used this

split practice expense per hour to create practice expense cost pools

for these specialties.

+ Time Associated with the Work Relative Value Units.

The time data resulting from the refinement of the work RVUs have

been, on the average, 25 percent greater than the time data obtained by

the Harvard research team for the same services. We increased the

Harvard research team's time data to ensure consistency between these

data sources.

For services with no assigned physician times, such as dialysis,

physical therapy, psychology and many radiology and other diagnostic

services, we calculated estimated total physician times based on work

RVUs, maximum clinical staff time for each service as shown in the CPEP

data, or the judgment of our clinical staff.

We calculated the time for the anesthesia CPT codes 00100 through

01996 using the base and time units from the anesthesia fee schedule

and the Medicare allowed claims data.

3. Refinement

Background

Section 4505(d)(1)(C) of the BBA requires us to develop a

refinement process to be used during each of the four years of the

transition period. In the June 1998 proposed rule, (63 FR 30823), we

did not propose a specific long-term refinement process. Rather, we set

out the parameters for an acceptable refinement process for practice

expense RVUs and solicited comments on our proposed process. Most of

the approximately 14,000 comments we received on the proposed rule

approved of our general ``top down'' approach to the calculation of

practice expense RVUs. However, many concerns were raised regarding the

specific steps in our methodology, the practice expense per hour data,

and detailed code level data. In response to these comments, we made

adjustments for those situations in which we were convinced an

adjustment was appropriate without the need for further data or input

(see the November 2, 1998 (63 FR 58818) final rule). We also indicated

that we would consider other comments for possible future refinement

and that RVUs for all codes would be considered interim for 1999 and

for future years during the transition period.

As part of the initial refinement process, in the November 2, 1998

final rule, page 58818, we outlined the steps we are undertaking to

resolve the outstanding general methodological issues. These steps

include--the establishment of a mechanism to receive additional

technical advice for dealing with these broad practice expense RVU

methodological issues; evaluation of any additional recommendations

from the GAO, MEDPAC, and the Practicing Physicians Advisory Council;

and consultation with physicians' and other groups about these issues.

In addition, we solicited comments and suggestions about methodology

from organizations that have a broad range of interest and expertise in

practice expense and survey issues. We especially encouraged

organizations that represent a broad range of physician, practitioner,

and provider groups (for example, groups that represent both

specialties receiving increases and those receiving decreases in

Medicare payments) with expertise in practice cost issues to make

specific recommendations regarding such issues as criteria for using

alternative survey data, methods for validating data collected in the

future, and possible alternatives for the allocation of indirect

expenses.

We also discussed a proposal submitted by the RUC, which was

supported by almost every medical specialty society, for the

establishment of a Practice Expense Advisory Committee (PEAC), to

review comments and make recommendations on the code-specific CPEP data

(that is, the clinical staff types and times, medical supplies, and

medical equipment needed for each procedure) during this refinement

period. This committee would report to the RUC, which would make final

recommendations to us.

Current Status of Refinement Activities

As stated above, one of our main strategies for resolving the

outstanding practice expense methodological issues was to seek a

mechanism for obtaining expert advice and technical support. To this

end we have awarded a contract beginning in May 1999 to obtain this

assistance in evaluating various aspects of our practice expense

methodology. As also discussed above, the RUC, through the PEAC, will

give us recommendations on the refinement of procedure-specific inputs.

The PEAC held its organizing meeting in February 1999 and met again in

April to begin the task of refining the code-specific CPEP data.

We believe that the awarding of the methodological support contract

and the establishment of the PEAC represent important steps in our

refinement process. However, at this time, our contractor has just

begun the task of assisting us with the major methodological issues

that we face in refining the resource-based practice expense RVUs. In

addition, the PEAC's recommendations on changes to the code-level

inputs have not yet been forwarded by the RUC. Therefore, we are able

to propose only a few changes in our practice expense methodology or in

the code-specific inputs in this proposed rule. However, we will

consider additional changes for the final rule, based on any

recommendations we receive from the RUC or PEAC or other commenters.

These changes, if accepted, would be established as interim values and

would be effective January 1, 2000. The following discusses more

specifically the status of refinement activities and the specific

changes we are proposing for the various aspects of our practice

expense methodology.

Top-Down Methodology

As we have already discussed, we now have a contractor to assist us

in refining our practice expense methodology. This support will help us

to pinpoint weaknesses in our top-down methodology and will also aid us

in generating alternative solutions to the identified problems. Among

the

[[Page 39617]]

activities we have requested the contractor to undertake are:

The evaluation of the validity and reliability of SMS data

for the specialty and subspecialty groups.

The identification and evaluation of alternative and

supplementary data sources from specialty and multi-specialty

societies.

The development of options for validating the Harvard and

RUC physician procedure time data.

The evaluation of the indirect cost allocation

methodology.

The development of options for the five-year review of

practice expense RVUs.

We intend to keep the medical community informed about all of these

activities and to seek their input.

SMS Data

Background

We received comments from a large number of medical specialty

societies, both on our June 1998 proposed rule and our November 2, 1998

final rule, which expressed concern that their specialty or

subspecialty was not adequately represented in the SMS survey data used

to compute their practice expense per hour. In addition, several

specialties, primarily nonphysician groups, were not included in the

SMS data, making it necessary for us to crosswalk their practice

expense per hour to an included specialty. A large number of these

specialties either have submitted supplementary data or have expressed

a desire to collect new data that they believe would more accurately

reflect the practice expense per hour for their specialty.

While we appreciate the effort that these organizations have

expended or are willing to expend, we are not yet in a position to use

this supplementary or new data in our practice expense calculations. It

is important to understand that, given the budget neutrality

restrictions under which we are working, any increase in one

specialty's practice expense pool will lead to a decrease for other

specialties. Therefore, until we have developed reliable and

standardized criteria for accepting and validating additional

specialty-specific data, it would be inequitable to make any

significant changes based on these data.

We recognize that this delay in indicating what additional data

would be acceptable might be frustrating to those groups that believe

that the SMS data does not accurately account for all of their costs.

For that reason, we are ensuring that a priority of the technical

contractor discussed above is to determine (1) the circumstances, if

any, under which we should consider use of survey data other than the

SMS data; (2) the appropriate form of these surveys; and (3) how these

surveys or future SMS surveys can be appropriately validated for our

use. We hope to be in a position to discuss this in more detail in the

final rule to be published this fall.

Adjustment to Direct Patient Care Hours for Pathology

In the November 1998 final rule, we made adjustments to the direct

patient care hours for pathologists to account for the fact that the

time spent performing autopsies and supervising technicians are Part A

services. The pathologists, supported by the AMA, also requested that

we eliminate some of the time for ``personally performing nonsurgical

laboratory procedures including reports'' because this time also

includes some Part A services. We did not make this latter adjustment

in the final rule because we did not have the data on what precise

adjustment to make. We now have information to propose this adjustment

as well. The SMS survey shows that pathologists reported 6.77 hours per

week in personally performing nonsurgical laboratory procedures

including time writing reports. The College of American Pathologists

recommended that 45 percent of the 6.77 hours, which represents three

hours, be removed from total patient care hours. The pathologists argue

that they are providing specific services to attending physicians, but

we will not allow separate payment because the attending physician does

not request a consultation. This problem is unique to this specialty

and, as this change will have no discernible negative impact on any

other specialty, we are proposing to remove these three hours from the

total patient care hours for pathologists.

CPEP Data

RUC Recommendations

As we stated above, the PEAC is beginning to review the procedure-

specific CPEP inputs. Because most major physician specialties are

represented on the PEAC and they will determine which codes are

discussed at each meeting, we plan to wait until we receive

recommendations from the RUC before making significant changes to most

code-specific inputs. However, there are a number of egregious errors

or anomalies that were pointed out in the public comments we received

on the June 1998 proposed rule and the November 1998 final rule that we

intend to address in the final rule this fall.

Physicians' Clinical Staff in the Facility Setting

In some of the original CPEP panels and in subsequent meetings,

various specialties have argued that the physician's own clinical staff

performs certain services for a hospital patient. In our initial

``bottom-up'' practice expense proposal in the June 1997 proposed rule,

we edited out all of the clinical staff time in the facility setting.

It was our contention then, and still is now, that Medicare already

pays for services performed for a facility patient through some other

mechanism, that these services are not typically performed by a

physician's own staff and that recognizing these inputs is arguably

inconsistent with the law and with our regulations. However, in our

1998 ``top-down'' proposal we used the raw CPEP inputs without applying

edits to any of the data, and the clinical staff time in the facility

setting was therefore included.

We are proposing to exclude from the raw CPEP data all staff time

allotted to the use of clinical staff in the facility setting. This

CPEP data is used in our methodology solely to allocate the specialty-

specific practice expense pools to the individual codes. We would not

make an adjustment to the SMS data because we cannot separately

identify the costs related to physicians' clinical staff time in

hospitals and we do not believe that these costs are typically

incurred. We propose to make this adjustment now before extensive

refinement efforts are undertaken. We are also soliciting comments,

information and data regarding situations where the recognition of

costs associated with the use of a physician's clinical staff in a

facility would be appropriate. We will consider these responses for the

final rule.

There are several arguments to be made for excluding the costs of

clinical staff in the facility setting from the raw CPEP data used in

calculating the practice expense payment for any service:

1. Medicare should not pay twice for the same service.

Many specialties argue that their clinical staff performs various

duties for the hospital patient, examples of which are presented below;

all these and other facility clinical staff services are already paid

for by Medicare through a mechanism other than physician practice

expense.

--Assistant at Surgery--Medicare will make a separate payment for a

physician assistant, nurse practitioner or clinical nurse specialist

acting as assistant at surgery. Therefore, their

[[Page 39618]]

time cannot also be counted as a practice expense input in the CPEP

data.

--Scrub Nurse--Medicare already pays the hospital for all nursing

services provided to a hospital patient, including scrub nurse

services, either through the DRG payment or on a cost basis.

--Monitoring Patients Undergoing Conscious Sedation--In order to meet

accreditation standards, all hospitals must already have staff

available to monitor these patients. Medicare pays the hospital for

this service or makes separate payment for a certified registered nurse

anesthetist. To include staff time in the CPEP data for this service

would result in a duplicate payment.

--Reviewing Charts, Making Patient Rounds, Pulling Chest Tubes--These

activities are physicians' services that are paid for through the

physician work RVUs. Physicians may choose to delegate some of their

work to their clinical staff. However, unless the work RVUs are

commensurately reduced, it would be inappropriate to also include this

staff time in the practice expense calculations.

--Making Phone Calls from the Physician's Office--Phone calls

concerning the patient made to the family or the facility are

considered an administrative cost. The staff time for these services is

paid for under our indirect practice expense allocation.

Unless we were to reduce the DRG payment made to hospitals or the

work RVUs used to determine physician payment, the inclusion of the

costs of any of this clinical staff time in the calculation of

procedure-specific practice expenses would essentially lead to a

duplication of Medicare payment. We welcome comments from hospitals,

physicians, and others on this issue.

2. It is not a typical practice for most specialties to use their

own staff in the facility setting.

While physician practice patterns may vary by specialty, by

practice size and configuration and by individual practitioner, we pay

only one rate, with the exception of a geographic adjuster, for a given

site for any specific service. Therefore, the CPEP inputs for each

service cannot reflect all variations in practice patterns, but are

rather meant to represent the clinical staff times, supplies, and

equipment that are used for the typical patient receiving that service.

We have not seen sufficient data to convince us that the use of the

physician's clinical staff in the facility setting is a typical

practice. The American Hospital Association performed a survey of a

sample of their members which indicated that this practice occurred

only occasionally. Because we do not believe that physicians typically

incur costs for bringing their staff into the facility setting, the

aggregate SMS data should contain few costs for such services.

Therefore, we are not proposing to eliminate any clinical staff

expenses from the surgical specialties' aggregate SMS practice expense

data.

3. Inclusion of these costs is arguably inconsistent with both the

law and Medicare regulations.

--Section 1862(a)(14) of the Act, which discusses exclusions from

coverage, states that,

``Notwithstanding any other provision of this title, no payment may

be made under part A or part B * * * for any expenses incurred for

items or services which are other than physicians' services (as defined

in regulations promulgated specifically for purposes of this paragraph)

* * * and which are furnished to an individual who is a patient of a

hospital * * * by an entity other than the hospital * * * unless the

services are furnished under arrangements. * * *''

(This section also exempts services of physician assistants, nurse

practitioners, clinical nurse specialists, certified nurse-midwife

services, qualified psychologist services, and services of certified

registered nurse anesthetists from the above exclusion.)

--In Sec. 411.15, (Particular Services Excluded from Coverage)

subparagraph (m)(1), we paraphrase the above provision for hospital

inpatients and add that ``services subject to exclusion under this

paragraph include * * * services incident to physicians' services.''

Section 411.15(m)(2) implements the exceptions to this exclusion, among

them ``physician services that meet the criteria of Sec. 415.102(a) of

this chapter for payment on a reasonable charge or fee schedule

basis.''

--Section 415.102(a) contains the definition of physicians' services

required by section 1862(a)(14) of the Act and the criteria referred to

in Sec. 411.15(m) above: ``If the physician furnishes services to

beneficiaries in providers, the carrier pays on a fee schedule basis

provided the following requirements are met: (1) The services are

personally furnished for an individual beneficiary by a physician. (2)

The services contribute directly to the diagnosis or treatment of an

individual beneficiary. (3) The services ordinarily require performance

by a physician.''

--On September 8, 1998, we published a proposed rule on a prospective

payment system for hospital outpatient services (63 FR 47552). This

rule proposes to add Sec. 410.39 which embodies in regulation for the

hospital outpatient setting the exclusion in Sec. 411.15 described

above. Section 410.39(c) would exempt from the exclusion physicians'

services that meet the requirements of Sec. 415.102(a) as described

above, physician assistant, nurse practitioner, clinical nurse

specialist, certified nurse midwife, and qualified psychologist

services, as well as services of an anesthetist.

A reading of all of the above suggests that no payment should be

made under the physician fee schedule for the costs of physicians'

clinical staff used in the hospital setting. Services performed by non-

physician clinical staff do not fulfill the definition of services

personally furnished by a physician, and, therefore, the exception to

the exclusion created by section 1862(a)(14) of the Act does not apply.

In addition, nursing services, such as those performed by a scrub nurse

working for a physician, do not ordinarily require performance by a

physician and, thus, are not physicians' services for the purpose of

section 1862(a)(14) of the Act. Finally, services ``incident to a

physician's service'' are explicitly excluded from coverage in the

hospital setting by Sec. 411.15(m)(1).

Table 5, ``Impact on Total Allowed Charges by Specialty of

Excluding the Cost of Clinical Staff in the Facility Setting,'' shows

the impact of the proposed changes on each major specialty's total

allowed charges. As can be seen from this table, anesthesia and cardiac

surgery face a decrease of 8 percent over the transition period, while

thoracic surgery has a decrease of 6 percent over the same period. No

other specialty has a decrease of more than 2 percent. The increases

are spread throughout the specialties, with rheumatology standing to

gain the most with a 5 percent increase, followed by orthopedic

surgery, obstetrics and gynecology and podiatry each with a 3 percent

increase.

It is not surprising that the practice expenses for cardiac and

thoracic surgery and anesthesiology would decrease if clinical staff in

the facility is excluded given the clinical staff time in the CPEP

data. The raw CPEP data for the cardiac and thoracic codes contain up

to 57 hours of clinical staff time in the hospital for a given

procedure. For example, the total facility clinical staff

[[Page 39619]]

time of 24 hours for CPT code 33771 (repair of great vessels defect)

includes nearly seven hours for a physician assistant to act as

assistant at surgery, which can be billed separately, and over six

hours for a scrub nurse that we pay the hospital to provide.

The anesthesia CPEP panel also added inputs of up to 195 minutes

clinical staff time per procedure in the facility setting, which is

particularly inexplicable for such a hospital-based specialty. This

time is divided between a registered nurse, physician assistant, and an

anesthesia technician. It is in no way clear for what purposes an

anesthesiologist would employ a nurse or a physician assistant, but in

any case we pay the hospital for all nursing care and we make separate

payment for a physician assistant.

We welcome comments on this entire issue and particularly solicit

information about any possible appropriate use of physicians' clinical

staff in the facility setting that we should consider for our final

rule.

Table 5.--Impact on Total Allowed Charges by Specialty of Excluding the

Cost of Clinical Staff in the Facility Setting

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

Impact on

total

Specialty payments

(percent)

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

ANESTHESIOLOGY............................................. -8

CARDIAC SURGERY............................................ -8

CARDIOLOGY................................................. -2

CLINICS.................................................... -1

DERMATOLOGY................................................ 2

EMERGENCY MEDICINE......................................... -1

FAMILY PRACTICE............................................ 2

GASTROENEROLOGY............................................ -2

GENERAL PRACTICE........................................... 2

GENERAL SURGERY............................................ 0

HEMATOLOGY ONCOLOGY........................................ 1

INTERNAL MEDICINE.......................................... 0

NEPHROLOGY................................................. 0

NEUROLOGY.................................................. 1

NEUROSURGERY............................................... 1

OBSTETRICS/GYNECOLOGY...................................... 3

OPHTHALMOLOGY.............................................. 1

ORTHOPEDIC SURGERY......................................... 3

OTHER PHYSICIAN............................................ 0

OTOLARYNGOLOGY............................................. 2

PATHOLOGY.................................................. 0

PLASTIC SURGERY............................................ 1

PSYCHIATRY................................................. -1

PULMONARY.................................................. -2

RADIATION ONCOLOGY......................................... 0

RADIOLOGY.................................................. 0

RHEUMATOLOGY............................................... 5

THORACIC SURGERY........................................... -6

UROLOGY.................................................... 2

VASCULAR SURGERY........................................... 0

OTHERS

CHIROPRACTOR............................................... 0

NONPHYSICIAN PRACTITIONER.................................. 0

OPTOMETRIST................................................ 2

PODIATRY................................................... 3

SUPPLIERS.................................................. 0

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

Physician Time

Background

Under the ``top down'' methodology we are using to calculate the

resource-based practice expense for physicians' services, the physician

time attributed to each service has now become a significant factor in

determining the RVUs assigned to that service. Therefore, it is vital

that there is confidence in the accuracy of these times. As we

discussed above, we have a contract to assist us in resolving many of

the outstanding methodological issues we face in refining our ``top

down'' approach. One of the tasks this contractor will undertake is to

develop options for validating the 1992 Harvard research team study and

the AMA/RUC physician time data.

Pediatric Surgery Physician Time Data

In its comments on the June 1998 proposed rule, the American

College of Surgeons stated that the physician time assigned to

pediatric surgery codes was based on erroneously low physician time

data from the original Harvard study, rather than on later data from

the study of pediatric services performed by the same Harvard study

team for the American Pediatric Surgical Association in 1992. The

comment further stated that the latter data were used as the basis for

the work RVUs assigned to these 48 pediatric surgical services. We

responded in the final rule that such inaccuracies in the physician

time data would be considered during the refinement process. We are

currently analyzing the data needed to make the appropriate corrections

and will update the physician times for these 48 pediatric surgical

services in the final rule.

Physical Therapy and Occupational Therapy Times

In the November 1998 final rule we did not use the RUC physician

time data for the physical therapy codes (CPT 97001 through 97770) as

we believed these times to be inaccurate. Instead, we set the time for

these procedures using the judgment of our clinical staff. In its

comments on the final rule, the American Physical Therapy Association

(APTA) stated that the times that we used were too low because it

appeared that we used only intra-service time. The American

Occupational Therapy Association, in its comments on the proposed rule,

also objected to our reduction in times for outpatient rehabilitation

codes. While APTA conceded that the RUC survey data on the times for

these services could cause confusion, APTA also argued that we should

recognize some preservice and postservice times for physical therapy

services. APTA made specific recommendations that included such

preservice and postservice times, while acknowledging that, because

multiple procedures are often performed at the same session, there

could be overlap in these times. We agree that it is appropriate to

include some preservice and postservice times for these procedures and

have adjusted the total code-specific times used to create the practice

expense pools as shown in Table 6, ``Revised Times for CPT codes 97001

through 97770.''

Table 6.--Revised Times for CPT Codes 97001 Through 97770

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

Total time

used for

HCFA 11/2/ Revised

HCPCS 98 final time

rule (minutes)

(minutes)

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

97001......................................... 30 42

97002......................................... 20 25

97003......................................... 45 57

97004......................................... 30 35

97010......................................... 5 5

97012......................................... 15 15

97014......................................... 13 13

97016......................................... 18 18

97018......................................... 13 13

97020......................................... 14 14

97022......................................... 15 15

97024......................................... 15 15

97026......................................... 10 10

97028......................................... 9 9

97032......................................... 18 18

97033......................................... 14 14

97034......................................... 16 16

97035......................................... 12 12

97036......................................... 15 15

97110......................................... 15 18

97112......................................... 15 18

97113......................................... 15 18

97122......................................... 15 18

97124......................................... 15 18

97250......................................... 15 18

97261......................................... 15 18

97265......................................... 15 18

97504......................................... 15 18

97520......................................... 15 18

97530......................................... 15 18

97535......................................... 15 18

97537......................................... 15 18

97542......................................... 15 18

[[Page 39620]]

97750......................................... 15 18

97703......................................... 15 18

97770......................................... 15 18

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

RUC Time Database

The primary sources for the physician time data used in creating

the specialty-specific practice expense pools are the surveys done for

the initial establishment of the work RVUs and the surveys submitted to

the AMA's RUC. We have been informed by the AMA that some of the RUC

times we used for the November 1998 final rule differed from the times

found in the official RUC database. The AMA also conveyed to us that

the RUC is currently verifying their database with the relevant

specialties and plans to send it to us in time for its use in the final

rule.

Crosswalk Issues

Physical and Occupational Therapy Indirect Costs

We currently crosswalk physical and occupational therapy services

to the ``all physician'' practice expense per hour for direct costs.

However, for indirect costs we believed that the crosswalk to ``all

physicians'' would overstate the actual practice expense for therapy

services. Instead we used the data used to develop the therapy salary

equivalency guidelines to create the practice expense per hour for

these costs. These guidelines, which were developed for therapists

working under contract for a facility, assume a required space of 250

square feet per therapist. Organizations representing both physical and

occupational therapists objected that this estimate of 250 square feet

was insufficient to reflect expenses for therapists in private

practice. After further consideration of these comments and after

consultation with industry representatives, we agree that these space

requirements may not be representative of the actual space needed by

independent therapists. Based on our analysis of the available data, we

have increased the space requirements to 500 square feet.

Vascular Surgery

The SMS survey sample of 10 vascular surgeons is too small for us

to calculate accurately a practice expense per hour for this specialty.

In the 1998 proposed and final rules, we combined their data with that

of the cardiac and thoracic surgeons to create a combined practice

expense pool for all three specialties. The Society for Vascular

Surgery commented that this crosswalk understated the actual practice

expense for their specialty because vascular surgery services generally

involved patients with more co-morbidities, included more evaluation

and management services and thus were more office-based. We agree that

the current crosswalk might not appropriately approximate the

specialty's costs, and we are proposing to change vascular surgery's

crosswalk to the ``all physician'' practice expense per hour.

Calculation of Practice Expense Pools--Other Issues

In the November 2, 1998 final rule, in response to the many

commenters that objected to the reductions published in the June 5,

1998 proposed rule for services with no work RVUS, we created, as an

interim solution, a separate practice expense pool for all services

with zero work RVUs. We used the ``all physicians'' category for the

practice expense per hour for this pool and, instead of allocating this

pool by the CPEP data, we used the 1998 RVUs as the allocator.

This was of benefit to most of the services included in this

expense pool, but some specialties, such as sleep medicine, neurology,

ophthalmology, and pathology that had not commented on problems with

their services with no work RVUs were negatively affected by this

methodological change relative to the June 5, 1998 proposal. We have

subsequently received comments from societies for these specialties

requesting that these services be taken out of this special pool and be

treated like the vast majority of codes. As many of these services are

provided by other specialties as well and such a change could have an

impact across specialties, we are seeking comments both on such an

adjustment in general and on specific services that should either be

included or excluded from the adjustment. However, if we do remove

codes from the zero work RVU pool in our final rule, we plan to do it

in a uniform manner across families or categories of codes, instead of

allowing individual services to be placed in or out of the ``zero work

RVU'' practice expense pool depending on which method yields the

highest RVUs.

Table 7, ``Approximate Additional Changes in the Practice Expense

RVUs for Codes That Might Be Removed from the Zero Work Pool,'' shows

the list of codes that we are considering removing from the ``zero work

RVU'' pool, and Table 8, ``Additional Impact on Total Allowed Charges

by Specialty of Removing Selected Codes from the Zero Work Pool,''

shows the impact of this change by specialty.

Table 7.--Approximate Additional Changes in Practice Expense RVUs for Codes That Might Be Removed From the ``Zero-Work'' Pool

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

Approx. change in non- Approx. change in

HCPCS MOD Description facility practice facility practice

expense RVUs expense RVUs

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

88104......................................... TC Cytopathology, fluids........... 0.52 0.52

88106......................................... TC Cytopathology, fluids........... 0.28 0.28

88107......................................... TC Cytopathology, fluids........... 0.09 0.09

88108......................................... TC Cytopath, concentrate tech...... 0.42 0.42

88125......................................... TC Forensic cytopathology.......... 0.08 0.08

88160......................................... TC Cytopath smear, other source.... 0.92 0.92

88161......................................... TC Cytopath smear, other source.... 0.25 0.25

88162......................................... TC Cytopath smear, other source.... 0.21 0.21

88170......................................... TC Fine needle aspiration.......... -0.11 -0.11

88171......................................... TC Fine needle aspiration.......... -0.44 -0.44

88172......................................... TC Evaluation of smear............. 0.44 0.44

88173......................................... TC Interpretation of smear......... 0.57 0.57

88180......................................... TC Cell market study............... 0.41 0.41

88182......................................... TC Cell market study............... 0.86 0.86

[[Page 39621]]

88300......................................... TC Surg path, gross................ 0.3 0.3

88302......................................... TC Tissue exam by pathologist...... 0.71 0.71

88304......................................... TC Tissue exam by pathologist...... 0.5 0.5

88305......................................... TC Tissue exam by pathologist...... 0.69 0.69

88307......................................... TC Tissue exam by pathologist...... 1.2 1.2

88309......................................... TC Tissue exam by pathologist...... 1.85 1.85

88311......................................... TC Decalcify tissue................ -0.01 -0.01

88312......................................... TC Special stains.................. 1.3 1.3

88313......................................... TC Special stains.................. 1 1

88314......................................... TC Histochemical stain............. 0.5 0.5

88318......................................... TC Chemical histochemistry......... 0.43 0.43

88319......................................... TC Enzyme histochemistry........... 0.93 0.93

88323......................................... TC Microslide consultation......... 0.58 0.58

88331......................................... TC Pathology consult in surgery.... -0.18 -0.18

88332......................................... TC Pathology consult in surgery.... -0.15 -0.15

88342......................................... TC Immunocytochemistry............. 0.98 0.98

88346......................................... TC Immunofluorescent study......... 1.09 1.09

88347......................................... TC Immunofluorescent study......... 1.06 1.06

88348......................................... TC Electron microscopy............. 3.87 3.87

88349......................................... TC Scanning electron microscopy.... 4.43 4.43

88355......................................... TC Analysis, skeletal muscle....... 1.46 1.46

88356......................................... TC Analysis, nerve................. 0.46 0.46

88358......................................... TC Analysis, tumor................. 0.67 0.67

88362......................................... TC Nerve teasing preparations...... 0.3 0.3

88365......................................... TC Tissue hybridization............ 1.21 1.21

92060......................................... TC Special eye evaluation.......... 1.13 1.13

92065......................................... TC Orthoptic/pleoptic training..... 0.67 0.67

92081......................................... TC Visual field examination(s)..... 0.6 0.6

92082......................................... TC Visual field examination(s)..... 0.74 0.74

92083......................................... TC Visual field examination(s)..... 0.96 0.96

92135......................................... TC Opthalmic dx imagining.......... 0.96 0.96

92235......................................... TC Eye exam with photos............ 1.44 1.44

92240......................................... TC Icg angiography................. 1.44 1.44

92250......................................... TC Eye exam with photos............ 1.17 1.17

92265......................................... TC Eye muscle evaluation........... 0.29 0.29

92270......................................... TC Electro-oculography............. 0.61 0.61

92275......................................... TC Electroretinography............. -0.23 -0.23

92283......................................... TC Color vision examination........ 0.05 0.05

92284......................................... TC Dark adaptation eye exam........ 0.57 0.57

92285......................................... TC Eye photography................. 1.41 1.41

92286......................................... TC Internal eye photography........ 1.02 1.02

92325......................................... ........................ Modification of contact lens.... -0.08 -0.28

92326......................................... ........................ Replacement of contact lens..... -1.4 -1.58

92354......................................... ........................ Special spectacles fitting...... -8.78 -9.09

92355......................................... ........................ Special spectacles fitting...... -4.05 -4.36

92358......................................... ........................ Eye prosthesis serive........... -0.72 -0.91

92371......................................... ........................ Repair & adjust spectacles...... -0.36 -0.54

92392......................................... ........................ Supply of low vision aids....... -3.94 -4.13

92393......................................... ........................ Supply of artificial eye........ -12.84 -13.02

92395......................................... ........................ Supply of spectacles............ -1.16 -1.34

92396......................................... ........................ Supply of contact lenses........ -2.12 -2.3

93307......................................... TC Echo exam of heart.............. -2.9 -2.9

93350......................................... TC Echo transthoracic.............. 4.55 4.55

95805......................................... TC Multiple sleep latency test..... -0.56 -0.56

95806......................................... TC Sleep study, unattended......... -3.07 -3.07

95807......................................... TC Sleep study, attended........... -0.04 -0.04

95808......................................... TC Polysomnograph, 1-3............. 5.62 5.62

95810......................................... TC Polysomnography, 4 or more...... 5.9 5.9

95811......................................... TC Polysomnography w/cpap.......... 5.54 5.54

95812......................................... TC Electroencephalogram (EEG)...... 0.84 0.84

95813......................................... TC Electroencephalogram (EEG)...... 0.55 0.55

95816......................................... TC Electroencephalogram (EEG)...... 0.85 0.85

95819......................................... TC Electroencephalogram (EEG)...... 1.04 1.04

95822......................................... TC Sleep electroencephalogram...... -0.62 -0.62

95824......................................... TC Electroencephalography.......... -0.38 -0.38

95829......................................... TC Surgery electrocorticogram...... 3.41 3.41

95875......................................... TC Limb exercise test.............. -0.02 -0.02

95923......................................... TC Autonomic nervous func test..... 0.93 0.93

95930......................................... TC Visual evoked potential test.... 0.21 0.21

[[Page 39622]]

95950......................................... TC Ambulatory eeg monitoring....... -3.35 -3.35

95951......................................... TC EEG monitoring/videorecord...... 22.62 22.62

95954......................................... TC EEG monitoring/giving drugs..... 1.7 1.7

95956......................................... TC EEG monitoring/cable/radio...... 13.85 13.85

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

Table 8.--Additional Impact on Total Allowed Charges by Specialty of

Removing Selected Codes From the ``Zero Work'' Pool

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

Impact on

Specialty total payments

(percent)

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

ANESTHESIOLOGY.......................................... 0

CARDIAC SURGERY......................................... 0

CARDIOLOGY.............................................. -2

CLINICS................................................. 0

DERMATOLOGY............................................. 2

EMERGENCY MEDICINE...................................... 0

FAMILY PRACTICE......................................... 0

GASTROENTEROLOGY........................................ 0

GENERAL PRACTICE........................................ -1

GENERAL SURGERY......................................... 0

HEMATOLOGY ONCOLOGY..................................... -1

INTERNAL MEDICINE....................................... -1

NEPHROLOGY.............................................. 0

NEUROLOGY............................................... 0

NEUROSURGERY............................................ 0

OBSTETRICS/GYNECOLOGY................................... 0

OPHTHALMOLOGY........................................... 3

ORTHOPEDIC SURGERY...................................... 0

OTHER PHYSICIAN......................................... 0

OTOLARYNGOLOGY.......................................... -1

PATHOLOGY............................................... 8

PLASTIC SURGERY......................................... 0

PSYCHIATRY.............................................. 0

PULMONARY............................................... 0

RADIATION ONCOLOGY...................................... -2

RADIOLOGY............................................... -1

RHEUMATOLOGY............................................ -1

THORACIC SURGERY........................................ 0

UROLOGY................................................. 0

VASCULAR SURGERY........................................ -1

OTHERS:

CHIROPRACTOR........................................ 0

NONPHYSICIAN PRACTITIONER........................... 0

OPTOMETRIST......................................... 3

PODIATRY............................................ 0

SUPPLIERS........................................... 16

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

Site-of-Service Differential

Clarification of Site-of-Service Policy

We wish to clarify the circumstances under which either the non-

facility or facility RVUs are used to calculate payment for a service.

In the November 2, 1998 final rule, we defined hospitals, skilled

nursing facilities (SNFs), and ambulatory surgical centers (ASCs) as

facilities for practice expense purposes. For the purposes of the

physician practice expense calculation, all other sites-of-service are

considered non-facility. The distinction between the non-facility and

facility setting takes into account the higher expenses of the

practitioner in the non-facility setting, where the practitioner

typically bears the cost of the resources--clinical staff, supplies,

and equipment--associated with the service.

The major purpose of the site-of-service distinction is to ensure

that Medicare does not make a duplicate payment for any of the practice

expenses incurred in performing a service for a Medicare patient. When

the beneficiary is a hospital, SNF, or ASC patient, the facility itself

is paid for the clinical staff, supplies, and equipment needed to take

care of that patient, and the lower facility rate should be paid to the

practitioner. Therefore, if the patient is a facility patient or a

facility will bill for the service, the practitioner must bill using

the facility site-of-service designation. We are modifying the language

in Sec. 414.22(b)(5)(i) in order to clarify this policy. There are also

three further clarifications that need to be made with respect to this

policy.

(1) When a procedure is performed in an ASC that is not on the

Medicare approved list of ASC procedures, we do

[[Page 39623]]

not make a facility payment to the ASC. In this situation, the ASC is

considered a physician's office and the non-facility RVUs would be

used.

(2) Because of the hospital bundling requirement, only the hospital

can bill for therapy services provided to hospital patients. In

addition, through PM-AB-98-63, ``Prospective Payment System for

Outpatient Rehabilitation Services and Application of Financial

Limitations,'' dated October 1998 and our final rule of November 2,

1998, we advised our fiscal intermediaries to require SNFs to bill

Medicare directly for all outpatient therapy services provided to their

SNF residents in a noncovered Part A stay and to their nonresidents

covered under Part B. Because only the facility can bill for therapy

services provided to hospital and SNF patients, the payment for the

full practice expense must be reflected in the facility payment.

Therefore, the higher non-facility RVUs are used to pay for therapy

services even in the facility setting.

(3) While a SNF is considered a facility, a nursing home is not.

Many are mixed facilities with a combination of nursing home and SNF

patients. Practitioners, such as podiatrists, have commented that it is

not always easy to determine into which category the patient falls. We

are clarifying our policy to state that practitioners, such as

podiatrists, should designate their service as a facility service,

unless they verify that no Part A claim will be made for the service,

in which case the ``non-facility'' designation can be used. However, we

note that there might be lower per patient costs in a mixed facility or

a nursing home setting, where multiple patients can be seen in a single

visit to the site, than in the office setting. We welcome comments on

ways to examine the relative costs of treating patients in these

different settings, so that we can determine whether an adjustment to

certain non-facility practice expense payments is appropriate.

Limitation on Facility RVUs

The non-facility RVUs would be expected to be higher than the

facility RVUs for a given service, because the practitioner bears the

costs of the necessary clinical staff, supplies, and equipment. Because

of anomalies in our calculations, generally due to the different mix of

specialties delivering the service in the two settings, for some codes

the facility RVUs are higher than the non-facility RVUs. We are

proposing to limit the facility rate so that it cannot be higher than

the non-facility rate for any given code. Because of budget neutrality,

any decrease in the facility RVUs will be offset by a corresponding

increase in RVUs spread throughout the physician fee schedule. This

change has negligible impact on any specialty.

C. Practice Expense Relative Value Units for a Physician's

Interpretation of Abnormal Papanicolaou Smears

In the November 1998 final rule (63 FR 58814), we revised the codes

for a physician's interpretation of an abnormal Papanicolaou (Pap)

smear to include three HCPCS level II codes (P3001, G0124, and G0141)

in addition to the CPT code 88141. We included the HCPCS level II codes

to accommodate differences in Pap smear technology. We evaluated the

practice expense RVUs for each of these three codes in a slightly

different manner for the 1999 physician fee schedule. We now believe

that it would be more appropriate to evaluate the work, practice

expense, and malpractice RVUs for these codes identically and

comparable to the values for CPT code 88141. We are proposing to make

the practice expense RVUs identical for these codes since there are no

significant differences between them.

D. Physician Pathology Services and Independent Laboratories

Physician pathology services consist of a technical component and a

professional component. The technical component refers to the slide

preparation, staining, and other duties performed by the laboratory

technologist. The professional component refers to the physician's

interpretation.

A hospital laboratory may furnish the technical component of the

physician pathology service directly to its patients or it may have an

independent laboratory furnish the service. Before the implementation

of the hospital inpatient prospective payment system (PPS), the

independent laboratory had two payment options:

It could make an arrangement with the hospital and have

the hospital bill the intermediary, and the hospital could be paid on a

reasonable cost basis for the service.

It could bill the carrier directly for the service and be

paid on a reasonable charge basis.

In most cases, the independent laboratory furnished a service that

combined the technical and professional components and billed the

carrier for the complete physician pathology service.

When developing PPS, we considered requiring the hospital to

include in its costs the technical component of the physician pathology

service to a patient by an independent laboratory. This would have been

consistent with our general policy of including the cost of hospital

services to hospital inpatients by outside suppliers in the diagnosis-

related group (DRG) payment. Instead, we decided to allow the

independent laboratory to continue to bill the carrier for the complete

service. The rationale, based on discussions with the College of

American Pathologists, was that the technical component was an

incidental service to the physician pathology service. At that time it

was not treated as a service in and of itself, and the independent

laboratory usually billed for the complete service. It was believed

that requiring the separation and identification of the technical

component service would have been disruptive to traditional billing

practices for independent laboratories.

When PPS began, hospitals that furnished the technical component of

the physician pathology service directly included that cost in their

base period cost report. This cost was used to calculate the

standardized amounts that are the basis for payment under PPS.

Therefore, hospitals are paid for providing the technical component of

the service through the standardized amounts. It was our understanding

that most hospital laboratories furnished the technical component

service directly to its patients. Even though the hospital that

contracted out its physician pathology services did not include any of

the cost of technical component services in its base period cost, when

PPS was fully implemented, this hospital would have been paid the same

PPS rate as that paid to other hospitals that had included technical

component costs.

Currently, under the physician fee schedule, an independent

laboratory can bill and receive payment for the technical component of

physician pathology services for a hospital inpatient. We believe this

is in conflict with the hospital rebundling provision in section

1862(a)(14) of the Act and has created a perverse incentive for the

type of activity that the bundling provision was intended to prevent.

Based on the way PPS rates are constructed, we believe that we are

paying for the technical component twice; once to the hospital through

the PPS payment and again to the independent laboratory through the

physician fee schedule.

Generally, historically larger hospitals used independent

laboratories on an ``as needed'' basis and smaller hospitals contracted

with independent laboratories for their physician pathology service.

Recently, though, we have become aware that more hospitals are

considering contracting their in-

[[Page 39624]]

house technical component physician pathology services to an outside

laboratory if our policy remained unchanged. The hospital could

continue to be paid for the technical component service under the PPS,

and the independent laboratory could bill its carrier for the same TC

under the physician fee schedule.

Because we believe that a hospital patient's technical component is

already included in payment under PPS, we are proposing to revise our

regulations to end payments to independent laboratories under the

physician fee schedule for technical component services furnished to

hospital inpatients. Specifically, we propose to revise Sec. 415.130(c)

to state that, after December 31, 1999, we would only pay hospitals for

their inpatients' technical component services.

Section 4104(c) of OBRA 1990 (Public Law 101-508) instructed HCFA,

in establishing ancillary policies under the physician fee schedule, to

``consider an appropriate adjustment to reflect the technical component

of furnishing physician pathology services through a laboratory that is

independent of a hospital and separate from an attending or consulting

physician's office.'' We considered this issue when we implemented the

physician fee schedule and established a separate payment for the

technical component of physician pathology services furnished both to

hospital patients and non-hospital patients.

However, we have now reconsidered this policy with respect to

hospital inpatients because it seems inconsistent with the hospital

rebundling provision and we believe it creates an incentive to shift

the location where the services are provided, thereby conflicting with

the purpose of the hospital rebundling provision. We have anecdotal

information that hospitals are having a pathologist establish an

``independent'' laboratory near the hospital, intending that the new

laboratory perform the technical components of physician pathology

services and bill for those technical components and that there would

be no reduction in PPS payment to the hospital. We believe our proposal

is necessary in order for Medicare to avoid making double payment in

such circumstances. We believe that the language of section 4104(c) of

OBRA 1990 provides sufficient authority for us to determine that, in

the case of hospital patients, it is not appropriate for us to provide

for independent laboratories to bill the TC of pathology services

directly.

Under our proposal, independent laboratories would still be able to

bill and receive payment from their Medicare carrier for the technical

component of a physician pathology service furnished to beneficiaries

who are not hospital inpatients. For the technical component of

physician pathology services provided by an independent laboratory to a

hospital inpatient, the independent laboratory would have to make

arrangements with a hospital to receive payment.

The physician fee schedule regulations would continue to allow the

independent laboratory to bill and receive payment under the physician

fee schedule for the technical component of physician pathology

services to hospital outpatients. Of course, the hospital could, if it

chose instead, make an arrangement with the independent laboratory and

be paid on a reasonable cost basis for this service. However, payment

is made under only one method and only to one of these entities.

Since we will be publishing final regulations to implement the

outpatient prospective payment system and have received comments and

concerns about the outpatient technical component of physician

pathology services, we will address that issue in context of those

regulations.

E. Discontinuous Anesthesia Time

Payment for anesthesia services is based on the sum of base units

plus time units multiplied by a locality-specific anesthesia conversion

factor. Under the current regulations at Sec. 414.46(a)(1) (Additional

rules for payment of anesthesia services), the base unit is the value

for each anesthesia code reflecting all activities other than

anesthesia time. These activities include preoperative and

postoperative visits, the administration of fluids or blood incident to

anesthesia care, and monitoring services.

Anesthesia time, as defined under Sec. 414.46(a)(2), starts when

the anesthesiologist or certified register nurse anesthetist (CRNA)

begins to prepare the patient for anesthesia care and ends when the

anesthesiologist or CRNA is no longer in personal attendance; that is,

when the patient may be placed safely under postoperative care. Time

units are computed by the carrier based on the reported anesthesia

time. (For purposes of this section and as described in section

1861(bb) of the Act, the term CRNA includes an anesthesiologist

assistant (AA)).

In the normal course of the administration of an anesthetic, the

following events occur:

Establishment of venous access.

Acquisition of initial monitoring information (blood

pressure, oximetry, electrocardiogram).

Induction of anesthesia (general, regional, block,

monitored anesthesia care).

Maintenance of anesthesia during the surgical procedure.

Conclusion of anesthesia attendance.

In many situations, once the anesthesiologist or CRNA is in

attendance he or she remains continuously with the patient for all five

events. This represents continuous anesthesia time.

There may be instances, however, when there is a break in the

continuous presence of the anesthesiologist or CRNA in the events

listed above. Discontinuous anesthesia time could occur when a regional

or block technique is used, resulting in a break between the induction

of the anesthesia and the maintenance of the anesthesia. For example, a

patient may receive an upper extremity block for hand or arm surgery in

a location other than the operating room, and there may be a time

period following the start of the anesthetic and prior to moving the

patient to the operating room during which the patient can be safely

observed by non-anesthesia personnel.

A break in anesthesia time could also occur between the periods

when the anesthesiologist or CRNA obtains initial monitoring

information and induces anesthesia. This usually occurs when a patient

is being prepared in the operating room for induction of anesthesia

and, for some reason, the surgeon is delayed or unavailable. In this

instance, the anesthesiologist or CRNA may leave the patient under the

observation of the operating room nurse until it is appropriate to

proceed with the induction of the anesthesia.

Discontinuous anesthesia time could also occur in facilities that

use anesthesia ``induction'' rooms where anesthesiologists or CRNAs may

start IVs, thereby increasing efficiency in the use of operating room

time. In these cases, there could be breaks at any point in the time

periods between the establishment of the venous access, acquisition of

the initial monitoring information, and induction of the anesthesia.

We are proposing to revise our regulations to allow

anesthesiologists and CRNAs to sum up blocks of time around a break in

continuous anesthesia care as long as there is continuous monitoring of

the patient within the blocks of time. We propose to revise our

regulations in Sec. 414.46 to include this exception to the general

requirement.

[[Page 39625]]

The current regulations on anesthesia time units refer to

anesthesiologists and medically-directed CRNAs. However, the

calculation of anesthesia time units also applies to claims for

services submitted by CRNAs who are not medically-directed. Thus, we

are proposing to revise the regulation text at Sec. 414.60 (Payment for

the services of CRNAs) to clarify this issue. These revisions are

necessary to link the payment methodology for CRNA services to the

payment methodology for physician anesthesia services.

These revisions would not alter the fundamental principle that

anesthesia time represents a continuous block of time when a patient is

under the care of an anesthesiologist or CRNA. Nor would this proposal

alter our policy that an anesthesiologist or CRNA may not bill time

units for the pre-anesthesia examination and evaluation; these services

will continue to be included as part of the base unit component.

F. Optometrist Services

Before 1987, the services of optometrists were covered only if

related to the condition of aphakia. Effective April 1, 1987, section

9336 of the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986)

(Public Law 99-509), enacted on October 21, 1986, amended section

1861(r)(4) of the Act to expand coverage of optometrists services.

Thus, coverage has been expanded to include services otherwise covered

by Medicare that an optometrist is legally authorized to perform as a

doctor of optometry by the State in which the optometrist performs

them.

We are conforming Sec. 410.23 (Limitations on services of an

optometrist) of the regulations to be consistent with the statutory

provision that has been implemented through manual provisions. The

regulations would specify that Medicare Part B pays for the services of

a doctor of optometry, acting within the scope of his or her license,

if the services would be covered as physicians' services when performed

by a doctor of medicine or osteopathy.

G. Assisted Suicide

Section 9 of Public Law 105-12 (The Assisted Suicide Funding

Restriction Act of 1997) added section 1862(a)(16) of the Act. Public

Law 105-12 prohibits the use of Federal funds to furnish or pay for any

health care service or health benefit coverage for the purpose of

causing, or assisting to cause, the death of any individual. The

prohibition does not apply to withholding or withdrawing medical

treatment, nutrition, or hydration. In addition, the prohibition does

not apply to furnishing a service to alleviate pain, even if doing so

may increase the risk of death, as long as the purpose is not to cause

or assist in causing death. The list of programs to which the

prohibition applies includes the Medicare program.

We are conforming the regulations to the Medicare law amendment

contained in ``The Assisted Suicide Funding Restriction Act of 1997''

by adding a new paragraph (q) to Sec. 411.15 (Particular services

excluded from coverage) to exclude from coverage any health care

service for the specific purpose of causing, or assisting to cause, the

death of an individual.

H. CPT Modifier -25

Payment under the Medicare physician fee schedule is based on the

relative resources or work involved in providing a service. Under

current policy, if a patient visits a physician for a minor procedure

(for example, a minor surgery or an office based endoscopy) and

receives no other services, the physician may only bill for the

procedure and may not also bill for an office visit since no other

services were provided.

If, however, in addition to the procedure the physician also

provides significant, separately identifiable evaluation and management

(E/M) services beyond the usual preoperative and postoperative services

associated with the procedure, these services should be billed with

modifier -25 and are separately payable. The E/M service does not have

to be unrelated to the procedure and the same diagnosis is not

sufficient reason to deny payment for the E/M service. This policy is

described in section 15501.1 of the Medicare Carriers Manual and is

consistent with CPT coding definitions.

To avoid any confusion on this point, we are proposing that for

procedures where the global surgery rules do not apply (for example,

the global code is ``XXX'' in the database), a provider may only bill

for a separately identifiable

E/M service by using the CPT modifier -25. Since every procedure has an

inherent E/M component, in order for an E/M service to be billed, there

must be a significant, separately identifiable service documented in

the medical record. While there has been concern raised that physicians

and others may be billing separately for E/M services that are part of

the underlying procedure, we understand that there are times that such

E/M services are provided and billed because they truly are separate

and significant.

Example 1: A woman visits her rheumatologist for a follow-up

visit. The visit is to monitor the status of her rheumatoid

arthritis and the medication regime she has been following

(methotrexate and non-steroidal anti-inflammatory drugs). During the

few days prior to her visit she has experienced increased pain in

her left knee. At the visit the rheumatologist notes the knee is

markedly swollen and aspirates it. The rheumatologist should

appropriately bill an E/M visit code with a modifier -25 in addition

to the procedure code for the knee aspiration. (The knee aspiration

is a significant, separately identifiable procedure which occurs

during a routine visit.)

Example 2: A cardiac patient visits the physician specifically

for a previously scheduled echography test. An E/M service should

not be billed. (The assumption is the E/M service is built into the

procedure and, therefore, should not be billed.)

Requiring the use of modifier -25 will assist carriers in claims

adjudication and eliminate unnecessary denials when providers

appropriately attach modifier -25 to E/M services that are significant

and separately identifiable from the procedure. A separate diagnosis is

not necessary. Additionally, using this modifier will alert physicians

to the need for documentation in the medical record to support proper

payment.

I. Nurse Practitioner Qualifications

In the November 2, 1998, final rule (63 FR 58814), we specified the

qualifications for a nurse practitioner (NP). On May 12, 1999 we

published a correction notice to the final rule (64 FR 25456). The

final NP qualifications in Sec. 410.75 (Nurse practitioner's services)

require that, after December 31, 1999, for Medicare Part B coverage of

his or her services, an NP must--

Possess a master's degree in nursing;

Be a registered professional nurse who is authorized by

the State in which the services are furnished to practice as a nurse

practitioner in accordance with State law; and,

Be certified as a nurse practitioner by the American

Nurses Credentialing Center or other recognized national certifying

bodies that have established standards for nurse practitioners as

defined in paragraphs (b)(1) and (b)(2) of Sec. 410.75.

Subsequent to the publication of the NP qualifications, we gave

additional consideration to the qualifications because we realized that

the qualifications would exclude many experienced NPs from continuing

to qualify as NPs under the Medicare program.

We gave particular consideration to the qualification criteria that

require an NP to have a master's degree and national certification for

the following reasons--

[[Page 39626]]

Many NPs who had been practicing for 10 to 20 years or

more did not graduate from master's level programs;

Several States still do not require a master's degree for

NPs to practice;

Numerous NPs without master's degrees who have been

practicing for 10 to 20 years or more in rural underserved areas and

serving indigent populations were grandfathered by States for licensure

and insurance payment purposes;

Experienced women's health NPs will not be required to

have a master's degree as a condition for national certification until

2007;

We did not allow the NP population a transition time to

enable NPs to achieve national certification or earn a master's degree;

and

The requirements for NPs were never implemented by

regulations but are contained in section 2158 of the Medicare Carriers

Manual. Nevertheless, it was under these qualifications, which did not

require NPs to have a master's degree, that many individuals have been

issued NP billing numbers, and no problems in practice have been

reported.

Prior to the publication of the NP qualifications, an advanced

nurse could qualify under section 2158 of the Medicare Carriers Manual

(HCFA Pub 14-3) as a NP if he or she--

Was a registered professional nurse currently licensed to

practice in the State in which the services are furnished;

Satisfied the applicable requirements for qualification of

NPs of the State in which the services are furnished; and,

Met at least one of the following requirements:

Was currently certified as a primary care nurse

practitioner by the American Nurses' Association or by the National

Board of Pediatric Nurse Practitioners and Associates; or,

Had satisfactorily completed a formal educational program

of at least one academic year that prepares registered nurses to

perform an expanded role in the delivery of primary care and that

includes at least four months (in the aggregate) of classroom

instruction, and that awards a degree, diploma, or certification for

successful completion of the program; or,

Had successfully completed a formal education program

(that does not qualify under the immediately preceding requirement)

that prepares registered nurses to perform an expanded role in the

delivery of primary care and have been performing that expanded role

for at least 12 months during the 18 month period immediately preceding

February 8, 1978, the effective date for provision of the services of

nurse practitioners as reflected in the conditions of certification for

health clinics.

Thus, NPs could have obtained Medicare billing numbers as NPs

without a master's degree or national certification if the State did

not require such certification. NPs who currently have billing numbers

can continue to bill the Medicare program for their services until the

end of this year without a master's degree or national certification.

NPs can apply to the Medicare program for a billing number until the

end of this year if they meet the NP qualifications at section 2158 of

the Medicare Carriers Manual (as set out above).

It was not our intention to establish qualifications in the 1998

final rule that would cause experienced NPs who have been furnishing

services to Medicare patients to be barred from billing under the

Medicare program because they do not posses a master's degree or

national certification. Also, it was not our intention to inadvertently

preclude NPs, solely on the basis of their not having a master's

degree, from billing under the Medicare program and providing services

to Medicare patients located in rural underserved areas and indigent

populations where access to care is extremely limited.

We are proposing to revise Sec. 410.75 to specify NP qualifications

that are less restrictive, but that still ensure that quality services

are furnished to Medicare patients. We propose to require progressively

enhanced qualifications, providing lead time for NPs to obtain a

Medicare billing number under section 2158 criteria or national

certification. The requirement that a NP applying for a Medicare

billing number for the first time must have a master's degree in

nursing as of January 1, 2003 will provide these NPs with enough time

to earn such a degree. We believe it is reasonable to require,

ultimately, a master's degree as the minimum educational level for new

practitioners independently treating beneficiaries and directly billing

the Medicare program.

The proposed NP qualifications require that for Medicare Part B

coverage of his or her services, a nurse practitioner must meet the

qualifications of either (1) or (2) below--

(1)(i) Be a registered professional nurse who is authorized by the

State in which the services are furnished to practice as a nurse

practitioner in accordance with State law; and

(ii) Be certified as a nurse practitioner by a recognized national

certifying body that has established standards for nurse practitioners;

or

(2) Be a registered professional nurse who is authorized by the

State in which the services are furnished to practice as a nurse

practitioner in accordance with State law and have been granted a

Medicare billing number as a nurse practitioner by December 31, 2000.

Nurse practitioners having and maintaining valid Medicare billing

numbers will not lose these numbers or the ability to bill the Medicare

program for covered services solely on the basis of education and

credentialing.

(3) On or after January 1, 2001, nurse practitioners applying for a

Medicare billing number for the first time must meet the standards for

nurse practitioners as defined in paragraphs (1)(i) and (1)(ii).

(4) On or after January 1, 2003, nurse practitioners applying for a

Medicare billing number for the first time must possess a master's

degree in nursing and meet the standards for nurse practitioners as

defined in paragraphs (1)(i) and (1)(ii) above.

J. Relative Value Units for Pediatric Services

It has come to our attention that the work RVUs for approximately

48 pediatric surgical services are inappropriate. The present values

reflect the evaluation and management (E/M) services of the

postoperative period as determined in the original Harvard study and

not the subsequent Harvard study of 1992. Thus, when we readjusted the

work RVUs for global surgical services to account for increases in the

work RVUs for E/M services during the 5-year review, we did not adjust

the work RVUs for these pediatric services appropriately. We are

proposing to change the RVUs for the

E/M services during the global surgical period for pediatric surgical

services to reflect the findings of the 1992 Harvard study and are in

the process of analyzing the data to determine the specific changes to

be made. Changing the RVUs for E/M services during the global surgical

period would result in increases in the work RVUs for these codes. The

actual increases would be reflected in the final rule.

K. Percutaneous Thrombectomy of an Arteriovenous Fistula

One editorial revision made by the AMA for the (Physicians')

Current Procedural Terminology (CPT) (4th Edition, 1999) was the

addition of the word ``external'' to CPT codes 36860 and 36861, which

describe declotting a cannula. Previously some professional

organizations had recommended using

[[Page 39627]]

these codes to describe the percutaneous declotting of a dialysis graft

or arteriovenous fistula. The editorial revision, however, makes it

clear that using CPT codes 36860 and 36861 for percutaneous declotting

is inappropriate. There are currently no CPT codes for the percutaneous

thrombectomy or revision of an arteriovenous fistula.

We have received a recommendation from the Society of

Cardiovascular and Interventional Radiology to create a temporary HCFA

Common Procedure Coding System (HCPCS) code, bundling several

activities regarding percutaneous thrombectomy of a dialysis graft or

fistula. The HCPCS code would be used until the AMA creates a permanent

CPT code. We are proposing to implement a HCPCS code, defined as

``percutaneous thrombectomy and/or revision, arteriovenous fistula,

autogenous or nonautogenous dialysis graft.'' We are defining it

analogously to open surgical procedures, CPT codes 36831 to 36833. We

are proposing a 90-day global period for this service to be consistent

with the open surgical procedure codes and to facilitate comparisons

with them. More than one CPT code may be required to describe them.

Moreover, we do not have an independent evaluation of the work RVUs

involved, such as a RUC recommendation. Therefore, we are proposing

individual local carrier pricing for the new HCPCS code.

L. Pulse Oximetry, Temperature Gradient Studies, and Venous Pressure

Determinations

There are certain simple diagnostic procedures, that is, CPT codes

94760, 94761, 94762, 93740, and 93770 (pulse oximetry and venous

pressure determinations), that have separate CPT codes. However, the

technical work involved in these procedures is small, while the

physician work involved in interpreting them is included in an E/M

service or a more complex procedure. Moreover, in the inpatient

hospital setting, the technical expense of performing these procedures

is included in the DRG payment. In the physician office setting, the

practice expenses associated with the procedures are included in the

staff and equipment costs reported in the AMA's Socioeconomic

Monitoring Survey that we have used to establish the resource-based

practice expenses in 1999. We believe that continuing to pay separately

for these codes duplicates amounts included in both facility payments

and PERVUs. In order to avoid duplicate payments, we are proposing to

discontinue separate payment for CPT codes 94760, 94761, 94762, and

93770 and to list them in the physician fee schedule with a status code

of ``B'' for ``payment always bundled into payment for other

services.''

M. Removal of Requirement for X-Ray Before Chiropractic Manipulation

Section 1861(r)(5) of the Act defines a doctor of chiropractic as a

physician only for purpose of manual manipulation of the spine to

correct a subluxation demonstrated by x-ray to exist. Section 4513(a)

of the BBA eliminates the statutory provision that a spinal subluxation

be demonstrated by an x-ray. Thus, section 1861(r)(5) of the Act was

amended to allow Medicare payment for a chiropractor's manual

manipulation of the spine to correct subluxation without that

subluxation being demonstrated by an x-ray. This provision is effective

for services furnished on or after January 1, 2000.

In Sec. 410.22 (Limitations on services of a chiropractor),

paragraph (b)(1) states that Medicare Part B pays only for a

chiropractor's manual manipulation of the spine to correct a

subluxation if an x-ray demonstrates that a subluxation exists and if

the subluxation has resulted in a neuromusculoskeletal condition for

which manipulation is appropriate treatment.

In accordance with the BBA, we are deleting the x-ray requirement

from Sec. 410.22(b)(1). Thus, effective January 1, 2000,

Sec. 410.22(b)(1) will state that Medicare Part B pays only for a

chiropractor's manual manipulation of the spine to correct a

subluxation if the subluxation has resulted in a neuromusculoskeletal

condition for which manipulation is appropriate treatment.

N. Coverage of Prostate Cancer Screening Tests

Section 4103 of the BBA provides for Medicare coverage of certain

prostate cancer screening tests for all male beneficiaries, effective

January 1, 2000, subject to certain frequency and other limitations.

Effective January 1, 2000, the law provides for coverage for screening

digital rectal examinations (DRE) and screening prostate-specific

antigen blood tests. In addition, the law provides for coverage for

years beginning after 2002 of other procedures as we find appropriate

for the purpose of early detection of prostate cancer, taking into

account changes in technology and standards of medical practice,

availability, effectiveness, costs, and other factors as we consider

appropriate.

Current Medicare coverage policy allows payment for tests to

diagnose prostate cancer and related medically necessary services that

are furnished to beneficiaries. Under the policy, diagnostic prostate

cancer tests are covered if they are medically necessary to evaluate a

specific complaint or symptom that might indicate prostate cancer, or

to monitor an existing medical condition of an individual who has had a

history of prostate cancer. This coverage is based, in part, on section

1861(s)(3) of the Act, that provides for general Medicare coverage for

diagnostic x-ray, clinical laboratory, and other diagnostic tests.

Before the enactment of the BBA, prostate cancer screening tests have

been excluded from coverage based on section 1862(a)(7) of the Act,

that states that routine physical checkups are excluded services. This

exclusion is described in Sec. 411.15(a) (Particular services excluded

from services). In addition, prostate cancer screening tests have been

excluded from coverage based on section 1862(a)(1)(A) of the Act. This

section provides that items and services must be reasonable and

necessary for the diagnosis or treatment of illness or injury or to

improve the functioning of a malformed body member as stated in

Sec. 411.15(k).

To conform the regulations to the statutory requirements of the

BBA, we are specifying an exception to the list of examples of routine

physical checkups excluded from coverage in Secs. 411.15(a)(1) and

411.15(k)(9) for prostate cancer screening tests that meet the

frequency limitations and the conditions for coverage that we are

specifying under Sec. 410.39 (Prostate cancer screening tests).

Coverage of prostate cancer screening is provided under Medicare Part B

only.

As provided in the law, this new coverage allows payment for one

screening DRE and one screening prostate-specific antigen blood test

every year.

We are proposing to add Sec. 410.39 (Prostate cancer screening

tests: Conditions for and limitations on coverage) to provide for

coverage of two types of prostate cancer screening tests. We are

proposing several definitions of terms that would be included to

implement the statutory provisions and to help the reader in

understanding the provisions of the regulation. These include

definitions of the terms--(1) prostate cancer screening tests, (2) a

screening DRE, (3) a screening prostate-specific antigen blood test,

(4) an attending physician, and (5) an attending physician assistant,

nurse practitioner, clinical nurse specialist or certified nurse

midwife. We are also proposing conditions of coverage for the two

prostate cancer screening tests

[[Page 39628]]

identified in the law for coverage effective January 1, 2000.

Section 4103(a) of the BBA defines the term ``prostate cancer

screening test'' to mean a test (among other things) that is ``provided

for the purpose of early detection of prostate cancer to a man over 50

years of age who has not had such a test during the preceding year.''

We have interpreted this language to mean that payment may be made for

a male beneficiary over 50 years of age or older (that is, starting at

least one day after he has attained age 50) for both an annual

screening DRE and an annual screening prostate-specific antigen test.

We have also interpreted the law to mean that payment may not be made

for such screening tests for an individual male beneficiary who is age

50 or younger.

Under our authority under the ``reasonable and necessary'' clause

of the Act, section 1862(a)(1)(A) of the Act, we are establishing

conditions under which we would cover prostate cancer screening tests.

To ensure that the screening digital rectal examinations are performed

as safely and accurately as possible, we are proposing to require, in

Sec. 410.39(b), that the examination must be performed by the

beneficiary's attending physician who is either a doctor of medicine or

osteopathy (as defined in section 1861(r)(1) of the Act), or by the

beneficiary's attending physician assistant, nurse practitioner,

clinical nurse specialist, or certified nurse midwife (as defined in

section 1861(aa) and section 1861(gg) of the Act) who is authorized

under State law to perform the examinations. In Sec. 410.39(c), we are

proposing that payment may not be made for screening DRE performed for

a man age 50 or younger. For an individual over 50 years of age,

payment may be made for a screening DRE only if the man has not had

such an examination paid for by Medicare during the preceding 11 months

following the month in which his last Medicare-covered screening DRE

was performed. In Sec. 410.39(d) (Conditions for coverage of screening

prostate-specific antigen blood tests), we are specifying that coverage

is available for screening prostate-specific antigen blood tests only

if they are ordered by the beneficiary's attending physician, or by the

beneficiary's attending physician assistant, nurse practitioner,

clinical nurse specialist, or certified nurse midwife who is authorized

to order this test under State law. We are including this coverage

requirement to make certain that beneficiaries receive appropriate

information about the implications and possible results of having these

examinations performed. In Sec. 410.39(e) (Limitation on coverage of

screening prostate-specific antigen blood test), we are proposing that

payment may not be made for a screening prostate-specific antigen blood

test performed for a man age 50 or younger. For an individual over 50

years of age, payment may be made for a screening prostate-specific

antigen blood test only if the man has not had such an examination paid

for by Medicare during the preceding 11 months following the month in

which his last Medicare-covered screening prostate-specific antigen

blood test was performed.

We have created a new HCPCS code, G0102, prostate cancer screening

DRE, to be used for the screening DRE. A DRE is a relatively quick and

simple procedure and we have assigned it the same value as CPT code

99211, the lowest level E/M service. A DRE is usually provided as part

of an E/M service. We believe that it would be extremely rare for a DRE

to be the only service provided during a patient encounter. For this

reason, we are proposing to bundle the DRE into the payment for an E/M

service when a covered E/M service is provided on the same day as a

DRE. If the DRE is the only service provided or is provided as part of

an otherwise noncovered service, such as CPT code 99397, preventive

services visit, HCPCS code G0102 would be separately payable if all the

aforementioned coverage requirements are met.

We have created a new HCPCS code, G0103, prostate screening;

prostate specific antigen (PSA) to be used for the screening PSA test.

The PSA screening test is priced at the same payment rate as CPT code

85153, PSA; total and would be paid under the clinical diagnostic

laboratory fee schedule.

O. Diagnostic Tests

1. Supervision of Diagnostic Tests

On October 31, 1997, we published a final rule with comment period

(62 FR 59048) in the Federal Register that required that diagnostic

tests covered under section 1861(s)(3) of the Act and payable under the

physician fee schedule must be furnished under the appropriate level of

supervision by a physician as defined in section 1861(r) of the Act in

order to be considered reasonable and necessary and, therefore, covered

under Medicare. Medicare requires that physicians supervise diagnostic

testing to ensure the safety and effectiveness of the diagnostic

testing furnished to beneficiaries. The October 31, 1997 final rule

designated the level of physician supervision for most diagnostic tests

payable under the physician fee schedule. The physician supervision

requirement applied to tests performed by physician assistants (PAs),

nurse practitioners (NPs), clinical nurse specialists (CNSs), and other

nonphysician personnel.

Sections 4511 and 4512 of the BBA removed the restrictions on the

areas and settings in which NPs, CNSs, and PAs may be paid under the

physician fee schedule for services that would be physician services if

furnished by a physician.

Therefore, we are proposing to revise Sec. 410.32(b)(2), which

concerns diagnostic x-ray and other diagnostic tests. We are proposing

to add an exception that would specify that no physician supervision is

required for diagnostic tests

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