# Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for Calendar Year 2000 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A99-18561 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** July 22, 1999 - **Citation:** 64 FR 39608 ## Text 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. ----------------------------------------------------------------------- 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 -------------------------------------------------------------------------------------------------------------------------------------------------------- ISO code Risk class Medicare code Medicare -------------------------------------------------------- St. Paul's description description Surgery Other Surgery Other -------------------------------------------------------------------------------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------------------------------------------------------------------------------- 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 ------------------------------------------------------------------------ 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 -------------------------------------------------------------------------------------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------------------------------------------- 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-18561. Public record. Not legal advice.