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

SUMMARY: This final rule makes 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; discontinuous anesthesia time;

diagnostic tests; prostate screening; use of CPT modifier -25;

qualifications for nurse practitioners; an increase in the work RVUs

for pediatric services; 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 and a number of

other changes relating to coding and payment. Furthermore, we are

finalizing the 1999 interim physician work RVUs and are issuing interim

RVUs for new and revised codes for 2000. This final rule solicits

public comments on the second 5-year refinement of work RVUs for

services furnished beginning January 1, 2002 and requests public

comments on potentially misvalued work RVUs for all services in the CY

2000 physician fee schedule. This final rule also conforms the

regulations to existing law and policy regarding: removal of the x-ray

as a prerequisite for chiropractic manipulation; the exclusion of

payment for assisted suicide; and optometrist services. This final rule

also announces the calendar year 2000 Medicare physician fee schedule

conversion factor under the Medicare Supplementary Medical Insurance

(Part B) program as required by section 1848(d) of the Social Security

Act. The 2000 Medicare physician fee schedule conversion factor is

$36.6137.

DATES: Effective date: This rule is effective January 1, 2000. This

rule is a major rule as defined in Title 5, United States Code, section

804(2). In accordance with 5 U.S.C. section 801(a)(1)(A), we are

submitting a report to the Congress on this final rule on October 29,

1999.

Comment date: Comments on interim RVUs for selected procedure codes

identified in Addendum C and on interim practice expense RVUs and

malpractice RVUs for all codes as shown in Addendum B will be

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

in the ADDRESSES section, no later than 5 p.m. on January 3, 2000.

Comments on all RVUs considered under the 5-year refinement process

as discussed in section IV of the preamble will be considered if we

receive them at the appropriate address, as provided below, no later

than 5 p.m. on March 1, 2000.

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

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

Financing Administration, Department of Health and Human Services,

Attention: HCFA-1065-FC (5-Year Refinement), P.O. Box 8013, Baltimore,

MD 21244-8013.

Mail written comments related to interim RVUs for new and revised

procedure codes, interim practice expense RVUs, and interim malpractice

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

Financing Administration, Department of Health and Human Services,

Attention: HCFA-1065-FC, P.O. Box 8013, Baltimore, MD 21244-8013.

If you prefer, you may deliver your written comments 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-FC. Comments received timely will be available

for public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 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:

Benjamin Long, (410) 786-0007 (for issues related to accessing the

physician fee schedule information on the HCFA homepage).

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).

Paul W. Kim, (410) 786-7410 (for issues related to nurse practitioner

qualifications).

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

requirement for chiropractic services).

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

Marc Hartstein, (410) 786-4539 (for issues related to the conversion

factor and physician fee schedule update and the regulatory impact

analysis).

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

SUPPLEMENTARY INFORMATION: Copies: To order copies of the Federal

Register containing this document, send your request to: New Orders,

Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-

7954. Please specify the date of the issue requested, and enclose a

check or money order payable to the Superintendent of Documents, or

enclose your Visa, Discover, or Master Card number and expiration date.

Credit card orders can also be placed by calling the order desk at

(202) 512-1800 (or toll free at 1-888-293-6498) or by faxing to (202)

512-2250. The cost for each copy is $8. As an alternative, you can view

and photocopy the Federal Register document at most libraries

designated as Federal Depository Libraries and at many other public and

academic libraries throughout the country that receive the Federal

Register.

To order the disks containing this document, send your request to:

Superintendent of Documents, Attention: Electronic Products, P.O. Box

37082, Washington, DC 20013-7082. Please specify, ``Medicare Program;

Revisions to Payment Policies Under the Physicians Fee Schedule for

Calendar Year 2000,'' and enclose a check or money order payable to the

Superintendent of Documents, or enclose your VISA, Discover, or

MasterCard number and expiration date. Credit card orders can be placed

by calling the order clerk at (202) 512-1530 (or toll free at 1-888-

293-6498) or by

[[Page 59381]]

faxing to (202) 512-1262. The cost of the two disks is $19.

Information on the Physician Fee Schedule can be found on our HCFA

homepage. This data can be accessed by using the following directions:

1. Go to the HCFA homepage (http://www.hcfa.gov).

2. Click on ``Medicare.''

3. Click on ``Professional/Technical Information.''

4. Select Medicare Payment Systems.

5. Select Physician Fee Schedule.

You will find information on the Physician Fee Schedule Regulation

on this page, as well as other documents (for example, Lewin Group

Report, Health Economics Research Report) that are referenced in the

preamble. Or, you can go directly to the Physician Fee Schedule page by

typing the following: http://www.hcfa.gov/medicare/pfsmain.htm.

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. Information on the regulation's impact appears throughout

the preamble and not exclusively in section IX.

Table of Contents

I. Background

A. Legislative History

B. Published Changes to the Fee Schedule

C. Components of the Fee Schedule Payment Amounts

D. Development of the Relative Value Units

II. Specific Proposals for Calendar Year 2000 and Responses to

Public Comments

A. Resource-Based Malpractice Relative Value Units

1. Current Malpractice Relative Value Unit System

2. Methodology for Developing Resource-Based Malpractice

Relative Value Units

B. Resource-Based Practice Expense Relative Value Units

1. Resource-Based Practice Expense Legislation

2. Current Methodology for Computing Practice Expense Relative

Value Units

3. Refinement

C. Adjustment to the 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. Other Issues

III. Refinement of Relative Value Units for Calendar Year 2000 and

Response to Public Comments on Interim Relative Value Units for 1999

(Including the Interim Relative Value Units Contained in the July

22, 1999 Proposed Rule)

A. Summary of Issues Discussed Related to the Adjustment of

Relative Value Units

B. Process for Establishing Work Relative Value Units for the

2000 Physician Fee Schedule

C. Other Changes to the 2000 Physician Fee Schedule and

Clarification of CPT Definitions

IV. Five Year Refinement of Relative Value Units

A. Background

B. Scope of the Five Year Review

C. Refinement of Work Relative Value Units

D. Nature and Format of Comments on Work Relative Value Units

E. New Initiatives

V. Physician Fee Schedule Update and Conversion Factor for Calendar

Year 2000

VI. Provisions of the Final Rule

VII. Collection of Information Requirements

VIII. Response to Comments

IX. Regulatory Impact Analysis

A. Resource-Based Malpractice Relative Value Units

B. Resource-Based Practice Expense Relative Value Units

C. Adjustment to the 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. Budget Neutrality

Q. Impact on Beneficiaries

Addendum A--Explanation and Use of Addenda B

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

Determining Medicare Payments for Calendar Year 2000

Addendum C--Codes with Interim RVUs

Addendum D--GPCI File

Addendum E--Reference Set with 2000 Work RVUs

In addition, because of the many organizations and terms to

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

acronyms and their corresponding terms in alphabetical order below:

AANA American Association of Nurse Anesthetists

AMA American Medical Association

APSA American Pediatric Surgical Association

ASA American Society of Anesthesiologists

BBA Balanced Budget Act of 1997

CF Conversion factor

CFR Code of Federal Regulations

CMDs Carrier Medical Directors

CPEPs Clinical Practice Expert Panels

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

1999, copyrighted by the AMA]

CRNA Certified Registered Nurse Anesthetist

DRE Digital rectal examination

DRG Diagnostic Related Group

E/M Evaluation and management

GAF Geographic adjustment factor

GPCI Geographic practice cost index

HCFA Health Care Financing Administration

HCPAC Health Care Professionals Advisory Committee

HCPCS HCFA Common Procedure Coding System

HHS [Department of] Health and Human Services

IDTFs Independent Diagnostic Testing Facilities

JUAs Joint Underwriting Associations

MEDPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

MGMA Medical Group Management Association

OBRA Omnibus Budget Reconciliation Act

OIG Office of the Inspector General

PSA Prostate-specific antigen

PC Professional component

PCF Patient Compensation Fund

PEAC Practice Expense Advisory Committee

PPS Prospective payment system

ROS Risk-of-Service

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

RVU Relative value unit

SMS Socioeconomic Monitoring Survey

STS The Society of Thoracic Surgeons

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''

[[Page 59382]]

Services.'' This section contains three major elements: (1) A fee

schedule for the payment of physicians' services; (2) a sustainable

growth rate for the rates of increase in Medicare expenditures for

physicians' services; and (3) limits on the amounts that

nonparticipating physicians can charge beneficiaries. The Act requires

that payments under the fee schedule be based on national uniform

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

In the July 22, 1999, proposed rule (64 FR 39609), we listed all of

the final rules published through November 2, 1998, relating to the

updates to the RVUs and revisions to payment policies under the

physician fee schedule. In the July 22, 1999, proposed rule (64 FR

39608), we discussed several policy issues affecting Medicare payment

for physicians' services including 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; discontinuous anesthesia time;

prostate screening; diagnostic tests; qualifications for nurse

practitioners; an increase in the work RVUs for pediatric services;

adjustments to the practice expense RVUs for physician interpretation

of Pap smears; revisions to the work RVUs for new and revised CPT codes

for calendar year 1999; and a number of other issues relating to coding

and payment. In the proposed rule, we also indicated that we would

conform the regulations to existing law and policy regarding removal of

the x-ray as a prerequisite for chiropractic manipulation, the

exclusion of payment for assisted suicide, and optometrist services.

This final rule affects 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;

Part 415, Services furnished by physicians in providers,

supervising physicians in teaching settings, and residents in certain

settings; and

Part 485, Conditions of participation; specialized

providers.

The information in this final rule updates information in the July

22, 1999 proposed rule (64 FR 39608).

C. Components of the Fee Schedule Payment Amounts

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

payment amount for each service paid for under the physician fee

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

relative value for the service; (2) a geographic adjustment factor

(GAF) for each physician fee schedule area; and (3) a nationally

uniform conversion factor (CF) for the service. The CF converts the

relative values into payment amounts.

For each physician fee schedule service, there are three relative

values: (1) An RVU for physician work; (2) an RVU for practice expense;

and (3) an RVU for malpractice expense. For each of these components of

the fee schedule there is a geographic practice cost index (GPCI) for

each fee schedule area. The GPCIs reflect the relative costs of

practice expenses, malpractice insurance, and physician work in an area

compared to the national average for each component.

The general formula for calculating the Medicare fee schedule

amount for a given service in a given fee schedule area can be

expressed as:

Payment = [(RVU work x GPCI work) + (RVU practice expense x GPCI

practice expense) + (RVU malpractice x GPCI malpractice) x CF]

The CF for calendar year 2000 appears in section V. The RVUs for

calendar year 2000 are in Addendum B. The GPCIs for calendar year 2000

can be found in Addendum D.

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

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

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

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

relative practice expenses, malpractice insurance, and physicians' work

in an area compared to the national average. In accordance with the

law, however, the GAF for the physician's work reflects one-quarter of

the relative cost of physician's work compared to the national average.

D. Development of the Relative Value Units

1. Work Relative Value Units

Approximately 7,500 codes represent services included in the

physician fee schedule. The work RVUs established for the

implementation of the fee schedule in January 1992 were developed with

extensive input from the physician community. The original work RVUs

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

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

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

expert physicians and obtained input from physicians from numerous

specialties.

The RVUs for radiology services are based on the American College

of Radiology relative value scale, which we integrated into the overall

physician fee schedule. The RVUs for anesthesia services are based on

RVUs from a uniform relative value guide. We established a separate CF

for anesthesia services while we continue to recognize time as a factor

in determining payment for these services. As a result, there is a

separate payment system for anesthesia services.

2. Practice Expense and Malpractice Expense Relative Value Units

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

and malpractice expense RVUs equal the product of the base allowed

charges and the practice expense and malpractice percentages for the

service. Base allowed charges are defined as the national average

allowed charges for the service furnished during 1991, as estimated

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

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

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

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

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

methodology for a resource-based system for determining practice

expense RVUs for each physician service. As amended by the BBA, section

1848(c) required the new payment methodology to be phased in over 4

years, effective for services furnished in 1999, with resource-based

practice expense RVUs becoming fully effective in 2002. The BBA also

requires us to implement resource-based malpractice RVUs for services

furnished beginning in 2000.

[[Page 59383]]

II. Specific Proposals for Calendar Year 2000 and Responses to

Public Comments

In response to the publication of the July 22, 1999 proposed rule,

we received approximately 2,050 comments. We received comments from

individual physicians, health care workers, and professional

associations and societies. The majority of comments addressed the

proposals related to resource-based malpractice RVUs, resource-based

practice expense RVUs, and supervision of diagnostic tests.

The proposed rule discussed policies that affect the number of RVUs

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

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

limitation on annual adjustments contained in section

1848(c)(2)(B)(ii)(II) of the Act.

After reviewing the comments and determining the policies we will

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

and added those costs and savings to the estimated costs associated

with any other changes in RVUs for 2000. We discuss in detail the

effects of these changes in the Regulatory Impact Analysis (section

IX.)

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

issues correspond to the headings used in the July 22, 1999 proposed

rule. More detailed background information for each issue can be found

in the July 22, 1999 proposed rule.

A. Resource-Based Malpractice Relative Value Units

1. Current Relative Value Unit System

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. Methodology for Developing Resource-based Malpractice RVUs

The resource-based malpractice RVU methodology is data-driven based

on malpractice insurance premium data. Malpractice premium data were

used because they represent the actual malpractice expense to the

physician and are widely available. Actual malpractice premium data

were collected for the top 20 Medicare payment physician specialties.

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 (JUAs), typically State

government administered risk pooling insurance arrangements in areas

where commercial insurers 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. Premium data reflect at least a

50 percent market share in each State, with the average market share

being 77 percent. Adjustments were made to reflect a standard $1

million/$3 million mature claims made policy (a policy covering claims

made rather than services provided during the policy term).

Medicare physician specialties were mapped to malpractice insurance

rating risk classes. A national average premium was computed for each

specialty by weighting area geographic premiums by fee schedule RVUs.

Specialty risk factors or indexes were then calculated by dividing the

national average premium for each specialty by the national average

premium for the specialty with the lowest premium, psychiatry. The risk

factors describe the relative malpractice costs among specialties.

Specialty-weighted resource-based malpractice RVUs were calculated

for each procedure by summing, for all specialties providing the

procedure, the product of each specialty's risk factor times the

proportion of total service count for that procedure provided by the

specialty. This number was then multiplied by the procedure's work RVUs

to account for differences in risk-of-service (ROS) among procedures.

If ROS differences were not recognized, all services 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. Since work RVUs reflect differences in time,

intensity, and difficulty among procedures and are generally accepted

as accurate, we proposed them as the best available proxy for

determining ROS. To attain budget neutrality as required by law, the

total new fee schedule resource-based malpractice RVUs were compared to

the total current charge-based malpractice RVUs, and the appropriate

adjustment was made to retain the same total malpractice RVUs.

We proposed 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.

A more detailed explanation of our methodology can be found in the

July 22, 1999 proposed rule (64 FR 39610).

We received the following comments on our proposed resource-based

malpractice RVUs:

Comment: Many commenters agreed that our methodology was generally

reasonable and that malpractice risk-of-service (ROS) differences among

procedures must be taken into account. While understanding that we used

work RVUs to reflect the malpractice ROS differences because we could

not find a better proxy, they commented that work RVUs may not be the

best proxy to use for ROS and suggested that we work with the medical

community to find a better alternative.

Response: As we stated in the July 1999 proposed rule, we realize

that work RVUs may not be the perfect proxy to reflect malpractice ROS

differences. It is the best proxy available at this time. We will be

happy to work with the medical community to find a better alternative

and welcome any suggestions.

Comment: The most frequently recurring comment was that, while the

law requires that we use the most recent available data, the data used

(1993 through 1995 malpractice premiums) is outdated and does not

accurately reflect current malpractice premiums. Commenters suggested

that we delay implementation of the resource-based malpractice RVUs

until more recent data can be collected. If delay is not an option, the

commenters requested that the resource-based malpractice RVUs be

considered interim subject to change, when more recent data are

collected and verified.

Response: We used the 1993 through 1995 data because they were

readily available. Moreover, we believe the use of these data are

reasonable because it is our understanding that malpractice

[[Page 59384]]

insurance premiums have been relatively stable in the 1990s. The law

requires us to implement the new malpractice RVUs in 2000. However, we

do agree that the RVUs should be considered interim until they can be

verified by more recent data.

Comment: Some commenters stated that using two risk factors,

surgical and nonsurgical, and applying the surgical risk factor to

surgical services performed by a specialty, and the lower nonsurgical

risk factor to the nonsurgical services performed by the specialty,

does not recognize that physicians typically perform a wide range of

services and that their malpractice costs are spread across the whole

range. Since a physician's malpractice premium is usually determined by

the higher risk services performed, the commenters state that the

higher risk factor should be applied to the whole range of services.

OBGYN specialties felt particularly strongly about this issue, stating

that over 80 percent of OBGYNs do both obstetrics and gynecology, and

that even if a physician only does a very minimal number of deliveries

a year he or she will pay the much higher obstetric premium.

Response: It is true that, for an individual physician in a

specialty with different risk factors depending upon whether or not the

physician performs surgery, the physician's malpractice premium will

probably be based upon the higher risk services, depending upon the

policies of the individual insurer. (For obvious surgical specialties,

for example, general surgeon and thoracic surgeon, there is only one

risk factor and this is applied to all services performed by that

specialty.) The purpose of the resource based malpractice RVUs is not

to guarantee each physician an absolute return of his or her

malpractice costs. It is rather to construct malpractice RVUs based on

the relative malpractice costs among services. We believe it is

reasonable to use the lower risk factor for the values of the lower

risk non-surgical services and to allocate the higher relative values

to the higher risk services that cause them. In the case of OBGYN

services, the higher obstetric premiums and risk factor were used for

services that were clearly obstetrical services which drive these

premiums, while the lower gynecology risk factor was used for all other

services. This also seems consistent with support from many commenters

that we use a risk of service adjuster for each service, as discussed

earlier.

Comment: Several commenters generally agreed with our policy of

retaining the existing malpractice RVUs for codes with zero work RVUs

(generally the technical component (TC) of diagnostic tests) rather

than making them zero (as they would have been if we multiplied the

premium-based RVUs by the work RVUs as our risk-of-service methodology

provides). Some commenters pointed out that retaining the existing

values leaves them charge based, however, and suggested that we work

with the physician community to find an alternative proxy to work RVUs

to use to adjust for risk-of-service. Some commenters suggested that we

merely leave the work multiplication step out of the calculation. One

commenter suggested that we use the non-physician clinical labor from

the practice expense Clinical Practice Expert Panels (CPEPs). It was

also pointed out that by retaining the present malpractice values for

the TCs and applying our methodology to the professional component (PC)

and the global fee, we created anomalies when the value of one of the

parts, the TC, was greater than the value of the whole, the global fee.

Response: As stated in the proposed rule, we welcome suggestions

concerning a different proxy than work to use to reflect ROS

differences among services with no work RVUs. We considered eliminating

the work multiplication step, but did not accept this for the reason

mentioned in the proposed rule: that without adjusting for ROS all

services performed solely or almost solely by a specialty would have

the same malpractice RVUs without regard to the different risks they

may entail. We will consider all suggestions including using the CPEP

data and may propose additional refinements in a future proposed rule.

In addition, we have corrected the global PC and TC anomaly. Instead of

separately calculating global values using our methodology, we have

added the PC and TC to obtain the global value, because that value by

definition is the sum of its TC and PC parts.

Comment: Cardiologists commented that the two-tiered surgical

breakdown was inadequate to reflect cardiologists' malpractice costs

because some of their services (for example, angioplasties and cardiac

catherization) do not neatly fall into either category, and that more

categories than just surgery or nonsurgery are required. They also

stated that we did not clearly define what are surgical and nonsurgical

services.

Response: As mentioned in the proposed rule we acknowledge that

insurers vary as to categories of physician risk classifications.

However, we believe that the major determinants of malpractice premiums

are physician specialty and whether or not the physician performs

surgery. We believe that our two risk factor methodology is generally

adequate. Our proposed methodology was based on the CPT definition of

surgery as a way to identify specific codes to be considered surgery or

nonsurgery. We applied the surgical risk factors to services in the

surgery section of CPT, codes 10000 through 69999, and the nonsurgical

risk factors to all other services. After considering this comment, we

acknowledge that the cardiological procedures they mentioned are quite

invasive and more akin to surgery than most non-surgical services. We

are, therefore, applying the higher cardiology surgical risk factor to

the following cardiology catheterization and angioplasty codes: 92980

to 92998 and 93501 to 93536. Since all malpractice RVUs are considered

to be interim, we welcome additional comments concerning other codes

which should be considered as surgery for these purposes.

Comment: Some commenters objected to our basing the resource-based

malpractice RVUs on premium data for 20 specialties with other

specialties being crosswalked to these 20 specialties. They stated that

the RVUs should be based on actual data for all specialties. Some

believed that it was particularly inappropriate to crosswalk non-

physician specialties to the ``all physician'' category.

Response: There are about 100 recognized specialties in our payment

records. We do not believe it is practical, possible, or necessary to

collect actual malpractice premium data on all these specialties. The

20 specialties most prominent in the data represent over 80 percent of

physician fee schedule payments. The shares of payments of many of the

other specialties for a specific service are extremely small and thus

have virtually no effect on the specialty share-weighted calculation.

As discussed in the proposed rule, insurers create their own risk

classes generally using ISO codes. We mapped all specialties to the

risk classes of St. Paul Companies, one of the oldest and largest

malpractice insurers. These risk classes include multiple specialties

that represent similar malpractice risk. To our knowledge, no insurer

has established risk classes for each of the almost 100 Medicare

specialties.

Comment: Some commenters objected to our computing the malpractice

RVUs for a service by weight-averaging the risk factors for all

specialties providing the service. They state that this rewards the

specialties with the lowest risk

[[Page 59385]]

factors and punishes the specialties with the highest risk factors.

Response: The basic principle underlying the physician fee schedule

is that the relative value for a service represents the resources

required to provide the typical service for all physicians providing

the service. Indeed, the law specifically prohibits any specialty

payment differential. The RVUs are intended to reflect the relative

resources required to provide the service compared to other services.

Computing resource-based malpractice RVUs for a service by weight-

averaging the relative costs of all specialties providing the service

is not intended to reward or punish a particular specialty but to

reflect average costs across all specialties providing the service and

is entirely in keeping with the basic principles underlying the fee

schedule.

Comment: Radiology groups commented that, while both the TC and PC

of radiology diagnostic tests contain malpractice RVUs, current and

proposed malpractice RVUs are generally much higher for the TC than for

the PC. They state that the radiologist supervising or interpreting the

test bears the malpractice responsibility and believe that all or the

bulk of malpractice RVUs currently in the TC should be moved to the PC.

Response: We disagree with the commenters. The total TC RVUs

(practice expense and malpractice) for the TC of radiology diagnostic

tests represent the expenses required to perform the test--equipment,

supplies, and technicians plus malpractice insurance. The total PC RVUs

(work, practice expense and malpractice) represent only the

interpretation of the test by the physician. In general, the current TC

RVUs for radiology services are significantly higher than the PC RVUs

because of the very expensive equipment, supplies and other costs. The

malpractice RVUs are generally split in similar proportion between PC

and TC as the practice expense RVUs. In cases where the physician or

group provides both the TC and PC and bills for both components, the

split is not a significant issue since the physician or group would

receive the total payment. In many cases, the TC is provided by an

entity--hospital or free standing imaging center--other than the

physician providing the interpretation. The entity providing the TC,

which includes a supervising physician who is most likely a

radiologist, assumes the risk, such as excessive irradiation of the

patient, of providing the TC. We can think of no reason to transfer any

portion of malpractice RVUs from the entity (including a supervising

physician) providing the majority of the service, the TC, to a

physician who is providing only the interpretation. The malpractice

liability associated with interpreting the test is reflected in the PC

malpractice RVUs.

Comment: One commenter stated that certain allergy and

immunotherapy codes (95145 through 95170, 95010, and 95015) should not

have zero malpractice RVUs as these codes contain work RVUs.

Response: We agree that all services with physician work RVUs

contain some potential malpractice liability and expense. This error

occurred because we rounded to zero in our computation. We have given

them a malpractice value of 0.01 RVU.

Comment: Some commenters stated that we should base the resource-

based malpractice RVUs on actual closed claims data as recommended by

MEDPAC and discussed in the proposed July 1999 proposed rule. MEDPAC

again recommended this approach in its comments and stated that some

insurers maintain a data base relating malpractice claims to ICD-9

codes and that software is available to crosswalk ICD-9 to CPT codes.

MEDPAC also commented that in using only the costs of malpractice

premiums that we failed to factor into the malpractice RVUs the ``* * *

loss of reputation* * *'' that a physician incurs from malpractice

claims. MEDPAC also indicated that ``* * * psychological costs of

professional liability are very important to physicians.''

Response: As stated in the proposed rule, we do not believe that

closed claims data linking malpractice claims to CPT codes are widely

available across the country for all or even a significant portion of

the 7000 plus CPT codes paid under the physician fee schedule. If any

such data are available, we expect they are for a very few codes on a

limited geographical basis. Our coding experts tell us it is not

possible to crosswalk ICD-9 codes to an individual CPT code with any

degree of accuracy. The statute requires that the new malpractice

system be based on the malpractice expense resources involved in

furnishing the service. We believe that the physician's malpractice

premium best reflects the malpractice expense. We do not believe that

any loss of a physician's reputation from a malpractice claim would be

related to the statutory requirement to base malpractice RVUs on the

malpractice resources involved in furnishing the service; we do not

believe that this intangible ``loss'' represents a resource used in

furnishing a service. Indeed, we do not see how loss of reputation and

psychological costs can be quantified. We encourage MEDPAC to further

develop their idea, particularly as it relates to the statutory

requirement, and submit their further analysis in comments to future

physician fee schedule notices.

Comment: Some neurologists listed five codes (95829, 95920, 95955,

95961, and 95962) assigned the neurology non-surgical risk factor that

they believe are surgical services and should be assigned the higher

neurology surgical risk factor.

Response: Our medical consultants believe that these are not

surgical services and no evidence was presented that these services

result in higher malpractice premiums for neurologists. At this time,

we will continue to apply the non-surgical risk factor to these

services. We will reconsider this decision should evidence be presented

that performance of these services results in higher malpractice

premiums.

Comment: Some neurosurgeons commented that the real effect of

malpractice changes on neurosurgeons is masked by comparing estimated

year 2000 allowed charges to 1999 allowed charges, thereby ignoring the

effect on the malpractice RVU pool of the rebasing of the MEI from 1998

to 1999. They further commented that, while comparing 2000 to 1999

malpractice RVUs for neurosurgical procedures shows significant

increases, comparing 2000 to 1998 malpractice RVUs will substantially

reduce or eliminate these increases. They also stated that, while the

updated MEI showed that the average malpractice expense represented 3.2

percent of gross income across all physician specialties, neurosurgeons

have much higher malpractice expenses of about 7 percent of gross

income. Neurosurgeons submitted a detailed methodology that they

suggested might be used as an alternative to our proposed methodology.

Response: The MEI was rebased in 1999 to reflect more recent (1997

as compared to 1989) data from the AMA's Socioeconomic Monitoring

Survey (SMS) on physician income and expenses. The more recent data

indicated that malpractice expenses across all physician specialties as

a percentage of gross income had shrunk from 4.8 to 3.2 percent. In

order to reflect these more recent data in the physician fee schedule,

the pool of malpractice RVUs was reduced from 4.8 to 3.2 percent of

total RVUs. We made this change on a budget-neutral basis: the 1.6

percentage points were redistributed among the work and practice

expense RVUs. We always show impacts relative to current law,

[[Page 59386]]

regulations and policies; therefore, comparing 2000 to 1999 changes was

not done to mask the effects of previous changes but was consistent

with past practices. The effects of proposed 2000 malpractice RVUs were

thus compared to existing 1999 levels. We agree that malpractice

expenses of neurosurgeons are generally higher than the overall average

3.2 percent of gross income for all physicians. An examination of high

volume codes performed primarily by neurosurgeons shows that the new

resource-based malpractice RVUs range from about 6 percent of the total

1999 transition RVUs to about 9 percent of fully implemented total 2002

RVUs for a given service. We are examining the alternative methodology

suggested by the neurosurgeons and will consider it along with other

alternatives during future refinement of malpractice RVUs.

Comment: Several surgical specialties commented that many of the

``winners'' under our proposal are relatively low-risk specialties (for

example, nephrology, general practice, and family practice) with

relatively low malpractice premiums, while many of the ``losers'' are

high-risk specialties (for example, cardiac surgery and thoracic

surgery) with relatively high malpractice premiums. While acknowledging

that the gains or losses are minor, usually less than 1 percent, they

state that the results are counter-intuitive and do not match clinical

practice experience. Some believe that this is a continuation of a HCFA

bias in favor of primary care specialties at the expense of surgical

specialties.

Response: We do not agree that the results are counter-intuitive or

reflect any intentional bias. The impacts compare a new resource-based

system with an existing charge-based system. The systems are on totally

different bases. All the results show is what provided the Congress

with the impetus to create the resource-based physician fee schedule in

the OBRA 1989 and expand it in subsequent legislation: charges for

physicians' services did not accurately reflect the relative resources

required to provide the services. While over the course of the

development of the fee schedule, the changes to a resource-based system

did generally increase payments for primary care services relative to

surgical services, it was because this was indicated by the resource

input data and not as a result of any intentional HCFA bias.

Result of Evaluation of Comments: After careful examination of

comments, we are adopting our proposal that new resource-based

malpractice RVUs calculated using the methodology described in the July

1999 proposed rule will become effective in 2000. We have modified our

proposal to identify certain services as surgery for purposes of

applying specialty risk factors to individual services. These RVUs can

be found in Addendum B.

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, required us to develop a

methodology for a resource-based system for determining practice

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

legislation specifically required 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 final rule (62 FR 59103). 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 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, (63 FR 58816) 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 RVU 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 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:

[[Page 59387]]

(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.

(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.

(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.

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

(the rationale for these adjustments is explained in the November 1998

proposed rule (63 FR 58817):

+ For the specialty of ``oncology'' we set the medical materials

and supplies practice expense per hour 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 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.

+ 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'' and the specialty of

``maxillofacial prosthetics'' 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.

Time Associated with the Work Relative Value Units

The time data resulting from the more current RUC refinement of the

work RVUs have been, on the average, 25 percent greater than the time

data obtained by the original Harvard research team for the same

services in 1992. We adjusted the Harvard research team's time data by

comparisons within families of CPT codes in order to ensure consistency

between these data sources and fairness to those services not yet

valued by the RUC.

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 30822) and the

November 2, 1998 final rule (63 FR 58818) we set out the parameters for

a refinement process and indicated 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 1998

final rule, 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 also discussed a proposal submitted by the Relative Update

Committee (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

[[Page 59388]]

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 make recommendations to the

RUC, which would make final recommendations to us.

Current Status of Refinement Activities

Top-Down Methodology

Comment: Several physician specialty societies expressed concern

about what they perceive as a lack of progress in the refinement

process. One surgical society noted the final report of the contractor

we chose to evaluate methodological issues is not due until May 2000.

Other commenters requested that we identify our plans for refinement,

provide guidance to specialty societies for refining key data sources

and inform the medical community of our progress. Several commenters

recommended that we lengthen the time period for transition, while

another requested that we consider all practice expense RVUs as interim

until all refinements are complete, even beyond 2002. Two surgical

specialty societies stated their concern that many of the

methodological issues on which they previously commented have not yet

been resolved, such as averaging of the CPEP inputs for services valued

by more than one CPEP panel, the negative effect of high patient care

hours on certain specialties, the effects of rounding on the physician

time for evaluation and management (E/M) services, and the impact of

errors in the Medicare claims data.

Response: We can understand the frustration expressed by many of

the commenters about the lack of many immediate revisions to our top-

down methodology. However, this methodology is complex and is also

dependent on the accuracy and interrelationship among five separate

data sources: the SMS survey, the CPEP inputs, Harvard and RUC

physician times, the Medicare claims data, and the work RVUs. In

addition, because the RVUs must be budget neutral, any change we make

that advantages one group could disadvantage another. Therefore, we

must ensure that all refinements we make are methodologically sound,

are consistent with Medicare policy, and, to the greatest degree

possible, are based on objective information.

We believe that we are now in a position to begin addressing many

of the methodological issues that are of concern to those commenting on

our refinement efforts. As indicated in the July 22, 1999 proposed rule

(64 FR 39608), one of our main strategies for resolving the outstanding

practice expense methodological issues was to establish a mechanism for

obtaining expert advice and technical support. We awarded a one-year

contract, beginning May 24, 1999, to The Lewin Group to provide

technical assistance in evaluating the following aspects of the

practice expense methodology:

Evaluate the validity and reliability of the SMS data for

specialty and subspecialty groups and academic and hospital-based

specialties to determine which groups may not be adequately represented

in the SMS survey.

Assist us in our consultations with the AMA and the

medical community on considering possible ways to improve the

representativeness of the aggregate specialty-specific data so that

sampling error is decreased and to eliminate as many sources of non-

response and measurement error as possible.

Evaluate the appropriateness of crosswalking unrepresented

specialties to a specialty included in the AMA survey and develop

alternative options to crosswalking.

Determine which specialties' SMS data may be affected by

inclusion of mid-level practitioners in specialty survey cost data and

develop alternative methodologies to address the issue.

Determine whether the impact on AMA SMS of non-billable

hours is significant and, if so, develop methodologies for adjusting

AMA/SMS to account for non-billable hours.

Determine whether the impact of uncompensated care is

significant and, if so, develop methodologies for adjusting the SMS

data to account for uncompensated care.

Identify and evaluate alternative and supplementary data

from sources such as specialty and multi-speciality societies and

future SMS surveys.

Determine under what circumstances, if any, we should

consider use of survey data other than AMA SMS data and, if this data

could be used, develop criteria for accepting other surveys and

determine the appropriate form of these surveys.

Consider ways that specialty data that significantly

change in a future survey can be selectively validated by AMA SMS

through an independent auditor or other appropriate entity.

Develop options for validating the Harvard/RUC physician

procedure time data.

Determine whether the effect of rounding time data for

high volume/low time services is significant and, if so, develop

methodologies to address it.

Review options supplied by us for allocating indirect

costs, including substituting physician time for physician work.

Provide advice on developing a process for the 5-year

review of practice expense RVUs.

Our contractor has accomplished the following to date:

Met with us and the AMA to discuss our future use of the

AMA SMS survey and to discuss the design and structure of the AMA's new

practice-level survey. The AMA plans to conduct its survey of practices

in alternating years with the SMS survey. Our contractor has completed

an evaluation of the 1998 SMS questionnaire and has completed an

initial review of the methodology of the practice expense per hour

values derived from the SMS data. Our contractor is developing

recommendations regarding the practice survey design and methodology

and is considering how we can use the practice-level survey and how we

can cross-walk the information to the SMS survey. We hope to present

the details of the final recommendations and our proposals regarding

them in next year's physician fee schedule proposed rule.

Met with the Society of Thoracic Surgeons (STS) to review

the methodology used in their survey to make a specific recommendation

concerning the use of this survey to calculate the practice expense per

hour for cardiothoracic surgery.

Hosted a meeting on September 15, 1999 with 37

representatives of physician specialty societies, 11 representatives of

nonphysician practitioners and a number of representatives of the AMA.

Our contractor held the meeting at our urging to allow an

opportunity for representatives of physicians and other practitioners

to raise issues and concerns regarding methodological issues which

effect Medicare payment for practice expenses. Among other issues, our

contractor discussed:

+ Improving collection reliability of practice expense data from

the SMS survey including data on practitioners not represented in the

SMS survey.

+ Developing and evaluating criteria for use of supplemental data

collection efforts.

+ Defining and validating the number of hours physicians spend in

patient care activities.

+ Appropriateness of crosswalk between HCFA and AMA specialty

designations.

Our contractor discussed concerns related to these and other issues

and facilitated a discussion among the

[[Page 59389]]

participants of potential ways of improving the top down methodology.

Submitted their first draft report, Practice Expense

Methodology, dated September 24, 1999, containing an analysis and

recommendations concerning SMS and other practice expense data. This

report has been placed on HCFA's homepage under the title ``Lewin Group

Report'' for anyone interested in reviewing it. (Access to our homepage

was discussed under the ``Address'' section earlier.)

Comment: We have received several comments regarding the effect of

the step in our methodology that weight-averages all scaled specialty-

specific dollar inputs for each CPT code to arrive at a single value

for each service. Commenters claim that this step can cause

redistributions in the specialty-specific practice expense pools and,

in some cases, can cause anomalies in the payment for certain services.

Several commenters indicate that payments for some nerve block

injections will rise by several hundred percent in the office. The

American Society of Anesthesiologists commented that the values for

some of the nerve block injections make no sense in the real world and

urged us to allow the refinement process to work before taking action

with respect to in-facility practice expense values. Some commenters

objected to the proposed increase in payments for outpatient E/M. A

number of commenters noted that office-based E/M services will increase

substantially under the proposed policy. The Society for Vascular

Surgery objected to the proposed 4 to 7 percent increase in total RVUs

for outpatient E/M. They indicated that the additional payments for an

intermediate office visit (CPT code 99213) alone will increase

$312,000,000 which will require further adjustments to the CF. The

American College of Cardiology recommended that we should implement a

way to reduce or eliminate the ``pool leakage'' for specialties such as

cardiology that have a high practice expense per hour. Such high

practice expense specialties can lose a portion of their pool to

specialties with lower expenses when the costs are averaged. Other

commenters also suggested that we should eliminate ``pool leakage.''

The American Association of Neurological Surgeons (AANS) made a similar

comment regarding ``pool leakage.'' AANS asserted that pool leakage is

unfair and violates that BBA mandate to develop a system that reflects

physicians' actual practice expenses.

The Society of Thoracic Surgeons (STS) commented that, because of

the dropping of clinical staff time in the facility setting from the

CPEP data, the values for cardiac and thoracic surgical procedures are

reduced while values for cardiac and thoracic office visits are

increased. The commenter asserted that the effect of this

``misallocation and subsequent weighted-averaging of E/M services

across specialties is a virtual draining and redistribution of cardiac

and thoracic surgery practice expenses to other specialties.'' The

commenter further stated that other anomalies demonstrate the

fallibility of this approach. For example, the scaling factors for

clinical staff for thoracic and cardiac surgery become 1.75 and 2.2

respectively, which are far from the norm for other specialties. As a

result of these high scaling factors, the values in the cardiac and

thoracic surgery practice expense pools for E/M services are increased

while the values for these same services are decreased in the internal

medicine practice expense pool. Cardiac and thoracic surgery have a

value for an E/M service which is about six times the values for these

services in the internal medicine practice expense pool. Finally, these

changes in the direct cost values for E/M services also cause the

indirect practice expense for these services to increase in a distorted

fashion.

Response: We are required by statute to have a single payment for

each service, regardless of the specialty performing that service. It

is for this reason that we adopted the weight averaging of services.

Under the top-down methodology, we calculate an ``SMS'' pool using the

practice expense per hour from the AMA's SMS as follows:

SMS Pool=Practice expense per hour * time per procedure * allowed

services.

This is summed by specialty across all procedures a specialty

performs.

We then calculate a ``CPEP'' pool using the estimates of direct

expenses for specific procedures by the CPEP:

CPEP Pool=Practice Expense for a procedure (as estimated by the CPEP) *

allowed services.

This is summed across all services a specialty does.

There is a separate pool for each category of direct costs

(clinical labor, supplies and equipment). The SMS pool is divided by

the CPEP pool for each specialty to produce a scaling factor which is

applied to the CPEP direct cost inputs. This process is intended to

match costs counted as practice expenses in the SMS survey with items

counted as a practice expense in the CPEP process. Ideally, all of the

scaling factors would equal 1.0, which would suggest that practice

expenses are being identified consistently within each pool. If the

scaling factor is more than 1.0, the CPEP inputs for each specialty are

increased prior to the weight-averaging step. If the scaling factor is

less than 1.0, the CPEP inputs for each specialty are decreased prior

to the weight-averaging step. If the scaling factors all equaled 1.0 or

alternatively were within a narrow range of each other, the weight

averaging step will have little impact on the final value for a

procedure relative to the original CPEP estimates. Thus, the ideal is

that the scaling factor equals 1.0.

Alternatively, if the scaling factors among different specialties

are equal to each other, each specialty specific value that goes into

the weight-averaging step would be the same. Since the scaling factors

tend to be less than one for the direct inputs, most specialties

overestimated practice expenses in the CPEP relative to how the costs

were estimated in the SMS survey. In the refinement process, one of our

key interests is ensuring that there is consistency between costs

counted as practice expenses in the SMS survey and costs which were

counted as practice expenses in the CPEP process. To the extent this

occurs and we can obtain reliable information on physician time related

to performing individual procedures, we believe that scaling factors

should approach 1.0 and these refinements would be an improvement in

the top-down methodology. In the interim, we believe the policies in

this final rule are an improvement in the top-down methodology.

The scaling factors for clinical labor costs for most specialties

move closer to 1.0 in this final rule. The scaling factor for all

physicians increased from 0.54 to 0.72 in this final rule relative to

last year's final rule. For a few specialties, the scaling factor

deviates sharply from 1.0 as a result of these new policies. For

instance, the scaling factor increased from 0.40 to 2.42 for thoracic

surgery, 0.36 to 3.07 for cardiac surgery, and 0.51 to 5.72 for

anesthesiology. Since the scaling factors for most specialties and for

all physician pools move closer to 1.0, we do not believe that

significant changes in policy related to the top-down methodology such

as the ones suggested by commenters are necessary. We continue to

believe the refinement process should be used to obtain better

information on physician practice expenses to further improve the top-

down methodology. We do not believe that results for a few specialties

that deviate from the general trend indicate a significant problem with

the top-down methodology. In fact, it is possible that the increase in

the scaling factor that

[[Page 59390]]

results from changes in this final rule is due to an overstatement of

SMS costs on practice expense per hour rather than an understatement of

the CPEP pool. For instance, if a physician brings nonphysician

practitioners to the hospital, whose services are charged for

separately, the expenses associated with these practitioners generate

physician revenue and should be considered as a part of the physician

work RVU. Indeed, the STS indicated in its comments that thoracic

surgeons frequently bring physician assistants to the operating room to

perform duties typical of ``the first assistant-at-surgery.'' In this

situation, the service of the assistant-at-surgery would be separately

billable and would generate additional revenue to the physician. If it

is commonplace for thoracic surgeons to bring physician assistants to

the hospital for whose services Medicare may make an additional

payment, it would be appropriate to examine whether expenses for

physician assistants are included as a practice expense in the SMS and

thus whether the practice expense per hour is overstated.

Similarly, we believe it is possible that anesthesiologists

responding to the SMS survey may have counted certified registered

nurse anesthetists as a clinical practice expense even though they may

receive an additional payment for the service of a CRNA providing

anesthesia services during a surgical procedure. We do not know that

this is the case but are instead indicating that this is an avenue for

further research to explain the very high scaling factor for

anesthesiology.

We acknowledge that payments under our rule will largely decline

for services which are predominantly performed in a facility and which

had substantial inputs for clinical staff. However, we do not believe

that this is illustrative of a problem with the top-down methodology.

Indeed, as we explained above, we believe our policies are an

improvement in the top-down methodology with a few exceptions.

With respect to some of the code level results that were pointed

out by commenters, we are concerned that there are a few instances

where the scaling and weight-averaging methodology could cause changes

in payment or redistributions that do not reflect the relative costs of

performing certain services. These occur for a few services that are

performed predominantly by a specialty whose scaling factor deviates

sharply from 1.0. For instance, as indicated by some commenters,

practice expense RVUs for pain management injection services would have

increased substantially for reasons unrelated to the relative resources

used in providing the service. This occurs because of the very high

scaling factor for anesthesia that is applied to these services. As

some commenters have noted, including anesthesiologists themselves,

these values ``make absolutely no sense in the real world.'' For this

reason, as an interim measure until refinement is completed, we will

use the average scaling factor in place of the specialty specific

scaling factor if the specialty specific scaling factor exceeds the

average scaling factor by more than 3 standard deviations. This change

will largely result in a reduction in the enormous increase in some of

the pain management services from the proposed rule as a result of a

different scaling factor being used for anesthesiology. Although these

services still appear to have higher RVUs, the changes do not seem so

extreme. We believe this change is warranted as an interim measure in

situations where there is an extreme deviation in specialty scaling

factor relative to the average scaling factor. As we have indicated,

this interim measure is being taken to avoid extremely anomalous

payments for certain services until we can further identify the reason

for aberrant scaling factors.

SMS Data

As we explained in the July 1999 proposed rule we have received

comments from a large number of medical specialty societies concerning

the SMS data and the parameters under which we would accept

supplementary data or new data. We identified as the top priority of

the technical contractor the determination of (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 other surveys; and (3) how

these surveys or future SMS surveys can be appropriately validated for

our use.

Comment: Many organizations reiterated the concerns expressed in

previous comments that their services or their actual costs are not

adequately represented in the SMS data or, in the case of non-physician

specialties, are not represented at all. Organizations representing

emergency medicine, vascular surgery, podiatry, and optometry requested

that we use supplementary data already collected for their specialties.

Two organizations representing cardiology recommended that we use the

most current SMS data in developing practice expense values for the

year 2000. One of the comments states that a review of the most recent

data indicates that no ``gaming'' took place in the responses to this

new SMS survey, once reported practice expenses have only grown at

about the rate of medical inflation.

Two primary care specialty societies support our decision not to

use supplementary data at this time and instead to use our outside

contractor to develop reliable and standardized criteria for accepting

and validating additional specialty-specific data.

Response: We are still in the process of developing the general

criteria for the use of supplementary practice expense surveys and more

recent SMS survey data that could be used in the calculation of the

specialty-specific practice expense per hour. We have made this issue

the top priority for our methodological contractor. As stated above,

our contractor has already met with AMA staff on several occasions to

discuss the future use of the SMS survey, in particular the design,

structure and potential use of the new practice-level SMS survey. Our

contractor also held a meeting on this issue to which all major

national specialty societies were invited in order to obtain input on

concerns relating to the AMA SMS survey and other supplementary survey

data. As mentioned earlier, we have just received the first draft

report with our contractor's findings and recommendations on the

criteria for acceptance of future data. We have not yet had the

opportunity to review closely this report and its recommendations.

Therefore, we are not yet ready to determine which already submitted or

potential additional survey data would be acceptable, although we have

previously stated our preference for future surveys to be carried out

on a multi-specialty level, as is the SMS. We are pleased that,

according to the comment mentioned above, the results in general from

the latest SMS survey may not have differed significantly from the data

that are used for this rule.

Comment: The Society of Thoracic Surgeons (STS) had commented on

last year's proposed rule (63 FR 30817) that the sample size in the SMS

surveys used by us for cardiac, thoracic and vascular surgery was

insufficient for use calculating accurate practice expenses for these

specialties. The STS submitted a supplementary survey with these

earlier comments that had a larger sample size and that showed a higher

practice expense for cardiac and thoracic surgery. The comments stated

that STS contracted with the AMA in April 1998, before it was known

that the SMS data would be used in the determination of practice

expense, to conduct an SMS-clone oversample. This survey showed a

practice expense per

[[Page 59391]]

hour of $75.90, rather than the $63.80 from the 1994 through 1996 data.

The STS requests that we use this later SMS data in the calculation of

cardiac and thoracic surgery's practice expense per hour.

Response: We believe that the STS survey is unique among all

specialty surveys that we have received in that it both appears to be a

clone of the SMS surveys already used in our calculations and was

undertaken before our top-down methodology was proposed. Therefore, we

asked our contractor to evaluate and advise us on the utility of

considering the STS survey at this time. Our contractor met with the

STS, discussed the issue with SMS technical staff and submitted a

detailed questionnaire to STS about the methodology used in the survey.

In the draft report on practice expense methodology mentioned

above, our contractor discusses the standards that could be applied to

supplementary data provided by specialty groups. The draft report

suggests that supplemental data collection efforts: draw the sample

from the AMA Physician Masterfile, when possible; survey a large enough

number of individuals to assure an adequate number of useable

responses; are based on SMS survey instruments and protocols, including

administration and follow-up efforts; use the same contractors as SMS

and be fielded during the same time-frame; consistently define, through

the SMS and all additional surveys, practice expense and hours spent in

patient care; give responsibility for data editing and analysis to the

AMA's SMS project team.

In a memo to us accompanying the above mentioned draft report, our

contractor stated: ``We believe that the survey conducted by the

Society of Thoracic Surgeons meets the standards we have set forth in

the paper. Therefore, it is our recommendation that HCFA incorporate

their supplemental survey data into its calculation of practice expense

RVUs.'' We agree with this recommendation and will use the survey

submitted by STS in the calculation of thoracic and cardiac surgery's

practice expense per hour.

Result of Evaluation of Comments

We will use the survey submitted by STS in the calculation of

thoracic and cardiac surgery's practice expense per hour. We

recalculated the practice expense per hour for cardiac and thoracic

surgery by weight-averaging the new survey information with practice

expense SMS survey data from 1995 and 1996. Consistent with other

specialty information we deflated values to reflect 1995 costs. We used

the number of survey responses adjusted for non-response as the

weights. In addition, we did not include the responses from vascular

surgeons in the calculations for thoracic and cardiac surgery because

we are now crosswalking vascular surgery to all physician practice

expense per hour. This produced the following practice expense per

hour:

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

Clinical Labor Supplies Equipment Clerical, Office & Other

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

$19.50 $1.93 $2.34 $48.20

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

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 time

spent performing autopsies and supervising technicians are Part A

services. The pathologists had 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 adjustment at the time because we did

not have appropriate data. We now have the necessary information and in

the July 1999 rule we proposed to remove three hours from the total

patient care hours for pathologists.

Comment: The College of American Pathologists, as well as

individual commenters, supported the proposal to eliminate three of the

6.77 hours of pathology SMS time for performing nonsurgical laboratory

procedures. The AMA also supports this proposal because the SMS survey

shows that 45 percent of the 6.77 weekly hours spent on performing

these procedures is non-reimbursable under the physician fee schedule.

One surgical organization expressed concern that this adjustment

will be made at the expense of all other specialty pools. Other

commenters contended that many other physicians, besides pathologists,

spend time in direct patient care activities for patients which is not

separately billable including phone calls, waiting time, ``hallway''

patient consultations and ``stand-by'' time, or uncompensated care. Two

commenters argued that specialties with high patient care hours are not

treated fairly in the calculation of practice expense RVUs and ask that

we consider removing such time from the SMS data for surgical

specialties as well. In a similar comment, an anesthesiology society,

though not opposed to the proposed pathology adjustment, urged its

extension to other specialties as part of an across-the-board

refinement of SMS-generated values.

Response: We believe that the data presented by the College of

American Pathologists, in conjunction with the AMA, is persuasive that

three hours should be eliminated from the SMS direct patient care

weekly hours for pathology. Therefore, we will make the adjustment at

this time. However, though we do believe that pathology may differ from

most specialties with regard to their split between Part A and Part B

payments, we also agree that the other commenters raised a valid point

concerning other specialties' non-billable hours that may be

inadvertently captured in the SMS direct patient care hours data. It is

because of this concern that we included the issue of the SMS patient

care hours in the scope of work for our contractor. Over three pages in

the draft report from our contractor, which is referenced above and

which is available on our home page, are dedicated to this issue. The

report points out that, if there is a discrepancy between the

activities captured in the code-specific physician time values in the

Harvard and RUC database and the activities that physicians considered

in responding to the patient care hour question in the SMS survey, the

practice expense pools could be biased in either direction. We hope to

discuss recommendations on improving the accuracy of the patient care

hours data in our next proposed rule.

Result of Evaluation of Comments: We will eliminate 3 hours from

pathology's direct patient care hours for ``personally performing

nonsurgical laboratory procedures including reports'' because this time

includes some part A services.

CPEP Data

Response to Comments on Egregious CPEP Errors and Anomalies/RUC

Recommendations

As we stated in last year's final rule, comments were submitted on

the CPEP inputs for about 3000 CPT codes. In response to the July 1999

proposed rule,

[[Page 59392]]

a few additional comments on CPEP inputs have been received, most of

them reiterations of comments previously submitted. In this year's

proposed rule we stated that we plan to wait until we receive

recommendations from the RUC before making significant changes to most

code-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. The PEAC and RUC then met at the end of September

to further develop the approach to the refinement of the CPEP data and

as a result of this meeting the RUC has forwarded recommendations to us

on 65 CPT codes. The November 1998 final rule also pointed out that we

had received comments on a number of egregious errors and anomalies

that we would address in future rulemaking. Our responses to the

comments on the errors and anomalies and to the RUC recommendations are

discussed further below.

Comment: One organization representing pediatric services supports

our decision to wait for RUC recommendations on code-specific direct

practice expense inputs, while an ophthalmology subspecialty society

strongly recommends adopting the CPEP input changes suggested by

ophthalmology groups now, without waiting for RUC recommendations. A

primary care group recommended that we publish the CPEP errors and

anomalies for review before we correct them in this final rule. A few

other organizations suggested further changes to the RUC recommended

inputs or changes in inputs for codes not yet reviewed or not agreed to

by the PEAC and RUC.

Response: We believe that, particularly at these first steps in

refining the CPEP inputs, it is preferable to have a multi-specialty

agreement on changing these data, rather than accepting the

recommendations of a single group without the level of peer input that

a group like the PEAC and RUC can afford. That is the major reason we

have chosen to wait for the RUC recommendations before refining most of

the CPEP data and why, at this point, we are not addressing the few

additional changes suggested by commenters to the July 1999 proposed

rule. The commenters pointed out at the same time that there are some

obvious errors or anomalies when the corrective action is of a more

technical nature. Therefore, we believe that it will be helpful to the

refinement process to make these corrections at this time.

Comments on Egregious Errors and Anomalies

Outlined below are comments and our responses concerning those

anomalies and errors for which corrections could easily be determined.

It is important to note that while we are making some revisions now,

all practice expense inputs for these codes are still subject to

further comment, our refinement and potential PEAC and RUC review and

action. In addition, we have made minor adjustments to the CPEP supply

list by deleting a few supplies either because of the difficulty in

measuring their use, or because the supplies were not fully used up

during a single procedure and do not fit the definition that we use for

direct supply costs. Therefore, the costs for tissues, biohazard bags

and Lysol spray will be treated as indirect costs. This change should

not affect the practice expense RVUs for any service, but it will help

simplify the refinement of the supply inputs.

Comment: The American Academy of Orthopaedic Surgeons and the

American College of Surgeons both commented that we should delete

separately billable casting materials from the CPEP inputs.

Response: Casting materials are bundled into the payment for the

initial fracture management procedures and separate billing for the

supplies is not allowed under Medicare billing rules. Therefore, for

these procedures, the casting supplies should remain as inputs.

However, for casting and strapping codes CPT codes 29000 through 29750,

casting supplies can be billed for separately, and including the

supplies in the CPEP data would lead to double counting. Therefore, we

have deleted the fiberglass roll, cast padding and cast shoe from the

list of supplies for these procedures.

Comment: The American College of Surgeons commented that we should

delete Romazicon (used to reverse conscious sedation) from supplies

wherever it appears since it is not typically used.

Response: This comment brought to our attention that many drugs in

addition to Romazicon are included in the supply lists of many

procedures. Most drugs are separately billable and are not paid under

the physician fee schedule. Therefore, in keeping with our general

policy to retain in the CPEP data only those inputs that would be paid

as practice expense under the physician fee schedule, we have deleted

from the supply lists all those drugs that would be billed separately,

which would include Romazicon. We have also deleted self-administrable

drugs that are not payable under Medicare. The drugs that have been

removed are: fentanyl, demerol injection, versed injection, valium

injection, ativan syringe, bacitracin ointment, neosporin, benadryl,

steroid kenalog, IV fluids, such as saline in various quantities, D5W,

droperidol, romazicon, narcan, ancef, nubain, sodium chloride

injection, lasix, brevital, decadron, esmolol IV, metopropol IV, sodium

amobarbital, tylenol and ibuprofen.

Comment: The American College of Surgeons commented that the supply

lists for the insertion of bile duct catheters (CPT code 47510) and

stents (CPT code 47511) include an extensive and costly list of

supplies used to perform the procedure in the out-of-office setting.

However, these supply costs are covered by the facility and therefore

should be removed from the list of supplies for these codes.

Response: We agree and note that the supplies listed in the

facility setting appear to be connected with the performance of the

procedure and will be included in the payment to the facility.

Therefore, we have removed these supply costs from the data. However,

since this is a 90-day global code and would be expected to have post-

procedure visits in the office, we would welcome comments about

appropriate supplies for the office visits during the global period. In

addition, one CPEP panel listed 210 minutes of angio technician time in

the post-procedure period. Because the services of an angio tech would

only be needed during the procedure itself and not during the post-

procedure office visits, we are deleting this time.

Comment: The American College of Surgeons commented that the supply

costs for the procto-sigmoidoscopies and flexible sigmoidoscopies are

significantly higher than the supply costs for colonoscopy codes. They

attributed this rank order problem partially to the inappropriate

inclusion in the supply list of an expensive lumen tube for the

sigmoidoscopy codes. They asserted that a lumen tube is not a typical

supply for sigmoidoscopy codes and recommended the removal of this

supply from these codes.

Response: We are in agreement with the College of Surgeons that the

lumen tube is not a typical supply for these procedures and are

therefore deleting this supply from the sigmoidoscopy codes

(specifically: CPT codes 45300, 45303, 45305, 45307, 45308, 45309,

45315, 45317, 45320, 45330, 45331, 45332, 45333, 45338 and 45339).

Comment: The American Academy of Ophthalmology and the Macula,

Retina and Vitreous Societies questioned the

[[Page 59393]]

prices identified in the CPEP data for the superblade. They indicated

the price for the superblade should be $1.00 instead of the $30 listed

in the Abt pricing file.

Response: We have verified this lower price and will make the price

change to the CPEP database.

Comment: The American Academy of Ophthalmology, the American

Optometric Association and the American Society of Cataract and

Refractive Surgery stated that the CPEP data included a discrepancy in

the supply costs for CPT code 92012 (eye exam, established patient,

intermediate). The supply costs reflected were much higher than supply

costs for the other eye exam codes. They felt the supplies for the eye

exam codes are essentially the same and recommended that the supply

values for CPT code 92012 should be changed to be consistent with the

value used for the other codes in the series.

Response: We have reviewed the CPEP data and made revisions to the

supplies used for CPT code 92012 so that these supplies are consistent

with those for other eye exam codes. (We removed as suggested: patient

education booklet; fox shield; patch, eye; bleach; gonisol; contact

lens solution; tape, VHS).

Comment: The Macula, Retina and Vitreous Societies believed the

price allocated for an 18 gauge filter needle, (listed at $46) was in

error. They recommended a price of $1 for this supply. They initially

also questioned the cost allocated for color film, but in later

discussion agreed that the list price of $.85 is reasonable.

Response: We agree that the price allocated for the 18 gauge filter

needle is in error and after reviewing supply catalogs believe that the

price suggested by the commenter ($1.00) is reasonable. We will revise

the CPEP data accordingly.

Comment: The American College of Cardiology pointed out that a cast

cutter is listed in the supply list for two cardiovascular

rehabilitation procedures (CPT codes 93797 and 93798) and should be

removed.

Response: The cast cutter has been deleted from the supply list for

these codes.

Comment: The American Academy of Neurology commented that CPT code

62270, spinal fluid tap, diagnostic and CPT code 62272, drainage of

spinal fluid, are erroneously listed as having no supplies. A short

list of suggested routine supplies was included with the comment.

Response: We believe that the list is appropriate and have included

these supplies in the CPEP inputs for these services.

Comment: The Joint Council of Allergy, Asthma and Immunology

(JCAAI) pointed out that no supplies were allotted to CPT 95070,

bronchial allergy tests, though other codes in the family did have

supplies listed.

Response: We agree that the CPEP panel left out the supplies that

should have been assigned to CPT 95070, and we found that this is also

true for CPT 95071. Therefore, until the inputs for these bronchial

allergy test codes can be refined, we are assigning to them the same

supplies that are listed for the other codes in the family, such as CPT

code 95065, nose allergy test, except that, because CPT codes 95070 and

95071 are inhalation tests, we are omitting the band aid, swab, gauze,

tape and syringe included in other codes in the family.

Comment: JCAAI also commented that there were rank order anomalies

for the venom immunotherapy codes (CPT codes 95145 through 95149),

because the needed antigens were not included in the supplies. The

comment lists the antigens (adjusted for a single 1 cc dose) that are

necessary for each service: CPT code 95145 requires a single venom; CPT

code 95146 requires two venoms; CPT code 95147 requires three venoms;

CPT code 95148 requires a three vespid mix plus a single venom; CPT

code 95149 requires a three vespid mix, a single venom and a honey bee

venom.

Response: We agree that these venom antigens should be added to the

supply lists for these codes and have made the necessary adjustments.

Comment: The American College of Obstetrics and Gynecology (ACOG)

commented that the CPEP inputs for CPT code 58350, reopen fallopian

tube, show time for angiography supplies although this is not an

angiography procedure.

Response: Although the comment stated that the angiography supplies

are in CPT code 58350, they actually are present in CPT code 58340,

catheter for hysterography,(which ACOG states is overvalued in

comparison to CPT code 58350). Consistent with the comment, we are

deleting the angiographic vessel dilator and the vascular sheath. We

also noticed that CPT code 58340 shows 63 minutes of angio technician,

which we are deleting as this is not an angiography procedure. In

addition, CPT code 58340 has 175 minutes of RN time in the intra-period

in the non-facility setting, while CPT code 58350 shows only 63 minutes

RN/MA in this period. In line with ACOG's comment that CPT code 58340

is overvalued, we are changing the intra time for CPT code 58340 to 63

minutes of RN/MA clinical time to match the input for CPT code 58350.

Comment: Raytel Cardiac Services were concerned that data on

supplies and clinical staff for arrhythmia monitoring services were

based on only one monitored event during a 30-day period. The comment

requested that we check for the appropriateness of the CPEP supplies

and staff time for these services.

Response: The CPEP panel stated that there were no clinical

supplies associated with these monitoring services, and the commenter

did not supply any information regarding the clinical staff duties

required for these codes. Therefore, we have no basis for making any

changes to the inputs for these monitoring services at this time, but

would welcome further information on this issue from additional

comments or from the PEAC and RUC.

Comment: The American Academy of Dermatology commented that the

actinotherapy and photochemotherapy CPT codes 96900, 96910, 96912 and

96913 were grossly undervalued because the CPEP equipment data do not

include the costs of a photochemotherapy unit. The comment stated that

these units also use almost 200 lamps a year.

Response: It is clear that a photochemotherapy unit was omitted

from the CPEP data in error, because these procedures could not be

performed without this equipment. We will add the photochemotherapy

unit and lamps to the CPEP database.

Comment: The American College of Radiology pointed out that many of

the cardiovascular nuclear medicine codes had two types of cameras

assigned in the CPEP files, but that only one camera is needed.

Response: We found that almost all of the nuclear medicine codes

(CPT codes 78000 through 78999) had two or three cameras listed. We

have included only one camera for each of these codes as suggested by

the commenter.

Comment: The American Urological Association commented that the

cost of a lithotriptor is not included in the equipment in the in-

office setting for CPT code 50590, extracorporeal shock wave

lithotripsy.

Response: The CPEP panel only evaluated inputs for this procedure

in the facility setting. However, we assigned practice expense RVUs to

both settings; the in-office inputs were crosswalked from the facility

setting. As a result, there is no procedure-specific equipment listed

in the office setting. We are adding a lithotriptor as requested by the

commenter.

[[Page 59394]]

Comment: The College of American Pathologists (CAP) commented that

the price of $1,481 in the CPEP data for a compound microscope was

insufficient to cover the cost of the microscope used for pathology

services. CAP submitted a quotation from a pathology equipment supplier

which listed the cost of a pathologist's professional microscope at

$11,600.

Response: The price submitted by CAP appears more reasonable to us

than the original CPEP price, and we will use the new price for the

final rule, subject to later review.

Comment: The American Association of Neurological Surgeons

recommended that all receptionist time listed in the clinical

activities field in the CPEP database be deleted from the labor file,

since this should be indirect expense.

Response: We agree and have deleted all administrative staff types

from our current CPEP database since all administrative staff costs are

included in our indirect expense pool.

Comment: The American Academy of Orthopaedic Surgeons pointed out

that the CPEP panel did not assign direct inputs to CPT code 27740,

thus creating an anomaly in the family of codes 27730 through 27742.

Response: The CPEP panel only included inputs for CPT code 27740 in

the facility setting. We are adding the same clinical staff, supplies

and equipment inputs to CPT code 27740, repair of leg epiphyses, in the

office setting as are assigned to CPT code 27730, repair of tibia

epiphyses. This should help eliminate this anomaly.

Comment: The American Academy of Dermatology (AAD) commented that

there are rank order anomalies in the family of excision of malignant

lesions, CPT codes 11600 through 11606.

Response: We examined these CPT codes and noted that 11601, 11603

and 11604 were missing routine supplies in the office setting and 11601

had no supply inputs in the facility setting. We are including the same

supply inputs as are assigned to 11600, which should bring this code

family back in line.

Comment: AAD commented that there is a lack of logical progression

in the values for lesions of different sizes in the CPT code series

11400, excision of benign lesions, and 17260, destruction of malignant

lesions.

Response: We determined that the 17260 series appeared to have a

logical progression in the proposed rule. However, CPT codes 11403,

11404, 11423, 11424, 11444 have supplies missing in the office setting.

These services should have at least the same supplies as their

``parent'' CPT codes, i.e., CPT codes 11403 and 11404 should have the

same supplies as CPT codes 11400; CPT codes 11423 and 11424 the same as

11420; and CPT code 11444 the same as 11440. We are including these

missing supplies.

Comment: The American College of Chest Physicians and the National

Association for Medical Direction of Respiratory Care commented that

the practice expense RVUs for complex pulmonary stress testing, CPT

code 94621, are lower than those for simple pulmonary stress testing,

CPT code 94620. The commenter requested that this anomaly be corrected.

Response: We agree that this anomaly should be corrected. As an

interim correction until actual practice expense direct inputs can be

developed for these services, which were not evaluated by the CPEP

panels, we have crosswalked the supply and equipment inputs for CPT

code 94621 from CPT code 94620, but have crosswalked the clinical staff

time from the higher of the two CPEP panels' assigned clinical staff

time for CPT code 93015, cardiovascular stress test.

Comment: The American College of Nuclear Physicians/Society of

Nuclear Medicine commented that CPT code 78494, heart image spect,

should be referenced to CPT code 78464, heart image,(3D) single, and

CPT code 78588, perfusion lung image, should be referenced to CPT code

78585, Lung V/Q imaging.

Response: We agree that these crosswalks are appropriate, and we

have made the changes.

Comment: The American College of Obstetrics and Gynecology

recommended the following crosswalk changes: CPT code 57308, fistula

repair transperineal, should be crosswalked to either CPT code 57305,

repair rectum-vagina fistula, or CPT code 57307, fistula repair and

colostomy; CPT 57531, removal of cervix radical, should be crosswalked

to CPT code 58210, extensive hysterectomy; CPT code 59866, abortion

should be crosswalked to CPT code 59000, amniocentesis or CPT code

59015, chorion biopsy. The values for the CPT vaginectomy codes 57107,

57109, 57111 and 57112 are too low in comparison to other gynecologic

oncology procedures. The commenter recommends that we use CPT code

58210, radical abdominal hysterectomy, as a crosswalk for these four

codes, since the clinical staff time, supplies and equipment are

similar.

Response: We will crosswalk CPT codes 57308 to 57305, 57531 to

58210, and 59866 to 59000 as requested. Due to the clinical similarity

of the procedures and the comparable follow up care, we are

crosswalking the CPEP inputs from CPT code 57110 to CPT codes 57107 and

57111. For similar reasons we are crosswalking the CPEP inputs from

58200 to CPT codes 57109 and 57112.

RUC Recommendations on CPEP Inputs

The AMA forwarded for our consideration the direct input

recommendations for 65 codes originally reviewed by the PEAC and

subsequently approved by the RUC. The RUC states that in the majority

of cases, the PEAC examined all of the direct inputs for a particular

code, but that in several instances, the PEAC examined only a subset of

the direct practice expenses. The comment also explains that, in those

instances where the RUC approved crosswalking direct impact data to

multiple codes, those crosswalked codes are listed. Several

organizations representing neurology, ophthalmology, urology,

dermatology and other specialties requested that we use these PEAC/RUC

recommended refined inputs to calculate the practice expense RVUs for

the year 2000 physician fee schedule.

Response: We have reviewed the submitted codes and discuss our

specific responses to each of them below. We appreciate the work of the

PEAC and RUC in developing the recommendations on these 65 codes. From

all of our previous experience in both the CPEP and validation panels,

it is a very difficult, time-consuming and complex process to deal with

the amount of detail required to arrive at reasonable inputs for a

specific procedure. In addition, it takes time for all participants to

achieve a level of comfort with our methodology.

We are accepting most of the recommendations with the exceptions

noted below, but some of the inputs may still need further review. It

does appear that in reviewing the inputs more attention was

understandably paid to the changes proposed by the presenting groups

than to the original CPEP data that we believe could still need

refining. For example, the quantity of supplies associated with many

procedures would appear to need further discussion with a view to

ensuring appropriate standardization among different services. Another

problem lies in the inconsistent assignment in the CPEP data of

equipment to either the procedure-specific or overhead equipment

categories. This process, we acknowledge, has been hampered by the lack

of clear definitions which we hope to correct in the near future.

We would also appreciate more comments and discussion about what

constitutes appropriate clinical staff

[[Page 59395]]

duties and times during the pre-service period. As most of the 65 codes

are related to other codes that have not yet been reviewed by the PEAC

and RUC, we are recommending that, as the group gains more experience

and reviews related codes, this group of codes be reassessed to see if

any further adjustments in inputs are warranted. As an alternative, we

could propose our own changes to these codes in a future proposed rule.

As discussed above, we have deleted a few minor supplies from the

overall CPEP supply list either because of the difficulty in measuring

their use or because the supplies were not fully used up during a

single procedure. Therefore, tissues, biohazard bags, and Lysol spray

have also been deleted from the supplies of these 65 procedures, when

applicable. We also have deleted all separately billable and self-

administrable drugs and casting supplies as described earlier. In

addition, consistent with our policy excluding the CPEP inputs for

clinical staff services for a facility patient, all clinical staff time

in the out of office intra-service period has been eliminated.

Other adjustments that we have applied to these 65 codes, when

relevant, are as follows: We standardized all exam table paper to a

quantity of 7 feet per visit, as that appears to be the most common

quantity reported. We adjusted the quantity of patient gowns and pillow

cases and other supplies to be consistent with the number of visits. We

deleted items that could be considered office supplies or office

equipment. We did not add any suggested equipment that was costed at

less than $500, in order to fit the equipment definition used by Abt.

Because we believe that betadine is only used on the day of a

procedure, we deleted it from post-procedure visits.

Listed below are the 65 codes on which we received RUC

recommendations. We have noted any revisions, other than those

specified above, that we have made to these recommendations. The RUC

recommendations are available on our home page, as discussed earlier.

Access to the homepage is discussed in the introductory section of this

regulation under ADDRESS.

CPT code 17000, Destruction by any method, including laser with or

without surgical curettement, all benign or premalignant lesions other

than skin tags or cutaneous vascular proliferate lesions, including

local anesthesia; first lesion

The RUC forwarded a recommendation for supplies only. We accepted

their recommendation but deleted what appeared to be duplicated gauze

supplies.

CPT code 17003, Destruction by any method, including laser with or

without surgical curettement, all benign or premalignant lesions other

than skin tags or cutaneous vascular proliferate lesions, including

local anesthesia; second through 14 lesions

The RUC forwarded a recommendation only on the supplies for this

service. This is an add-on code, for which there would be few added

supplies since most are contained in the base code. We adjusted the

supply list accordingly. In comments, the society representing

dermatologists had indicated that this CPT code appeared to be over-

valued in comparison with other CPT codes in the family.

CPT code 17004, Destruction by any method, including laser with or

without surgical curettement, all benign or premalignant lesions other

than skin tags or cutaneous vascular proliferate lesions, including

local anesthesia; 15 or more lesions

The RUC forwarded a recommendation only on the supplies for this

service. We accepted the recommendation but deleted what appeared to be

duplicated gauze supplies and the drape sheet.

CPT code 17304, Chemosurgery (Mohs micrographic technique), including

removal of all gross tumor, surgical excision of tissue specimens,

mapping, color coding of specimens, microscopic examination of

specimens by the surgeon, and complete histopathologic preparation;

first stage, fresh tissue technique, up to 5 specimens.

We reviewed and made no changes to the RUC recommendation on

clinical staff at this time. We accepted the recommended additions to

the supply list; however, we removed the Mohs kit listed in the

original CPEP data because it duplicated the pathology supplies that

have been added to the list. For equipment, we moved the doppler,

suction machine, x-ray view box and smoke evacuator from procedure-

specific to overhead equipment because this equipment is used for a

wide range of services and thus fits the definition of overhead

equipment. We deleted the ECG machine from equipment since it is not

needed for this procedure.

CPT code 17305, Chemosurgery (Mohs micrographic technique), including

removal of all gross tumor, surgical excision of tissue specimens,

mapping, color coding of specimens, microscopic examination of

specimens by the surgeon, and complete histopathologic preparation;

second stage, fixed or fresh tissue, up to 5 specimens

We made no changes to the RUC recommendation on clinical staff at

this time. We deleted the Mohs kit from the supplies (as noted in

discussion for CPT code 17304) as well as the sutures, suture kit and

patient education pamphlet because we do not believe they are needed

for each stage of this procedure. We also deleted the nerve stimulator

because it is not typically used for this service. We made the same

adjustments for equipment as we did for CPT code 17304.

CPT code 17306, Chemosurgery (Mohs micrographic technique), including

removal of all gross tumor, surgical excision of tissue specimens,

mapping, color coding of specimens, microscopic examination of

specimens by the surgeon, and complete histopathologic preparation;

third stage, fixed or fresh tissue, up to 5 specimens

We made no changes to the RUC recommendation on clinical staff at

this time. We made the same adjustments in the supply and equipment

lists as made for CPT code 17304.

CPT code 17310, Chemosurgery (Mohs micrographic technique), including

removal of all gross tumor, surgical excision of tissue specimens,

mapping, color coding of specimens, microscopic examination of

specimens by the surgeon, and complete histopathologic preparation;

more than five specimens, fixed or fresh tissue, any stage

We reviewed and made no changes to the RUC recommendation on

clinical staff at this time. We deleted the Mohs kit for the reasons

discussed for CPT code 17304 above. We also deleted gel foam, xylocain

and the syringe from the supply list and all equipment because this is

essentially an add-on code representing an increased number of

specimens and these supplies and the equipment are reflected in the

base code.

CPT code 32000, Thoracentesis, puncture of pleural cavity for

aspiration, initial or subsequent

We reviewed and made no changes to the RUC recommendations for

clinical

[[Page 59396]]

staff time or equipment. We deleted a syringe, xylocain and atropine

from the supply list since these items should be included in the

thoracentesis kit that is also on the supply list.

CPT code 43239, Upper gastrointestinal endoscopy including esophagus,

stomach, and either the duodenum and/or jejenum as appropriate; with

biopsy single or multiple

The RUC made recommendations only on supplies and we accepted them.

CPT code 45330, Sigmoidoscopy, flexible diagnostic, with or without

collection of specimen(s) by brushing or washing (separate procedure)

The RUC made recommendations for supplies only. We accepted the

recommendations with the following adjustments. We decreased the staff

gowns and surgical masks to two items each to reflect that there would

typically only be two staff, a physician and a nurse, involved in this

procedure.

CPT code 56340 Laparoscopy, surgical; cholecystectomy (any method).

Only refinements to clinical staff time were proposed by the RUC.

We reviewed the proposed changes and the original CPEP inputs. While

the RUC proposed changes to the pre-service clinical staff time, we are

not accepting these changes at this time because there was an

inadequate explanation for these changes. We will continue to use the

original CPEP time of 15 minutes for the pre-service clinical staff

time. We also noted that the post-service staff time included two RNs.

Since it is more typical for one RN to assist with patient care during

post-operative visits, we allowed 76 minutes of staff time for one RN

and deleted 25 minutes for a second RN from the original CPEP inputs.

Total staff time is now 91 minutes. This is an interim value, and the

CPT code may be subject to further refinements.

CPT code 58100, Endometrial sampling (biopsy) with or without

endocervical sampling (biopsy), without cervical dilation, any method

(separate procedure)

We reviewed and made no change to the RUC recommendation on

clinical labor or supplies. We deleted the vaginal/surgical procedure

tray from the procedure-specific equipment because it was less than

$500 and the colposcope from the overhead equipment since it is not

typically used for this procedure.

CPT code 65855, Trabeculoplasty by laser surgery, one or more sessions

We made changes based upon review of both the RUC recommendations

and the comments of the American Academy of Ophthalmology (AAO) that

described the practice expense proposals they made to the RUC. We will

continue to use the original CPEP inputs for pre-service clinical staff

time of zero minutes. We accepted the RUC's proposed refinements for

intra-service time in the office, 62 minutes, and post-service time,

82.5 minutes. We also accepted the RUC's proposal for supplies and

equipment. These values were crosswalked to CPT codes 66762, 66770 and

66761 as recommended by the RUC.

CPT code 66170, Fistulization of sclera for glaucoma; trabeculectomy ab

externo in absence of previous surgery

We accepted the RUC's recommendation to value the procedure only in

the facility setting. Based upon review of both the recommendations of

the RUC and the comments of the AAO, we retained the original CPEP

value of zero minutes for pre-service clinical staff time and decreased

the post-service clinical staff time to 247 minutes. We accepted the

recommendations for supplies and deleted the Argon Laser and Hoskins

Lens from equipment because this procedure is performed in the facility

setting only and therefore this equipment is not used in the office for

this procedure. These are interim values and the code may be subject to

further refinement. These values were crosswalked to CPT codes 66150

66155, 66160, and 66165 as recommended by the RUC.

CPT code 66172, Fistulization of sclera for glaucoma; trabeculectomy ab

externo with scarring from previous ocular surgery or trauma (included

injection of antibiotic agents).

This procedure was valued only in the facility setting. Based upon

review of both the recommendations of the RUC and comments from the

AAO, we retained the original CPEP value of zero minutes for pre-

service clinical staff time and decreased the post-service clinical

staff time to 330 minutes. We accepted the RUC's proposals for supplies

and equipment. These are interim values and the code will be subject to

further refinement.

CPT code 66821, Discission of secondary membranous cataract (opacified

posterior lens capsule and/or anterior hyaloid); laser surgery (eg YAG

laser) (one or more stages)

Based upon review of both the recommendations of the RUC and the

comments of the AAO, we retained the original CPEP value of zero

minutes for pre-service clinical staff time, we decreased the post-

service clinical staff time to 55 minutes, and we accepted the RUC

proposed refinement of 37 minutes of intra-service clinical staff time

in the office. We accepted the RUC's proposals for supplies and

equipment. These are interim values and the code may be subject to

further refinement.

CPT code 66984, Extracapsular cataract removal with insertion of

intraocular lens prosthesis (one stage procedure), manual or mechanical

technique (eg, irrigation and aspiration or phacoemulsification).

This procedure was valued only in the facility setting. Based upon

review of both the recommendations of the RUC and the comments of the

AAO, we retained the original CPEP value of zero minutes for pre-

service clinical staff time, and we decreased the post-service clinical

staff time to 110 minutes. We accepted the RUC's proposals for supplies

and equipment. These are interim values and the code will be subject to

further refinement. These adjusted values were crosswalked to CPT codes

66830, 66840, 66850, 66852, 66920, 66983, 66985, and 66986 as

recommended by the RUC.

CPT code 67036, Vitrectomy, mechanical, pars plana approach

This procedure was valued only in the facility setting. Based upon

review of both the recommendations of the RUC and the comments of AAO,

we retained the original CPEP value of zero minutes for pre-service

clinical staff time, and we decreased the post-service clinical staff

time to 124 minutes. We accepted the RUC's proposals for supplies and

equipment. These are interim values and the code will be subject to

further refinement.

CPT code 67038, Vitrectomy, mechanical, pars plana approach; with

epiretinal membrane stripping

This procedure was valued only in the facility setting. Based upon

review of both the recommendations of the RUC and the comments the AAO,

we retained the original CPEP value of zero minutes for pre-service

clinical staff time and we adjusted the post-service clinical staff

time to 220 minutes. We accepted the RUC's proposals for supplies and

equipment. These are interim values and the code will be subject to

further refinement. These adjusted values were crosswalked to CPT codes

67039 and 67040 as recommended by the RUC.

[[Page 59397]]

CPT code 67800, Excision of chalazion; single

Based upon review of both the recommendations of the RUC and the

comments of the AAO, we retained the original CPEP value of zero

minutes of pre-service clinical staff time, and we accepted the RUC's

proposed refinements of 35 minutes for intra-service clinical staff

time and 20 minutes of post-service clinical staff time. We also

accepted their recommendations for supplies and equipment but corrected

typographical errors in the quantity of betadine, irrigation fluid and

sterile towels. These are interim values and the code will be subject

to further refinement. These adjusted values were crosswalked to CPT

codes 67700, 67710, 67715, 677801, 67805, 67810, 67840, 68020, 68040,

68100, 68110, 68115, 68130, 68135, 68440, 68705, and 68760 as

recommended by the RUC.

CPT code 67820, Correction of trichiasis; epilation, by forceps only

This procedure was valued only in the office setting. We accepted

the RUC proposed refinement of 35 minutes for intra-service clinical

staff time. We also accepted the RUC's proposed refinements for

supplies and equipment, except that we decreased the number of sterile

towels and cotton tipped applicators because of typographical errors.

These are interim values and the code will be subject to further

refinement.

CPT code 71020, Radiologic examination, chest, two views, frontal and

lateral

CPT code 72100, Radiologic examination, spine, lumbosacral;

anteroposterior and lateral

CPT code 72170, Radiologic examination, pelvis; anteroposterior only

CPT code 73560, Radiologic examination, knee; one or two views

CPT code 74000, Radiologic examination, abdomen; single anteroposterior

view

CPT code 74020, Radiologic examination, abdomen; complete, including

decubitus and/or erect views

For all these radiologic services we reviewed and made no changes

in the RUC recommendation for clinical staff time. Date stickers and

insert folders were deleted from the medical supplies because these are

considered office supplies. We accepted the RUC recommendation for

equipment except for deleting dictation equipment because it is

considered office equipment and the lead shield because it does not

cost over $500.

CPT code 76519, Ophthalmic biometry by ultrasound echography, A-scan;

with intraocular lens power calculation

We reviewed and made no changes in the RUC recommendations for

clinical staff time or supplies. We moved the printer from procedure-

specific to overhead equipment because it can be used across a range of

services.

CPT code 76700, Echography, abdominal, B-scan and/or real time with

image documentation complete

The RUC made recommendations only on supplies and, after reviewing,

we made no changes to their recommendations.

CPT code 85060, Blood smear, peripheral, interpretation by physician

with written report

CPT code 85097, Bone marrow, smear interpretation only, with or without

differential cell count

Since these are professional services only, all clinical staff

time, supplies, and equipment were deleted. Practice expenses are

included for payment with other applicable CPT codes and, if practice

expense inputs were included here, would result in a duplicate payment.

CPT code 88104, Cytopathology, fluids, washings or brushings, except

cervical or vaginal; smears with interpretation

We made no changes in the clinical staff time, but made a minor

revision to the supplies listed. We deleted the marking pen from the

supplies because the cost per procedure was negligible and deleted the

metal slide storage cabinet from overhead equipment because it is

considered furniture.

CPT code 88304, Level III--Surgical pathology, gross and microscopic

examination

CPT code 88305, Level IV--Surgical pathology, gross and microscopic

examination

We made no changes in the clinical staff time, but made a minor

revision to the supply list. We deleted the marking pen from the

supplies because the cost per procedure was negligible, and deleted the

metal slide storage cabinet and the plastic block storage cabinet from

overhead equipment because these items are considered furniture. We

also deleted the Stryker saw which is not typically used with these

procedures.

CPT code 88312, Special stains; Group I for microorganisms, each

We reviewed and made no changes to the RUC recommendations for

clinical labor, equipment and supplies.

CPT code 92004, Ophthalmological services; medical examination and

evaluation with initiation of diagnostic and treatment program;

comprehensive, new patient, one or more visits

The RUC recommendation was for supplies only; we accepted the

recommendation except for deleting the betadine from the supply list

because it would not be used during an eye examination.

CPT code 92012, Ophthalmological services; medical examination and

evaluation with initiation or continuation of diagnostic and treatment

program; intermediate, established patient

CPT code 92014, Ophthalmological services; medical examination and

evaluation with initiation or continuation of diagnostic and treatment

program; comprehensive, established patient, one or more visits

The RUC recommendation was for supplies only; we accepted this

recommendation, except for deleting the betadine from the supply list

because it would not be used during an eye examination. We also deleted

the patient education pamphlet and contact lens solution to be

consistent with comments from the American Academy of Ophthalmology.

CPT code 92083, Visual field examination, unilateral or bilateral, with

interpretation and report; extended examination

We reviewed and made no changes to the RUC recommendations for

clinical staff time or equipment. We deleted the black pins from the

supply list because they are a reusable supply. These adjusted values

were crosswalked to CPT code 92081 and 92082 as recommended by the RUC.

CPT code 92235, Fluorescein angiography (includes multiframe imaging)

with interpretation and report

We reviewed and made no change to the RUC recommendations on

supplies. For equipment, we deleted the electric table because a

reclining exam chair is also included and both are not needed for this

procedure.

CPT code 92240, Indocyanine-green angiography (includes multiframe

imaging) with interpretation and report

We received RUC recommendations on equipment only. We deleted the

[[Page 59398]]

electric table because a reclining exam chair is also included and both

would not be used for a given service.

CPT code 92250, Fundus photography with interpretation and report

We received a RUC recommendation on equipment only. We deleted the

electric table because a reclining exam chair is also included and both

are not needed for a given service. These adjusted values were

crosswalked to CPT code 92230 as recommended by the RUC.

CPT code 92507, Treatment of speech, language , voice, communication,

and/or auditory processing disorder (includes aural rehabilitation);

individual

CPT code 92526, Treatment of swallowing dysfunction and/or oral

function for feeding

CPT code 92585, Auditory evoked potentials for evoked response

audiometry and/or testing of the central nervous system

We reviewed and made no change to the clinical staff time

recommended by the RUC. However, we did not increase the wage rate for

the audiologist as suggested by the RUC because we will address this

issue globally for all staff types during refinement.

CPT code 93307, Echocardiography, transthoracic, real-time with image

documentation (2D) with or without M-mode recording; complete

The RUC made recommendations only for supplies that we reviewed and

made no changes.

CPT code 93320, Doppler echocardiography, pulsed wave and/or continuous

wave with spectral display ; complete

A comment accompanying the RUC recommendation stated that this is

an add-on code and questioned whether the RUC recommended equipment

should be included. Because the cost of the equipment is reflected in

the values for the base code, we have deleted all the equipment listed

for this service.

CPT code 94010, Spirometry, including graphic record, total and timed

vital capacity, expiratory flow rate measurement(s), with or without

maximal voluntary ventilation

We reviewed and made no changes to the RUC recommendations for

clinical labor, supplies or equipment.

CPT code 95819, Electroencephalogram (EEG) including recording awake

and asleep, with hyperventilation and/or photic stimulation

We reviewed and made no changes to the RUC's clinical labor

recommendations. We deleted the following items from the list of

supplies: printer toner cartridge, since this is an office expense; the

skin marking pen because the cost per procedure is negligible; the

nasopharyngeal-electrode because it is not typically used with this

procedure; and seconal and chloral hydrate since these are drugs that

are not paid under the physician fee schedule. We moved the pulse

oximeter from procedure-specific to overhead equipment because it can

be used for a wide range of services and deleted the exam table because

an electric bed is included with the equipment and both would not be

needed for a given service.

CPT code 95860, Needle electromyography, one extremity with or without

relaxed paraspinal areas

We reviewed and made no changes to the RUC's clinical labor

recommendations. For supplies, we deleted the sharps container and

blood medical waste bag since they are not disposed of after only one

procedure. We also substituted the ENG electrode needle for the

concentric ENG needle electrode because it is more typically used for

this procedure. For equipment, we moved the hydrocollator from

procedure-specific to overhead equipment because it is used for a wide

range of services.

CPT code 95900, Nerve conduction, amplitude and latency/velocity study,

each nerve, any /all site(s) along the nerve; motor, without F-wave

study

CPT code 95904, Nerve conduction, amplitude and latency/velocity study,

each nerve, any /all site(s) along the nerve; sensory

We reviewed and made no changes to the RUC's clinical labor

recommendations. For supplies, we deleted the skin marking pen and the

stimulator bar electrode and pick-up electrodes because they are not

disposable supplies. For equipment, we moved the hydrocollator from

procedure-specific to overhead equipment because it is used for a wide

range of services.

CPT code 97022, Application of a modality to one or more areas;

whirlpool

Based on a review of the RUC recommendation and the original CPEP

data, we are using the original CPEP staff time of 31 minutes in the

intra-service period because the RUC recommended set-up time of 13

minutes is excessive. For supplies, we deleted the sterile drape,

culterette and culture media because they are rarely used for this

procedure, and we are deleting the patient education booklet because

this procedure would be performed on the same patient more than once

and a booklet would not be required at each session. We deleted the

hilo table and hoyer lift from the equipment because they are not

typically used for the service.

CPT code 97035, Application of a modality to one or more areas;

ultrasound, each 15 minutes

We reviewed and made no changes to the RUC's clinical staff time

recommendation. However, we deleted the patient education booklet from

supplies because it is not provided with every treatment. We also

deleted the utility cart from equipment because the cost was under

$500.

CPT code 97110, Therapeutic procedure, one or more areas, each 15

minutes; therapeutic exercises to develop strength and endurance, range

of motion and flexibility

We made no changes to the RUC's clinical staff time recommendation.

However, from the supply list we deleted the patient education booklet,

because it would not be provided at each therapeutic session, as well

as tape and ace bandage because they are not typically used. For

equipment, the RUC recommendation suggested 50 percent utilization for

the isokinetic strengthening equipment and the therapeutic exercise

equipment set. We have instead assumed 100 percent utilization of the

therapeutic exercise equipment as it is much more typically used than

the isokinetic equipment. We also deleted the hilo table because there

is another table listed in the equipment and only one or the other

would be used for a specific procedure.

CPT code 97530, Therapeutic activities, direct (one on one) patient

contact by the provider (use of dynamic activities to improve

functional performance); each 15 minutes

We reviewed and made no changes to the RUC's clinical staff time

recommendation. However, we deleted the patient education booklet, as

well as tape and ace bandage, from supplies, because they are not

typically used. For equipment, the RUC recommendation suggested 50

percent utilization for the isokinetic strengthening equipment and the

therapeutic exercise equipment set.

[[Page 59399]]

We have instead used 100 percent utilization of the therapeutic

exercise equipment as it is much more typically used. We also deleted

the hilo table and the low mat table because the patient would

typically be standing during this service.

The RUC also forwarded to us recommendations for the CPEP inputs

for the following services:

CPT code 11100, Biopsy of skin, subcutaneous tissue and/or mucous

membrane (including simple closure), unless otherwise listed (separate

procedure); single,

CPT code 52647, Non-contact laser coagulation of prostate, including

control of postoperative bleeding, complete (vasectomy, meatotomy,

cystourethroscopy, urethral calibration and/or dilation, and internal

urethrotomy are included),

CPT code 53850, Transurethral destruction of prostate tissue; by

microwave thermotherapy,

CPT code 53852, Transurethral destruction of prostate tissue; by

radiofrequency thermotherapy,

CPT code 64721, Neuroplasty and/or transposition; median nerve at

carpal tunnel,

CPT code 96408, Chemotherapy administration, intravenous; push

technique, and

CPT code 96410, Chemotherapy administration, intravenous; infusion

technique, up to one hour.

Since many of the changes proposed for these CPT codes included

items not typically used for the procedures, duplicate inputs,

inconsistent inputs or extensive additional in-office inputs for

services currently only costed in the facility setting, we have

concluded that further review is required before the proposed changes

can be adopted or rejected. Therefore, the original CPEP inputs will

remain unchanged. We solicit comments on these CPT codes to assist us

with those refinements.

Physicians' Clinical Staff in the Facility Setting

In the ``top-down'' methodology set forth in the 1998 regulation,

we used the raw CPEP inputs without applying edits to any of the data,

and the staff time allotted to the use of clinical staff in the

facility setting was therefore included. In our July 1999 rule, we

proposed to exclude from the raw CPEP data all clinical staff time in

the facility setting. The CPEP data is used in our methodology solely

to allocate the specialty-specific practice expense pools to the

individual CPT codes. We proposed to exclude this clinical staff time

for the following reasons: (1) Medicare should not pay twice for the

same service; (2) It is not typical practice for most specialties to

use their own staff in the facility setting; (3) Inclusion of these

costs is arguably inconsistent with both the law and Medicare

regulations. We believe these reasons strongly support not including

the costs of physicians' clinical staff used in the facility setting in

the calculation of practice expense values. However, in the proposed

rule, we invited comments on this issue and particularly solicited

information about any possible instances where it would be appropriate

to include data on the use of a physician's clinical staff in the

facility setting.

Comment: Several commenters, from the American Hospital Association

(AHA) and other hospital trade groups, as well as from several

physician specialty societies, believe we have correctly determined

that it is not a typical practice for physicians to bring their own

staff to the hospital. The AHA commented that 1,459 hospitals in the

National Hospital Panel Survey were surveyed on physician practices in

their institutions. They believe the Panel Survey ensures reliable

national estimates by stratifying hospitals according to size and

randomly selecting from each stratum in each of the nine census regions

in disproportionately larger numbers as bed size increases. There were

573 responses to the survey. They stated that, though 63 percent of the

hospitals surveyed answered that at some time in the last 6 months a

physician brought his or her own staff to the hospital, only 11 percent

of all responding hospitals said this was a regular practice. Two

primary care specialty groups agreed that it is not typical for

physicians to use their own clinical staff in the facility setting. One

specialty group representing urologists acknowledged that a survey of

its physician membership showed that less than 15 percent of its

members take their clinical staff to facility settings.

We also received many comments that took issue with the argument in

the proposed rule that it is not typical practice for most specialties

to use their own staff in the facility setting. Several commenters

questioned the validity of the AHA survey. Some commenters argued that

the category ``not a regular practice'' in the AHA survey was ambiguous

because a negative answer to the question could mean either that no

physicians regularly brought staff to the hospital or that only certain

specialties, such as cardiothoracic surgeons or anesthesiologists,

regularly brought staff to the hospital. Another specialty society

commented that the AHA survey provides no basis for concluding that

cardiothoracic surgeons do not bring their staff into the hospital

because less than 25 percent of the hospitals in the U.S. provide open

heart surgery.

Many commenters merely stated, with no data to support their view,

that it is common for their particular specialty to bring nurses or

physician assistants with them to the facility to prepare the patient

for surgery, assist during the procedure, and provide post-operative

care. Other commenters referred to the results of one or more surveys

that would indicate use of physicians' clinical staff in the facility

setting, but did not include a copy of the survey or provide any

details of the survey methodology, the sample used, or the questions

asked. An organization representing neurosurgery referred to data

collected by their society that suggests that between 40 and 60 percent

of practices in the mid-West and South Central regions of the country

use their employed clinical staff in the hospital. One organization

representing a sub-specialty of cardiology cited a survey of its

members that indicated that 55 percent of its members follow the

practice of bringing staff to the hospital for purposes of patient

education when performing such procedures as electrophysiology studies,

pacing procedures and ablations. The commenter contended that hospital

nurses are not knowledgeable enough about the above procedures to talk

comprehensively with patients or families.

Two specialty societies provided more extensive information

regarding survey data on the use of clinical staff in the facility

setting. The American Society of Anesthesiologists (ASA) stated that

the ASA surveyed 220 anesthesia practice managers in August of this

year. The survey referenced the fact that our proposed rule proposed to

exclude from CPEP data the costs of clinical staff in the facility

partly because of our belief that it was not typical and asked

respondents if their practice used any of their own staff, excluding

those who can bill separately, in the facility setting. The commenter

reported that with a 65 percent response rate, 40 percent of the

managers reported that they did use clinical staff in the facility

setting. ASA further stated that a 1997 Abt survey for the ASA

suggested that many anesthesia practices employ clinical staff with a

mean of 0.32 employees per practice; this total included a mean of 0.19

[[Page 59400]]

registered nurses and 0.04 anesthesia technicians. The commenter also

argued that the typical cost criterion does not rest on any statutory

footing and that allowances for practice expenses should be based on

average cost rather than typical cost. The STS referred to surveys

undertaken by the American Association of Physician Assistants and the

Association of Physician Assistants in Cardiovascular Surgery that

report physician assistants (PAs) are involved in at least 200,000

cardiac cases a year, that almost all these PAs have responsibilities

in the operating room, and 85 percent are involved in postoperative

care in the hospital.

Response: We want to make it clear that we are not asserting that

physicians never bring their own clinical staff into the facility

setting or that this practice may not be more common among some

specialties than among others. However, as stated in the proposed rule,

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 search for sufficient data did not start with the proposal in

this year's proposed rule. Rather, the inclusion by most of the CPEP

panels of varying amounts of inputs for clinical staff in the facility

setting has been controversial from the start. While many medical

specialties insist that the physicians' practice of bringing staff to

the hospital is common, other specialties indicate that this is not a

typical practice.

In our Notice of Intent to Regulate published on October 31, 1997,

we stated that there seemed to be some question of whether the practice

of bringing a physician's staff to a facility was, in fact, common and

widespread. We explicitly solicited information about this practice. We

asked for comments about the extent to which the practice occurs,

procedures involved, functions performed, type of staff employed, and

staff training and credentialling. We specifically requested the name,

location and characteristics of any facility where this practice

occurred and the facility's requirements for credentialling the staff,

including any limits on duties of the staff by the facility. In

addition, we requested that where surveys had been conducted to

document this practice, we wanted to receive copies of the surveys and

results, including such details as the survey methodology and sampling

design.

The response to this request for information was sparse. We

received only 16 responses to this issue, most were anecdotal without

any specific information. Only two comments from specialty societies

included information from surveys or objective sources. The American

Academy of Ophthalmology (AAO) surveyed 300 ophthalmologists and

reported that 45 percent of the respondents said they utilized staff

out of the office. There was no information on the sample size,

composition, or response rate. In addition, the information on the

frequency of this practice was not clear. It appears from the

information provided that a large portion of those who brought their

own staff into the facility did so less than 100, and many probably

less than 50, times a year. The STS included the PA surveys that are a

part of their current comments from which they drew indirect inferences

regarding the use of physicians' staff in the facility setting.

However, neither the AAO nor the STS surveys answered the specific

questions asked in the Notice.

In December 1997, we received a copy of the AHA survey mentioned

above that indicated that only 11 percent of the hospitals that

responded to the survey said that it was a regular practice for

physicians to bring their staff into the facility. We compared the

results of the AHA survey with the AMA's 1996 SMS survey of physicians

that included responses from 153 surgeons and obstetricians and

gynecologists about the use of clinical staff in the facility setting

and found that the findings correlated closely. In answer to the

question, ``When the physician provides services in the hospital how

often is he or she assisted by non-physician personnel employed by the

physician's practice?,'' only 11 percent of the physicians answered

``always.'' In contrast, 68 percent answered ``never'' and another 9

percent ``occasionally.'' Equally important, in answer to the question,

``Are these non-physician personnel reimbursed by the hospital,

reimbursed by a third party or are they paid directly by the practice

for services provided in the hospital?,'' 38 percent of those who

brought their staff to the facility answered ``reimbursed by

hospital,'' and only 51 percent said they were paid by the practice.

Therefore, it was both the absence of requested data that could

actually demonstrate that it was typical for physicians to bring their

staff to the hospital, as well as existence of data that strongly

indicated that this indeed was not a typical practice, that has led us

to the conclusion that it is indeed not typical for physicians to bring

their staff to a facility.

The only hard data supplied to us in the comments on the proposed

rule were provided by the ASA and STS. The ASA reported the results of

two surveys. The Abt study reported a mean of 0.32 full time equivalent

(FTE) total clinical staff per practice, of which 0.19 FTE were

registered nurses and only 0.04 FTE were anesthesia technicians. These

relatively low numbers of clinical staff per practice would actually

seem to support a conclusion that it is not typical to bring these

staff to the hospital. The ASA also conducted their own study of 220

anesthesia practice managers. With a 65 percent response rate, about 40

percent of the respondents indicated that their practice employed

clinical support personnel who were not eligible for direct

reimbursement. There is, however, no indication in their comment about

what this staff is doing and where they are doing it. In addition, this

survey actually shows that 60 percent of practices do not employ

clinical staff; therefore, this is not a typical practice. Apparently

aware of this, the ASA argues that the typicality standard ``merely

derives from the original studies undertaken as part of the development

of physician work values when the Fee Schedule was initiated.'' The ASA

then contends that we should base our practice expense on the cost of

the average patient, not the typical patient. The ASA is correct that

all of the RVUs, both work and practice expense, have been based on the

services provided to the typical patient. Though we would be willing to

discuss in the future the merits of using the typical versus the

average patient for certain practice expense categories, we do not

believe that the costs of an average patient would be meaningful

regarding the use of clinical staff in the facility setting when there

is such obvious inconsistency in practice patterns. All the use of the

cost of an average patient would accomplish would be to consistently

underpay some, while consistently overpaying others.

As stated above, while STS submitted surveys compiled by two PA

organizations, no information was included regarding the use of nurses

in the facility setting. From the submitted surveys, it would appear

that cardiovascular PAs are very active in the hospital setting. For

example, the surveys showed that almost all cardiovascular PAs assist

in the operating room. The problem with the submitted data is that,

because PAs are eligible for direct reimbursement from Medicare, the

physicians' costs associated with PAs cannot, in general, be considered

practice expense. The same would be true of nurse practitioners.

[[Page 59401]]

After reviewing all the available data, we remain convinced that

our position in the proposed rule was correct: it is not a typical

practice for physicians to bring their own staff into the facility

setting.

Comment: We received only a few comments in response to our

statement in the proposed rule that Medicare should not pay twice for

the same service and that this was a major reason to exclude the

clinical staff time for physicians' staff used in the facility setting

from the CPEP data. Two groups contended that, to the extent that Part

A is paying for the cost of clinical staff brought to the hospital by

the physician, we should take measures to see that Part A monies are

shifted to Part B. Two other organizations took issue with our

statement that, because the hospital is already paid for providing all

nursing care to its patients, the inclusion of the costs of physicians'

clinical staff in calculating the practice expense RVUs would amount to

paying twice for the same service. These commenters claimed that

because hospital payments are reweighted annually to reflect changes in

costs and charges, these facilities are not being reimbursed for the

costs of clinical staff that physicians now bring themselves to the

facilities.

The STS argued that, though our observation in the proposed rule

that there is separate Part B reimbursement for a PA acting as an

assistant-at-surgery is generally true, this is not true in the

academic setting where a resident is available, nor in California where

state law requires that two physicians be present for every case. The

commenters also raised the more general point that PAs are also used in

the office setting and point out that 15,000 PAs are employed in family

practice, either billing directly or being included as ``incident to''

physicians' services. The commenters asked why we have not raised this

issue more broadly across all specialties and suggested that we could

better eliminate duplicate payment for these clinical services by

reducing the SMS specialty pools by the amount of income received for

staff who can bill directly to Medicare.

In response to our statement that much of the time claimed for

clinical staff in the facility for making patient rounds is really a

substitute for physician work, the STS states that the Congress and the

government have explicitly encouraged the use of such physician

extenders. The commenter conceded that it is possible that the work

RVUs may need to be adjusted for all specialties, but added that it is

not clear what activities are a substitute for physician work and which

are added services. Finally, STS argued that excluding hospital-related

clinical staff costs from CPEP data because they are not otherwise

covered services or because they are separately reimbursable without

taking similar action for all other CPEP inputs with similar

characteristics is discriminatory.

Response: In the proposed rule we stated our belief that the duties

that were being attributed by many specialties to physicians' clinical

staff in the facility setting were already paid for by Medicare through

a mechanism other than physician expense. For example, an assistant at

surgery can be paid separately. In addition, we already pay the

facility to provide all nursing care to the facility patient whether

that nurse is acting as a scrub nurse or monitoring a patient

undergoing conscious sedation. We also pointed out that reviewing

charts, making patient rounds or pulling chest tubes are physicians'

services that are paid for through the physician work RVUs.

In response to the comment that we should shift Part A monies to

Part B so that a double payment would not be made, we believe this

implies that we should adjust inpatient hospital PPS rates to remove

costs associated with clinical staff brought to the hospital by

physicians. We do not believe that such an adjustment is consistent

with section 1886(d)(2)(C) of the Act which prescribes the methodology

for standardizing PPS base year costs and calculating PPS rates for

each fiscal year. We disagree with the comment that annual reweighting

of hospital costs and charges means that hospitals are not being

reimbursed for staff allegedly replaced by the clinic staff physicians

bring to hospitals. The relative weights which determine payment for a

diagnostic related group (DRG) are reweighted annually based on

hospital charges. However, this only affects the relative payment for

each DRG. Payment would continue to be included in the PPS rates unless

a specific adjustment were made to remove these costs. As stated above,

we do not believe such an adjustment is consistent with section

1886(d)(2)(C) of the Act.

The STS made several interesting points in their comments, and we

will respond to each. STS conceded that a PA acting as an assistant-at-

surgery can be separately paid, but not when another doctor is there to

assist. The STS did not clarify why the use of a PA would be necessary

in such a situation or why, if a PA is used, Medicare should recognize

any such extra costs. We believe that the STS has raised a valid issue

about the general use of physician extenders across all specialties. It

is true that in our proposed rule we only addressed the possible

substitution of nonphysician practitioners' work for physician work in

the facility setting for all specialties. It is not possible in the

CPEP data to readily identify in office setting what clinical staff

time might be a substitute for physician work or what staff is eligible

for separate payment. It was relatively rare for the CPEP panels to

identify a PA or nurse practitioner as the clinical staff type in the

office setting. However, this is clearly an issue that we intend to

address during the refinement process. In addition, as specific in-

office codes are refined, either by us or by the PEAC and RUC, the

question of possible duplication of physician work should be raised for

all services.

The STS also suggests adjustment of the SMS data to account for

staff that may bill directly. As we noted above, we have asked our

contractor to determine which specialties' SMS data may be affected by

inclusion of mid-level practitioners in specialty survey cost data and

to develop alternative methodologies to address it. It should also be

noted that the practice-level SMS survey that is in development breaks

out the costs for clinical staff who are eligible for direct payment.

Regarding the commenter's argument that we are acting in a

discriminatory manner unless we exclude from the CPEP data all inputs

that are separately billable or not covered, we are attempting to do

just that. In last year's final rule, we used the raw CPEP data and

made no modifications for any separately billable or non-covered CPEP

inputs. However, we have in this final rule identified separately

billable supplies, such as drugs and casting materials, and have

excluded these from the CPEP data. We have also excluded self-

administered drugs from the supply list because they are not covered by

Medicare. We invite comments about any other inputs currently in our

CPEP database that fall into either category.

After reviewing the comments on this issue, we continue to believe

that including in CPEP data the costs of physicians' clinical staff in

the facility setting would represent a duplicate payment that Medicare

should not make.

Comment: We also stated in the proposed rule that inclusion in CPEP

data of the costs of clinical staff brought into the facility is

arguably inconsistent with both the law and Medicare regulations. No

commenter directly challenged this contention. However, several groups

stated the general concern that the elimination of clinical staff costs

from the CPEP data

[[Page 59402]]

contradicts the intent of section 4505(d) of the BBA that specifically

states that, in developing such units, the Secretary shall utilize to

the maximum extent practicable, generally accepted cost accounting

principles which recognize all staff, equipment, supplies, and

expenses, not just those which can be tied to specific procedures. The

STS submitted an extensive comment on this point which stated that even

if it were true that the clinical staff costs would be excluded from

coverage under Medicare if physicians sought to bill separately for

those services, the point is irrelevant and inconsistent with the

statutory language and the history of the practice expense provisions.

The comment stated that the Congress defined the term practice expense

as ``all expenses for furnishing physicians'' services, excluding

malpractice expenses, physician compensation, and other physician

fringe benefits.'' The STS concluded that nothing in these definitions

requires or even permits the agency to carve out from practice expenses

RVU costs that would not be covered services on their own or that are

separately reimbursable under Medicare. The commenter added that, to

the contrary, the agency's mandate is to identify all practice expenses

incurred by physicians in their practice and then to allocate all of

those costs to

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