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

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A99-28367

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** November 2, 1999
- **Citation:** 64 FR 59380

## Text

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

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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''

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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.

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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 w

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-28367. Public record. Not legal advice.