Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

Federal RegisterNov 19, 2008

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 409, 410, 411, 413, 414, 415, 423, 424, 485, 486, and 489

[CMS-1403-FC] [CMS-1270-F2]

RINs 0938-AP18, 0938-AN14

Medicare Program; Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2009; E-Prescribing Exemption for Computer-Generated Facsimile Transmissions; and Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Final rule with comment period.

SUMMARY:

This final rule with comment period implements changes to the physician fee schedule and other Medicare Part B payment policies to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. It also finalizes the calendar year (CY) 2008 interim relative value units (RVUs) and issues interim RVUs for new and revised codes for CY 2009. In addition, as required by the statute, it announces that the physician fee schedule update is 1.1 percent for CY 2009, the preliminary estimate for the sustainable growth rate for CY 2009 is 7.4 percent, and the conversion factor (CF) for CY 2009 is $36.0666. This final rule with comment period also implements or discusses certain provisions of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). (See the Table of Contents for a listing of the specific issues addressed in this rule.)

DATES:

Effective Date:

This final rule with comment period is effective on January 1, 2009 except for amendments to § 410.62 and § 411.351 which are effective July 1, 2009.

Comment Date:

Comments will be considered if we receive them at one of the addresses provided below, no later than 5 p.m. e.s.t. on December 29, 2008.

ADDRESSES:

In commenting, please refer to file code CMS-1403-FC. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov.

Follow the instructions for “Comment or Submission” and enter the filecode to find the document accepting comments.

By regular mail.

You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1403-FC, P.O. Box 8013, Baltimore, MD 21244-8013.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

By express or overnight mail.

You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1403-FC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

By hand or courier.

If you prefer, you may deliver (by hand or courier) your written comments (one original and two copies) before the close of the comment period to either of the following addresses:

7500 Security Boulevard, Baltimore, MD 21244-1850; or

Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201.

(Because access to the interior of the HHH Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.

Submission of comments on paperwork requirements.

You may submit comments on this document's paperwork requirements by mailing your comments to the addresses provided at the end of the “Collection of Information Requirements” section in this document.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Pam West, (410) 786-2302, for issues related to practice expense.

Rick Ensor, (410) 786-5617, for issues related to practice expense methodology.

Stephanie Monroe, (410) 786-6864, for issues related to malpractice RVUs.

Esther Markowitz, (410) 786-4595, for issues related to telehealth services.

Craig Dobyski, (410) 786-4584, for issues related to geographic practice cost indices.

Ken Marsalek, (410) 786-4502, for issues related to the multiple procedure payment reduction for diagnostic imaging.

Catherine Jansto, (410) 786-7762, or Cheryl Gilbreath, (410) 786-5919, for issues related to payment for covered outpatient drugs and biologicals.

Edmund Kasaitis, (410) 786-0477, or Bonny Dahm, (410) 786-4006, for issues related to the Competitive Acquisition Program (CAP) for Part B drugs.

Corinne Axelrod, (410) 786-5620, for issues related to Health Professional Shortage Area Bonus Payments.

Henry Richter, (410) 786-4562, for issues related to payments for end-stage renal disease facilities.

Lisa Grabert, (410) 786-6827, for issues related to hospital-acquired conditions and the Physician Resource Use Feedback Program.

August Nemec, (410) 786-0612, for issues related to independent diagnostic testing facilities; enrollment issues; and the revision to the “Appeals of CMS or CMS contractor Determinations When a Provider or Supplier Fails To Meet the Requirements for Medicare Billing Privileges” final rule.

Lisa Ohrin, (410) 786-4565, Kristin Bohl, (410) 786-8680, or Don Romano, (410) 786-1401, for issues related to anti-markup provisions and physician self-referral (incentive payment and shared savings programs).

Diane Stern, (410) 786-1133, for issues related to the quality reporting system for physician payment for CY 2009.

Andrew Morgan, (410) 786-2543, for issues related to the e-prescribing exemption for computer-generated fax transmissions.

Terri Harris, (410) 786-6830, for issues related to payment for comprehensive outpatient rehabilitation facilities (CORFs).

Lauren Oviatt, (410) 786-4683, for issues related to CORF conditions of coverage.

Trisha Brooks, (410) 786-4561, for issues related to personnel standards for portable x-ray suppliers.

David Walczak, (410) 786-4475, for issues related to beneficiary signature for nonemergency ambulance transport services.

Jean Stiller, (410) 786-0708, for issues related to the prohibition concerning providers of sleep tests

Mark Horney, (410) 786-4554, for issues related to the solicitation for comments and data pertaining to physician organ retrieval services.

Regina Walker-Wren, (410) 786-9160, for information concerning educational

requirements for nurse practitioners and clinical nurse specialists.

Randy Throndset, (410) 786-0131, for information concerning physician certification and recertification for Medicare home health services.

William Larson, (410) 786-4639, for coverage issues related to the initial preventive physical examination.

Cathleen Scally, (410) 786-5714, for payment issues related to the initial preventive physical examination.

Dorothy Shannon, (410) 786-3396, for issues related to speech language pathology.

Kendra Hedgebeth, (410) 786-4644, or Gina Longus, (410) 786-1287, for issues related to low vision aids.

Christopher Molling, (410) 786-6399, or Anita Greenberg, (410) 786-4601, for issues related to the repeal to transfer of title for oxygen equipment.

Karen Jacobs, (410) 786-2173, or Hafsa Bora, (410) 786-7899, for issues related to the therapeutic shoes fee schedule.

Diane Milstead, (410) 786-3355, or Gaysha Brooks, (410) 786-9649, for all other issues.

SUPPLEMENTARY INFORMATION:

Submitting Comments:

We welcome comments from the public on the following issues:

• The Exception for Incentive Payment and Shared Savings Programs (§ 411.357(x)) in section II.N.1. of this final rule with comment period;

• Sections 131(c), 144(b), and 149 of the MIPPA as described in sections III.C., III.J., and III.M. of this final rule with comment period.

• Interim Relative Value Units (RVUs) for selected codes identified in Addendum C;

• Information on pricing for items in Tables 2 through 5;

• Issues related to the Physician Resource Use Feedback Program described in section II.S.6. of this final rule with comment period; and

• The physician self-referral designated health services (DHS) codes listed in Tables 29, 30, and 31. You can assist us by referencing the file code [CMS-1403-FC] and the section heading on which you choose to comment.

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received:

http://www.regulations.gov.

Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Table of Contents

To assist readers in referencing sections contained in this preamble, we are providing a table of contents. Some of the issues discussed in this preamble affect the payment policies, but do not require changes to the regulations in the

Code of Federal Regulations

(CFR). Information on the regulation's impact appears throughout the preamble, and therefore, is not exclusively in section XVI. of this final rule with comment period.

I. Background

A. Development of the Relative Value System

1. Work RVUs

2. Practice Expense Relative Value Units (PE RVUs)

3. Resource-Based Malpractice RVUs

4. Refinements to the RVUs

5. Adjustments to RVUs are Budget Neutral

B. Components of the Fee Schedule Payment Amounts

C. Most Recent Changes to Fee Schedule

II. Provisions of the Proposed Regulation

A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs)

1. Current Methodology

2. PE Proposals for CY 2009

B. Geographic Practice Cost Indices (GPCIs): Locality Discussion

C. Malpractice RVUs (TC/PC issue)

D. Medicare Telehealth Services

E. Specific Coding Issues Related to Physician Fee Schedule

1. Payment for Preadministration-Related Services for Intravenous Infusion of Immune Globulin

2. Multiple Procedure Payment Reduction for Diagnostic Imaging

3. HCPCS Code for Prostate Saturation Biopsies

F. Part B Drug Payment

1. Average Sales Price (ASP) Issues

2. Competitive Acquisition Program (CAP) Issues

G. Application of the HPSA Bonus Payment

H. Provisions Related to Payment for Renal Dialysis Services Furnished by End-Stage Renal Disease (ESRD) Facilities

I. Independent Diagnostic Testing Facility (IDTF) Issues

J. Physician and Nonphysician Practitioner (NPP) Enrollment Issues

K. Amendment to the Exemption for Computer-Generated Facsimile (FAX) Transmissions From the National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard for Transmitting Prescription and Certain Prescription-Related Information for Part D Covered Drugs Prescribed for Part D Eligible Individuals

L. Comprehensive Outpatient Rehabilitation Facilities (CORF) and Rehabilitation Agency Issues

M. Technical Corrections for Therapy-Related Issues

N. Physician Self-Referral and Anti-Markup Issues

1. Exception for Incentive Payment and Shared Savings Programs (§ 411.357(x))

2. Changes to Reassignment Rules Related to Diagnostic Tests (Anti-Markup Provisions)

O1. Physician Quality Reporting Initiative

O2. Electronic Prescribing (E-Prescribing) Incentive Program

P. Discussion of Chiropractic Services Demonstration

Q. Educational Requirements for Nurse Practitioners and Clinical Nurse Specialists

R. Portable X-Ray Issue

S. Other Issues

1. Physician Certification (G0180) and Recertification (G0179) for Medicare-Covered Home Health Services Under a Home Health Plan of Care (POC) in the Home Health Prospective Payment System (HH PPS)

2. Prohibition Concerning Payment of Continuous Positive Airway Pressure (CPAP) Devices

3. Beneficiary Signature for Nonemergency Ambulance Transport Services

4. Solicitation of Comments and Data Pertaining to Physician Organ Retrieval Services

5. Revision to the “Appeals of CMS or CMS contractor Determinations When a Provider or Supplier Fails To Meet the Requirements for Medicare Billing Privileges” Final Rule

6. Physician Resource Use Feedback Program

T. Electronic Prescribing (E-Prescribing) Incentive Program

III. Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) Provisions

A. Section 101: Improvements to Coverage of Preventive Services

B. Section 131: Physician Payment, Efficiency, and Quality Improvements

C. Section 131(c): Physician Resource Use Feedback Program

D. Section 132: Incentives for Electronic Prescribing

E. Section 133(b): Expanding Access to Primary Care Services

F. Section 134: Extension of Floor on Medicare Work Geographic Adjustment Under the Medicare Physician Fee Schedule

G. Section 136: Extension of Treatment of Certain Physician Pathology Services Under Medicare

H. Section 141: Extension of Exceptions Process for Medicare Therapy Caps

I. Section 143: Speech-Language Pathology Services

J. Section 144(b): Repeal of Transfer of Title for Oxygen Equipment

K. Section 145: Clinical Laboratory Tests

L. Section 146: Improved Access to Ambulance Services

M. Section 149: Adding Certain Entities as Originating Sites for Payment of Telehealth Services

N. Section 153: Renal Dialysis Provisions

IV. Potentially Misvalued Codes Under PFS

A. Valuing Services Under the Physician Fee Schedule

B. Requested Approaches for the AMA RUC To Utilize

C. AMA RUC Review of Potentially Misvalued Codes

V. Refinement of Relative Value Units for Calendar Year 2009 and Response to Public Comments on Interim Relative Value Units for 2008

A. Summary of Issues Discussed Related to the Adjustment of Relative Value Units

B. Process for Establishing Work Relative Value Units for the Physician Fee Schedule

C. Interim 2008 Codes

D. Establishment of Interim Work Relative Value Units for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System Codes (HCPCS) for 2009 (Includes Table Titled “AMA RUC Recommendations and CMS' Decisions for New and Revised 2009 CPT Codes”)

E. Discussion of Codes and AMA RUC Recommendations

F. Additional Coding Issues

G. Establishment of Interim PE RVUs for New and Revised Physician's Current Procedural Terminology (CPT) Codes and New Healthcare Common Procedure Coding System (HCPCS) Codes for 2009

VI. Physician Self-Referral Prohibition: Annual Update to the List of CPT/HCPCS Codes

A. General

B. Speech-Language Pathology Services

C. Annual Update to the Code List

VII. Physician Fee Schedule Update for CY 2009

A. Physician Fee Schedule Update

B. The Percentage Change in the Medicare Economic Index (MEI)

C. The Update Adjustment Factor (UAF)

VIII. Allowed Expenditures for Physicians' Services and the Sustainable Growth Rate (SGR)

A. Medicare Sustainable Growth Rate

B. Physicians' Services

C. Preliminary Estimate of the SGR for 2009

D. Revised Sustainable Growth Rate for 2008

E. Calculation of 2009, 2008, and 2007 Sustainable Growth Rates

IX. Anesthesia and Physician Fee Schedule Conversion Factors for CY 2009

A. Physician Fee Schedule Conversion Factor

B. Anesthesia Conversion Factor

X. Telehealth Originating Site Facility Fee Payment Amount Update

XI. Payment for Certain Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)—Services Excluded From Coverage

A. Low Vision Aid Exclusion

B. Replacement of Reasonable Charge Methodology by Fee Schedules for Therapeutic Shoes

XII. Provisions of the Final Rule

XIII. Waiver of Proposed Rulemaking and Delay in Effective Date

XIV. Collection of Information Requirements

XV. Response to Comments

XVI. Regulatory Impact Analysis

Regulation Text

Addendum A—Explanation and Use of Addendum B

Addendum B—Relative Value Units and Related Information Used in Determining Medicare Payments for CY 2009

Addendum C—Codes With Interim RVUs

Addendum D—2009 Geographic Adjustment Factors (GAFs)

Addendum E—2009 Geographic Practice Cost Indices (GPCIs) by State and Medicare Locality

Addendum F—Multiple Procedure Payment Reduction Code List

Addendum G—CY 2009 ESRD Wage Index for Urban Areas Based on CBSA Labor Market Areas

Addendum H—CY 2009 ESRD Wage Index Based on CBSA Labor Market Areas for Rural Areas

Addendum I—CPT/HCPCS Imaging Codes Defined by Section 5102(b) of the DRA

Addendum J—List of CPT/HCPCS Codes Used To Define Certain Designated Health Services Under Section 1877 of the Social Security Act

Acronyms

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

ACC American College of Cardiology

ACR American College of Radiology

AFROC Association of Freestanding Radiation Oncology Centers

AHA American Heart Association

AHRQ [HHS] Agency for Healthcare Research and Quality

AIDS Acquired immune deficiency syndrome

AMA American Medical Association

AMP Average manufacturer price

AOA American Osteopathic Association

ASC Ambulatory surgical center

ASP Average sales price

ASRT American Society of Radiologic Technologists

ASTRO American Society for Therapeutic Radiology and Oncology

ATA American Telemedicine Association

AWP Average wholesale price

BBA Balanced Budget Act of 1997 (Pub. L. 105-33)

BBRA [Medicare, Medicaid and State Child Health Insurance Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554)

BLS Bureau of Labor Statistics

BN Budget neutrality

CABG Coronary artery bypass graft

CAD Coronary artery disease

CAH Critical access hospital

CAHEA Committee on Allied Health Education and Accreditation

CAP Competitive acquisition program

CBSA Core-Based Statistical Area

CCHIT Certification Commission for Healthcare Information Technology

CEAMA Council on Education of the American Medical Association

CF Conversion factor

CfC Conditions for Coverage

CFR Code of Federal Regulations

CKD Chronic kidney disease

CLFS Clinical laboratory fee schedule

CMA California Medical Association

CMHC Community mental health center

CMP Civil money penalty

CMS Centers for Medicare & Medicaid Services

CNS Clinical nurse specialist

CoP Condition of participation

CORF Comprehensive Outpatient Rehabilitation Facility

CPAP Continuous positive air pressure

CPEP Clinical Practice Expert Panel

CPI Consumer Price Index

CPI-U Consumer price index for urban customers

CPT [Physicians'] Current Procedural Terminology (4th Edition, 2002, copyrighted by the American Medical Association)

CRT Certified respiratory therapist

CSW Clinical social worker

CY Calendar year

DHS Designated health services

DME Durable medical equipment

DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies

DNP Doctor of Nursing Practice

DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)

DSMT Diabetes self-management training

E/M Evaluation and management

EDI Electronic data interchange

EEG Electroencephalogram

EHR Electronic health record

EKG Electrocardiogram

EMG Electromyogram

EMTALA Emergency Medical Treatment and Active Labor Act

EOG Electro-oculogram

EPO Erythopoeitin

ESRD End-stage renal disease

FAX Facsimile

FDA Food and Drug Administration (HHS)

FFS Fee-for-service

FMS [Department of the Treasury's] Financial Management Service

FPLP Federal Payment Levy Program

Federal Register

GAF Geographic adjustment factor

GAO General Accounting Office

GPO Group purchasing organization

GPCI Geographic practice cost index

HAC Hospital-acquired conditions

HCPAC Health Care Professional Advisory Committee

HCPCS Healthcare Common Procedure Coding System

HCRIS Healthcare Cost Report Information System

HH PPS Home Health Prospective Payment System

HHA Home health agency

HHRG Home health resource group

HHS [Department of] Health and Human Services

HIPAA Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191)

HIT Health information technology

HITSP Healthcare Information Technology Standards Panel

HIV Human immunodeficiency virus

HOPD Hospital outpatient department

HPSA Health Professional Shortage Area

HRSA Health Resources Services Administration (HHS)

ICF Intermediate care facilities

ICR Information collection requirement

IDTF Independent diagnostic testing facility

IFC Interim final rule with comment period

IPPS Inpatient prospective payment system

IRS Internal Revenue Service

IVIG Intravenous immune globulin

IWPUT Intra-service work per unit of time

JRCERT Joint Review Committee on Education in Radiologic Technology

MA Medicare Advantage

MA-PD Medicare Advantage-Prescription Drug Plans

MedCAC Medicare Evidence Development and Coverage Advisory Committee (formerly the Medicare Coverage Advisory Committee (MCAC))

MedPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index

MIEA-TRHCA Medicare Improvements and Extension Act of 2006 (that is, Division B of the Tax Relief and Health Care Act of 2006 (TRHCA) (Pub. L. 109-432)

MIPPA Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275)

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173)

MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173)

MNT Medical nutrition therapy

MP Malpractice

MPPR Multiple procedure payment reduction

MQSA Mammography Quality Standards Act of 1992 (Pub. L. 102-539)

MRA Magnetic resonance angiography

MRI Magnetic resonance imaging

MS-DRG Medicare Severity-Diagnosis related group

MSA Metropolitan statistical area

NCD National Coverage Determination

NCPDP National Council for Prescription Drug Programs

NDC National drug code

NISTA National Institute of Standards and Technology Act

NP Nurse practitioner

NPDB National Practitioner Data Bank

NPI National Provider Identifier

NPP Nonphysician practitioner

NPPES National Plan and Provider Enumeration System

NQF National Quality Forum

NRC Nuclear Regulatory Commission

NTTAA National Technology Transfer and Advancement Act of 1995 (Pub. L. 104-113)

NUBC National Uniform Billing Committee

OACT [CMS'] Office of the Actuary

OBRA Omnibus Budget Reconciliation Act

ODF Open door forum

OIG Office of Inspector General

OMB Office of Management and Budget

ONC [HHS'] Office of the National Coordinator for Health Information Technology

OPPS Outpatient prospective payment system

OSA Obstructive Sleep Apnea

OSCAR Online Survey and Certification and Reporting

P4P Pay for performance

PA Physician assistant

PC Professional component

PCF Patient compensation fund

PDP Prescription drug plan

PE Practice expense

PE/HR Practice expense per hour

PEAC Practice Expense Advisory Committee

PECOS Provider Enrollment, Chain, and Ownership System

PERC Practice Expense Review Committee

PFS Physician Fee Schedule

PHP Partial hospitalization program

PIM [Medicare] Program Integrity Manual

PLI Professional liability insurance

POA Present on admission

POC Plan of care

PPI Producer price index

PPS Prospective payment system

PPTA Plasma Protein Therapeutics Association

PQRI Physician Quality Reporting Initiative

PRA Paperwork Reduction Act

PSA Physician scarcity areas

PSG Polysomnography

PT Physical therapy

ResDAC Research Data Assistance Center

RFA Regulatory Flexibility Act

RIA Regulatory impact analysis

RN Registered nurse

RNAC Reasonable net acquisition cost

RRT Registered respiratory therapist

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

RVU Relative value unit

SBA Small Business Administration

SGR Sustainable growth rate

SLP Speech-language pathology

SMS [AMA's] Socioeconomic Monitoring System

SNF Skilled nursing facility

SOR System of record

SRS Stereotactic radiosurgery

TC Technical Component

TIN Tax identification number

TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)

UPMC University of Pittsburgh Medical Center

USDE United States Department of Education

VBP Value-based purchasing

WAMP Widely available market price

I. Background

Since January 1, 1992, Medicare has paid for physicians' services under section 1848 of the Social Security Act (the Act), “Payment for Physicians' Services.” The Act requires that payments under the physician fee schedule (PFS) be based on national uniform relative value units (RVUs) based on the relative resources used in furnishing a service. Section 1848(c) of the Act requires that national RVUs be established for physician work, practice expense (PE), and malpractice expense. Before the establishment of the resource-based relative value system, Medicare payment for physicians' services was based on reasonable charges.

A. Development of the Relative Value System

1. Work RVUs

The concepts and methodology underlying the PFS were enacted as part of the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Pub. L. 101-239), and OBRA 1990, (Pub. L. 101-508). The final rule, published on November 25, 1991 (56 FR 59502), set forth the fee schedule for payment for physicians' services beginning January 1, 1992. Initially, only the physician work RVUs were resource-based, and the PE and malpractice RVUs were based on average allowable charges.

The physician work RVUs established for the implementation of the fee schedule in January 1992 were developed with extensive input from the physician community. A research team at the Harvard School of Public Health developed the original physician work RVUs for most codes in a cooperative agreement with the Department of Health and Human Services (DHHS). In constructing the code-specific vignettes for the original physician work RVUs, Harvard worked with panels of experts, both inside and outside the Federal government, and obtained input from numerous physician specialty groups.

Section 1848(b)(2)(B) of the Act specifies that the RVUs for anesthesia services are based on RVUs from a uniform relative value guide. We established a separate conversion factor (CF) for anesthesia services, and we continue to utilize time units as a factor in determining payment for these services. As a result, there is a separate payment methodology for anesthesia services.

We establish physician work RVUs for new and revised codes based on recommendations received from the American Medical Association's (AMA) Specialty Society Relative Value Update Committee (RUC).

2. Practice Expense Relative Value Units (PE RVUs)

Section 121 of the Social Security Act Amendments of 1994 (Pub. L. 103-432),

enacted on October 31, 1994, amended section 1848(c)(2)(C)(ii) of the Act and required us to develop resource-based PE RVUs for each physician's service beginning in 1998. We were to consider general categories of expenses (such as office rent and wages of personnel, but excluding malpractice expenses) comprising PEs.

Section 4505(a) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), amended section 1848(c)(2)(C)(ii) of the Act to delay implementation of the resource-based PE RVU system until January 1, 1999. In addition, section 4505(b) of the BBA provided for a 4-year transition period from charge-based PE RVUs to resource-based RVUs.

We established the resource-based PE RVUs for each physician's service in a final rule, published November 2, 1998 (63 FR 58814), effective for services furnished in 1999. Based on the requirement to transition to a resource-based system for PE over a 4-year period, resource-based PE RVUs did not become fully effective until 2002.

This resource-based system was based on two significant sources of actual PE data: the Clinical Practice Expert Panel (CPEP) data; and the AMA's Socioeconomic Monitoring System (SMS) data. The CPEP data were collected from panels of physicians, practice administrators, and nonphysicians (for example, registered nurses (RNs)) nominated by physician specialty societies and other groups. The CPEP panels identified the direct inputs required for each physician's service in both the office setting and out-of-office setting. We have since refined and revised these inputs based on recommendations from the RUC. The AMA's SMS data provided aggregate specialty-specific information on hours worked and PEs.

Separate PE RVUs are established for procedures that can be performed in both a nonfacility setting, such as a physician's office, and a facility setting, such as a hospital outpatient department. The difference between the facility and nonfacility RVUs reflects the fact that a facility typically receives separate payment from Medicare for its costs of providing the service, apart from payment under the PFS. The nonfacility RVUs reflect all of the direct and indirect PEs of providing a particular service.

Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) directed the Secretary of Health and Human Services (the Secretary) to establish a process under which we accept and use, to the maximum extent practicable and consistent with sound data practices, data collected or developed by entities and organizations to supplement the data we normally collect in determining the PE component. On May 3, 2000, we published the interim final rule (65 FR 25664) that set forth the criteria for the submission of these supplemental PE survey data. The criteria were modified in response to comments received, and published in the

Federal Register

(65 FR 65376) as part of a November 1, 2000 final rule. The PFS final rules published in 2001 and 2003, respectively, (66 FR 55246 and 68 FR 63196) extended the period during which we would accept these supplemental data through March 1, 2005.

In CY 2007 PFS final rule with comment period (71 FR 69624), we revised the methodology for calculating PE RVUs beginning in CY 2007 and provided for a 4-year transition for the new PE RVUs under this new methodology. We will continue to evaluate this policy and proposed necessary revisions through future rulemaking.

3. Resource-Based Malpractice (MP) RVUs

Section 4505(f) of the BBA amended section 1848(c) of the Act requiring us to implement resource-based malpractice (MP) RVUs for services furnished on or after 2000. The resource-based MP RVUs were implemented in the PFS final rule published November 2, 1999 (64 FR 59380). The MP RVUs were based on malpractice insurance premium data collected from commercial and physician-owned insurers from all the States, the District of Columbia, and Puerto Rico.

4. Refinements to the RVUs

Section 1848(c)(2)(B)(i) of the Act requires that we review all RVUs no less often than every 5 years. The first 5-Year Review of the physician work RVUs was published on November 22, 1996 (61 FR 59489) and was effective in 1997. The second 5-Year Review was published in the CY 2002 PFS final rule with comment period (66 FR 55246) and was effective in 2002. The third 5-Year Review of physician work RVUs was published in the CY 2007 PFS final rule with comment period (71 FR 69624) and was effective on January 1, 2007. (

Note:

Additional codes relating to the third 5-Year Review of physician work RVUs were addressed in the CY 2008 PFS final rule with comment period (72 FR 66360).)

In 1999, the AMA's RUC established the Practice Expense Advisory Committee (PEAC) for the purpose of refining the direct PE inputs. Through March 2004, the PEAC provided recommendations to CMS for over 7,600 codes (all but a few hundred of the codes currently listed in the AMA's Current Procedural Terminology (CPT) codes). As part of the CY 2007 PFS final rule with comment period (71 FR 69624), we implemented a new methodology for determining resource-based PE RVUs and are transitioning this over a 4-year period.

In the CY 2005 PFS final rule with comment period (69 FR 66236), we implemented the first 5-Year Review of the MP RVUs (69 FR 66263).

5. Adjustments to RVUs are Budget Neutral

Section 1848(c)(2)(B)(ii)(II) of the Act provides that adjustments in RVUs for a year may not cause total PFS payments to differ by more than $20 million from what they would have been if the adjustments were not made. In accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if adjustments to RVUs cause expenditures to change by more than $20 million, we make adjustments to ensure that expenditures do not increase or decrease by more than $20 million.

As explained in the CY 2007 PFS final rule with comment period (71 FR 69624), due to the increase in work RVUs resulting from the third 5-Year Review of physician work RVUs, we applied a separate budget neutrality (BN) adjustor to the work RVUs for services furnished during 2007 and 2008. This approach is consistent with the method we used to make BN adjustments to reflect the changes in the PE RVUs.

Section 133(b) of the MIPPA amends section 1848(c)(2)(B) of the Act to specify that, instead of continuing to apply the BN adjustor for the 5-Year Review to work RVUs, the BN adjustment must be applied to the CF for years beginning with CY 2009. Further discussion of this MIPPA provision as it relates to the CY 2009 PFS can be found in sections III. and IX. of this final rule with comment period.

B. Components of the Fee Schedule Payment Amounts

To calculate the payment for every physician's service, the components of the fee schedule (physician work, PE, and MP RVUs) are adjusted by a geographic practice cost index (GPCI). The GPCIs reflect the relative costs of physician work, PE, and malpractice insurance in an area compared to the national average costs for each component.

RVUs are converted to dollar amounts through the application of a CF, which

is calculated by CMS' Office of the Actuary (OACT).

The formula for calculating the Medicare fee schedule payment amount for a given service and fee schedule area can be expressed as:

Payment = [(RVU work × GPCI work) + (RVU PE × GPCI PE) + (RVU malpractice × GPCI malpractice)] × CF.

C. Most Recent Changes to the Fee Schedule

The CY 2008 PFS final rule with comment period (72 FR 66222) addressed certain provisions of Division B of the Tax Relief and Health Care Act of 2006—Medicare Improvements and Extension Act of 2006 (Pub. L. 109-432) (MIEA-TRHCA), and made other changes to Medicare Part B payment policy to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. The CY 2008 PFS final rule with comment period also discussed refinements to resource-based PE RVUs; GPCI changes; malpractice RVUs; requests for additions to the list of telehealth services; several coding issues including additional codes from the 5-Year Review; payment for covered outpatient drugs and biologicals; the competitive acquisition program (CAP); clinical lab fee schedule issues; payment for end-stage renal dialysis (ESRD) services; performance standards for facilities; expiration of the physician scarcity area (PSA) bonus payment; conforming and clarifying changes for comprehensive outpatient rehabilitation facilities (CORFs); a process for updating the drug compendia; physician self-referral issues; beneficiary signature for ambulance transport services; durable medical equipment (DME) update; the chiropractic services demonstration; a Medicare economic index (MEI) data change; technical corrections; standards and requirements related to therapy services under Medicare Parts A and B; revisions to the ambulance fee schedule; the ambulance inflation factor for CY 2008; and an amendment to the e-prescribing exemption for computer-generated facsimile transmissions.

We also finalized the calendar year (CY) 2007 interim RVUs and issued interim RVUs for new and revised procedure codes for CY 2008.

In accordance with section 1848(d)(1)(E)(i) of the Act, we also announced that the PFS update for CY 2008 is −10.1 percent, the preliminary estimate for the sustainable growth rate (SGR) for CY 2008 is −0.1 percent and the CF for CY 2008 is $34.0682. However, subsequent to publication of the CY 2008 PFS final rule with comment period, section 101(a) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173) (MMSEA) was enacted on December 29, 2007 and provided for a 0.5 percent update to the conversion factor for the period beginning January 1, 2008 and ending June 30, 2008. For the first half of 2008 (that is, January through June), the Medicare PFS conversion factor was $38.0870. In the absence of legislation, the PFS conversion factor for the second half of 2008 would have been $34.0682, as announced in the PFS final rule with comment period for CY 2008. However, as a result of the enactment of the Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110-275) (MIPPA), the Medicare PFS conversion factor remained at $38.0870 for the remaining portion of 2008 (July through December).

II. Provisions of the Final Rule With Comment Period

In response to the CY 2009 PFS proposed rule (73 FR 38502) we received approximately 4,100 timely public comments. These included comments from individual physicians, health care workers, professional associations and societies, manufacturers and Congressmen. The majority of the comments addressed proposals related to independent diagnostic testing facilities, anti-markup, prohibition concerning providers of sleep tests, and the general impact of the proposed rule on specific specialties. To the extent that comments were outside the scope of the proposed rule, they are not addressed in this final rule with comment period.

A. Resource-Based Practice Expense (PE) Relative Value Units (RVUs)

Practice expense (PE) is the portion of the resources used in furnishing the service that reflects the general categories of physician and practitioner expenses, such as office rent and personnel wages but excluding malpractice expenses, as specified in section 1848(c)(1)(B) of the Act.

Section 121 of the Social Security Amendments of 1994 (Pub. L. 103-432), enacted on October 31, 1994, required CMS to develop a methodology for a resource-based system for determining PE RVUs for each physician's service. Until that time, PE RVUs were based on historical allowed charges. This legislation stated that the revised PE methodology must consider the staff, equipment, and supplies used in the provision of various medical and surgical services in various settings beginning in 1998. The Secretary has interpreted this to mean that Medicare payments for each service would be based on the relative PE resources typically involved with furnishing the service.

The initial implementation of resource-based PE RVUs was delayed from January 1, 1998, until January 1, 1999, by section 4505(a) of the BBA. In addition, section 4505(b) of the BBA required that the new payment methodology be phased in over 4 years, effective for services furnished in CY 1999, and fully effective in CY 2002. The first step toward implementation of the statute was to adjust the PE values for certain services for CY 1998. Section 4505(d) of the BBA required that, in developing the resource-based PE RVUs, the Secretary must—

• Use, to the maximum extent possible, generally-accepted cost accounting principles that recognize all staff, equipment, supplies, and expenses, not solely those that can be linked to specific procedures and actual data on equipment utilization.

• Develop a refinement method to be used during the transition.

• Consider, in the course of notice and comment rulemaking, impact projections that compare new proposed payment amounts to data on actual physician PE.

In CY 1999, we began the 4-year transition to resource-based PE RVUs utilizing a “top-down” methodology whereby we allocated aggregate specialty-specific practice costs to individual procedures. The specialty-specific PEs were derived from the American Medical Association's (AMA's) Socioeconomic Monitoring Survey (SMS). In addition, under section 212 of the BBRA, we established a process extending through March 2005 to supplement the SMS data with data submitted by a specialty. The aggregate PEs for a given specialty were then allocated to the services furnished by that specialty on the basis of the direct input data (that is, the staff time, equipment, and supplies) and work RVUs assigned to each CPT code.

For CY 2007, we implemented a new methodology for calculating PE RVUs. Under this new methodology, we use the same data sources for calculating PE, but instead of using the “top-down” approach to calculate the direct PE RVUs, under which the aggregate direct and indirect costs for each specialty are allocated to each individual service, we now utilize a “bottom-up” approach to calculate the direct costs. Under the “bottom up” approach, we determine the direct PE by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically required to provide each service. The

costs of the resources are calculated using the refined direct PE inputs assigned to each CPT code in our PE database, which are based on our review of recommendations received from the AMA's Relative Value Update Committee (RUC). For a more detailed explanation of the PE methodology see the June 29, 2006 proposed notice (71 FR 37242) and the CY 2007 PFS final rule with comment period (71 FR 69629).

1. Current Methodology

a. Data Sources for Calculating Practice Expense

The AMA's SMS survey data and supplemental survey data from the specialties of cardiothoracic surgery, vascular surgery, physical and occupational therapy, independent laboratories, allergy/immunology, cardiology, dermatology, gastroenterology, radiology, independent diagnostic testing facilities (IDTFs), radiation oncology, and urology are used to develop the PE per hour (PE/HR) for each specialty. For those specialties for which we do not have PE/HR, the appropriate PE/HR is obtained from a crosswalk to a similar specialty.

The AMA developed the SMS survey in 1981 and discontinued it in 1999. Beginning in 2002, we incorporated the 1999 SMS survey data into our calculation of the PE RVUs, using a 5-year average of SMS survey data. (See the CY 2002 PFS final rule with comment period (66 FR 55246)). The SMS PE survey data are adjusted to a common year, 2005. The SMS data provide the following six categories of PE costs:

• Clinical payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician clinical personnel.

• Administrative payroll expenses, which are payroll expenses (including fringe benefits) for nonphysician personnel involved in administrative, secretarial, or clerical activities.

• Office expenses, which include expenses for rent, mortgage interest, depreciation on medical buildings, utilities, and telephones.

• Medical material and supply expenses, which include expenses for drugs, x-ray films, and disposable medical products.

• Medical equipment expenses, which include depreciation, leases, and rent of medical equipment used in the diagnosis or treatment of patients.

• All other expenses, which include expenses for legal services, accounting, office management, professional association memberships, and any professional expenses not previously mentioned in this section.

In accordance with section 212 of the BBRA, we established a process to supplement the SMS data for a specialty with data collected by entities and organizations other than the AMA (that is, those entities and organizations representing the specialty itself). (See the Criteria for Submitting Supplemental Practice Expense Survey Data interim final rule with comment period (65 FR 25664)). Originally, the deadline to submit supplementary survey data was through August 1, 2001. In the CY 2002 PFS final rule (66 FR 55246), the deadline was extended through August 1, 2003. To ensure maximum opportunity for specialties to submit supplementary survey data, we extended the deadline to submit surveys until March 1, 2005 in the Revisions to Payment Policies Under the Physician Fee Schedule for CY 2004 final rule with comment period (68 FR 63196) (hereinafter referred to as CY 2004 PFS final rule with comment period).

The direct cost data for individual services were originally developed by the Clinical Practice Expert Panels (CPEP). The CPEP data include the supplies, equipment, and staff times specific to each procedure. The CPEPs consisted of panels of physicians, practice administrators, and nonphysicians (for example, RNs) who were nominated by physician specialty societies and other groups. There were 15 CPEPs consisting of 180 members from more than 61 specialties and subspecialties. Approximately 50 percent of the panelists were physicians.

The CPEPs identified specific inputs involved in each physician's service provided in an office or facility setting. The inputs identified were the quantity and type of nonphysician labor, medical supplies, and medical equipment.

In 1999, the AMA's RUC established the PEAC. From 1999 to March 2004, the PEAC, a multi-specialty committee, reviewed the original CPEP inputs and provided us with recommendations for refining these direct PE inputs for existing CPT codes. Through its last meeting in March 2004, the PEAC provided recommendations for over 7,600 codes which we have reviewed and in most instances have accepted. As a result, the current PE inputs differ markedly from those originally recommended by the CPEPs. The PEAC was replaced by the Practice Expense Review Committee (PERC) and now these PE-related activities are addressed by the AMA RUC PE subcommittee.

b. Allocation of PE to Services

The aggregate level specialty-specific PEs are derived from the AMA's SMS survey and supplementary survey data. To establish PE RVUs for specific services, it is necessary to establish the direct and indirect PE associated with each service.

(i)

Direct costs.

The direct costs are determined by adding the costs of the resources (that is, the clinical staff, equipment, and supplies) typically required to provide the service. The costs of these resources are calculated from the refined direct PE inputs in our PE database. These direct inputs are then scaled to the current aggregate pool of direct PE RVUs. The aggregate pool of direct PE RVUs can be derived using the following formula: (PE RVUs × physician CF) × (average direct percentage from SMS/(Supplemental PE/HR data)).

(ii)

Indirect costs.

The SMS and supplementary survey data are the source for the specialty-specific aggregate indirect costs used in our PE calculations. We then allocate the indirect costs to the code level on the basis of the direct costs specifically associated with a code and the maximum of either the clinical labor costs or the physician work RVUs. For calculation of the 2009 PE RVUs, we use the 2007 procedure-specific utilization data crosswalked to 2009 services. To arrive at the indirect PE costs—

• We apply a specialty-specific indirect percentage factor to the direct expenses to recognize the varying proportion that indirect costs represent of total costs by specialty. For a given service, the specific indirect percentage factor to apply to the direct costs for the purpose of the indirect allocation is calculated as the weighted average of the ratio of the indirect to direct costs (based on the survey data) for the specialties that furnish the service. For example, if a service is furnished by a single specialty with indirect PEs that were 75 percent of total PEs, the indirect percentage factor to apply to the direct costs for the purposes of the indirect allocation would be (0.75/0.25) = 3.0. The indirect percentage factor is then applied to the service level adjusted indirect PE allocators.

• We use the specialty-specific PE/HR from the SMS survey data, as well as the supplemental surveys for cardiothoracic surgery, vascular surgery, physical and occupational therapy, independent laboratories, allergy/immunology, cardiology, dermatology, radiology, gastroenterology, IDTFs, radiation oncology, and urology. (

Note:

For radiation oncology, the data represent

the combined survey data from the American Society for Therapeutic Radiology and Oncology (ASTRO) and the Association of Freestanding Radiation Oncology Centers (AFROC)). As discussed in the CY 2008 PFS final rule with comment period (72 FR 66233), the PE/HR survey data for radiology is weighted by practice size. We incorporate this PE/HR into the calculation of indirect costs using an index which reflects the relationship between each specialty's indirect scaling factor and the overall indirect scaling factor for the entire PFS. For example, if a specialty had an indirect practice cost index of 2.00, this specialty would have an indirect scaling factor that was twice the overall average indirect scaling factor. If a specialty had an indirect practice cost index of 0.50, this specialty would have an indirect scaling factor that was half the overall average indirect scaling factor.

• When the clinical labor portion of the direct PE RVU is greater than the physician work RVU for a particular service, the indirect costs are allocated based upon the direct costs and the clinical labor costs. For example, if a service has no physician work and 1.10 direct PE RVUs, and the clinical labor portion of the direct PE RVUs is 0.65 RVUs, we would use the 1.10 direct PE RVUs and the 0.65 clinical labor portions of the direct PE RVUs to allocate the indirect PE for that service.

c. Facility/Nonfacility Costs

Procedures that can be furnished in a physician's office as well as in a hospital or facility setting have two PE RVUs: facility and nonfacility. The nonfacility setting includes physicians' offices, patients' homes, freestanding imaging centers, and independent pathology labs. Facility settings include hospitals, ambulatory surgical centers (ASCs), and skilled nursing facilities (SNFs). The methodology for calculating PE RVUs is the same for both facility and nonfacility RVUs, but is applied independently to yield two separate PE RVUs. Because the PEs for services provided in a facility setting are generally included in the payment to the facility (rather than the payment to the physician under the PFS), the PE RVUs are generally lower for services provided in the facility setting.

d. Services With Technical Components (TCs) and Professional Components (PCs)

Diagnostic services are generally comprised of two components: a professional component (PC) and a technical component (TC), both of which may be performed independently or by different providers. When services have TCs, PCs, and global components that can be billed separately, the payment for the global component equals the sum of the payment for the TC and PC. This is a result of using a weighted average of the ratio of indirect to direct costs across all the specialties that furnish the global components, TCs, and PCs; that is, we apply the same weighted average indirect percentage factor to allocate indirect expenses to the global components, PCs, and TCs for a service. (The direct PE RVUs for the TC and PC sum to the global under the bottom-up methodology.)

e. Transition Period

As discussed in the CY 2007 PFS final rule with comment period (71 FR 69674), we are implementing the change in the methodology for calculating PE RVUs over a 4-year period. During this transition period, the PE RVUs will be calculated on the basis of a blend of RVUs calculated using our methodology described previously in this section (weighted by 25 percent during CY 2007, 50 percent during CY 2008, 75 percent during CY 2009, and 100 percent thereafter), and the CY 2006 PE RVUs for each existing code. PE RVUs for codes that are new during this period will be calculated using only the current PE methodology and will be paid at the fully transitioned rate.

f. PE RVU Methodology

The following is a description of the PE RVU methodology.

(i) Setup File

First, we create a setup file for the PE methodology. The setup file contains the direct cost inputs, the utilization for each procedure code at the specialty and facility/nonfacility place of service level, and the specialty-specific survey PE per physician hour data.

(ii) Calculate the Direct Cost PE RVUs

Sum the costs of each direct input.

Step 1:

Sum the direct costs of the inputs for each service. The direct costs consist of the costs of the direct inputs for clinical labor, medical supplies, and medical equipment. The clinical labor cost is the sum of the cost of all the staff types associated with the service; it is the product of the time for each staff type and the wage rate for that staff type. The medical supplies cost is the sum of the supplies associated with the service; it is the product of the quantity of each supply and the cost of the supply. The medical equipment cost is the sum of the cost of the equipment associated with the service; it is the product of the number of minutes each piece of equipment is used in the service and the equipment cost per minute. The equipment cost per minute is calculated as described at the end of this section.

Apply a BN adjustment to the direct inputs.

Step 2:

Calculate the current aggregate pool of direct PE costs. To do this, multiply the current aggregate pool of total direct and indirect PE costs (that is, the current aggregate PE RVUs multiplied by the CF) by the average direct PE percentage from the SMS and supplementary specialty survey data.

Step 3:

Calculate the aggregate pool of direct costs. To do this, for all PFS services, sum the product of the direct costs for each service from Step 1 and the utilization data for that service.

Step 4:

Using the results of Step 2 and Step 3 calculate a direct PE BN adjustment so that the aggregate direct cost pool does not exceed the current aggregate direct cost pool and apply it to the direct costs from Step 1 for each service.

Step 5:

Convert the results of Step 4 to an RVU scale for each service. To do this, divide the results of Step 4 by the Medicare PFS CF.

(iii) Create the Indirect PE RVUs

Create indirect allocators.

Step 6:

Based on the SMS and supplementary specialty survey data, calculate direct and indirect PE percentages for each physician specialty.

Step 7:

Calculate direct and indirect PE percentages at the service level by taking a weighted average of the results of Step 6 for the specialties that furnish the service. Note that for services with TCs and PCs we are calculating the direct and indirect percentages across the global components, PCs, and TCs. That is, the direct and indirect percentages for a given service (for example, echocardiogram) do not vary by the PC, TC and global component.

Step 8:

Calculate the service level allocators for the indirect PEs based on the percentages calculated in Step 7. The indirect PEs are allocated based on the three components: the direct PE RVU, the clinical PE RVU, and the work RVU.

For most services the indirect allocator is:

indirect percentage * (direct PE RVU/direct percentage) + work RVU.

There are two situations where this formula is modified:

• If the service is a global service (that is, a service with global, professional, and technical components), then the indirect allocator is:

indirect percentage * (direct PE RVU/direct percentage) + clinical PE RVU + work RVU.

• If the clinical labor PE RVU exceeds the work RVU (and the service is not a global service), then the indirect allocator is:

indirect percentage * (direct PE RVU/direct percentage) + clinical PE RVU.

(

Note:

For global services, the indirect allocator is based on both the work RVU and the clinical labor PE RVU. We do this to recognize that, for the professional service, indirect PEs will be allocated using the work RVUs, and for the TC service, indirect PEs will be allocated using the direct PE RVU and the clinical labor PE RVU. This also allows the global component RVUs to equal the sum of the PC and TC RVUs.)

For presentation purposes in the examples in Table 1, the formulas were divided into two parts for each service. The first part does not vary by service and is

the indirect percentage * (direct PE RVU/direct percentage).

The second part is either the work RVU, clinical PE RVU, or both depending on whether the service is a global service and whether the clinical PE RVU exceeds the work RVU (as described earlier in this step.)

Apply a BN adjustment to the indirect allocators.

Step 9:

Calculate the current aggregate pool of indirect PE RVUs by multiplying the current aggregate pool of PE RVUs by the average indirect PE percentage from the physician specialty survey data. This is similar to the Step 2 calculation for the direct PE RVUs.

Step 10:

Calculate an aggregate pool of indirect PE RVUs for all PFS services by adding the product of the indirect PE allocators for a service from Step 8 and the utilization data for that service. This is similar to the Step 3 calculation for the direct PE RVUs.

Step 11:

Using the results of Step 9 and Step 10, calculate an indirect PE adjustment so that the aggregate indirect allocation does not exceed the available aggregate indirect PE RVUs and apply it to indirect allocators calculated in Step 8. This is similar to the Step 4 calculation for the direct PE RVUs.

Calculate the Indirect Practice Cost Index.

Step 12:

Using the results of Step 11, calculate aggregate pools of specialty-specific adjusted indirect PE allocators for all PFS services for a specialty by adding the product of the adjusted indirect PE allocator for each service and the utilization data for that service.

Step 13:

Using the specialty-specific indirect PE/HR data, calculate specialty-specific aggregate pools of indirect PE for all PFS services for that specialty by adding the product of the indirect PE/HR for the specialty, the physician time for the service, and the specialty's utilization for the service.

Step 14:

Using the results of Step 12 and Step 13, calculate the specialty-specific indirect PE scaling factors as under the current methodology.

Step 15:

Using the results of Step 14, calculate an indirect practice cost index at the specialty level by dividing each specialty-specific indirect scaling factor by the average indirect scaling factor for the entire PFS.

Step 16:

Calculate the indirect practice cost index at the service level to ensure the capture of all indirect costs. Calculate a weighted average of the practice cost index values for the specialties that furnish the service. (

Note:

For services with TCs and PCs, we calculate the indirect practice cost index across the global components, PCs, and TCs. Under this method, the indirect practice cost index for a given service (for example, echocardiogram) does not vary by the PC, TC and global component.)

Step 17:

Apply the service level indirect practice cost index calculated in Step 16 to the service level adjusted indirect allocators calculated in Step 11 to get the indirect PE RVU.

(iv) Calculate the Final PE RVUs

Step 18:

Add the direct PE RVUs from Step 6 to the indirect PE RVUs from Step 17.

Step 19:

Calculate and apply the final PE BN adjustment by comparing the results of Step 18 to the current pool of PE RVUs. This final BN adjustment is required primarily because certain specialties are excluded from the PE RVU calculation for rate-setting purposes, but all specialties are included for purposes of calculating the final BN adjustment. (See “Specialties excluded from rate-setting calculation” below in this section.)

(v) Setup File Information

•

Specialties excluded from rate-setting calculation:

For the purposes of calculating the PE RVUs, we exclude certain specialties such as midlevel practitioners paid at a percentage of the PFS, audiology, and low volume specialties from the calculation. These specialties

are

included for the purposes of calculating the BN adjustment.

•

Crosswalk certain low volume physician specialties:

Crosswalk the utilization of certain specialties with relatively low PFS utilization to the associated specialties.

•

Physical therapy utilization:

Crosswalk the utilization associated with all physical therapy services to the specialty of physical therapy.

•

Identify professional and technical services not identified under the usual TC and 26 modifiers:

Flag the services that are PC and TC services, but do not use TC and 26 modifiers (for example, electrocardiograms). This flag associates the PC and TC with the associated global code for use in creating the indirect PE RVU. For example, the professional service code 93010 is associated with the global code 93000.

•

Payment modifiers:

Payment modifiers are accounted for in the creation of the file. For example, services billed with the assistant at surgery modifier are paid 16 percent of the PFS amount for that service; therefore, the utilization file is modified to only account for 16 percent of any service that contains the assistant at surgery modifier.

•

Work RVUs:

The setup file contains the work RVUs from this final rule.

(vi) Equipment Cost per Minute

The equipment cost per minute is calculated as:

(1/(minutes per year * usage)) * price * ((interest rate/(1-(1/((1 + interest rate) ** life of equipment)))) + maintenance)

Where:

minutes per year

= maximum minutes per year if usage were continuous (that is, usage = 1); 150,000 minutes.

usage

= equipment utilization assumption; 0.5.

price

= price of the particular piece of equipment.

interest rate

= 0.11.

life of equipment

= useful life of the particular piece of equipment.

maintenance

= factor for maintenance; 0.05.

Note:

To illustrate the PE calculation, in Table 1 we have used the conversion factor (CF) of $36.0666 which is the CF effective January 1, 2009 as published in this final rule.

Table 1—Calculation of PE RVUs Under Methodology for Selected Codes

Step

Source

Formula

99213

Office visit, est nonfacility

33533

CABG, arterial

single facility

71020

Chest x-ray nonfacility

71020TC

Chest x-ray nonfacility

7102026

Chest x-ray nonfacility

93000

ECG, complete nonfacility

93005

ECG, tracing nonfacility

93010

ECG, report nonfacility

(1) Labor cost (Lab)

Step 1

AMA

$13.32

$77.52

$5.74

$—

$6.12

$—

(2) Suppy cost (Sup)

Step 1

AMA

$2.98

$7.34

$3.39

$—

$1.19

$—

(3) Equipment cost (Eqp)

Step 1

AMA

$0.19

$0.65

$8.17

$—

$0.12

$—

(4) Direct cost (Dir)

Step 1

=(1)+(2)+(3)

$16.50

$85.51

$17.31

$—

$7.43

$—

(5) Direct adjustment (Dir Adj)

Steps 2-4

See footnote*

0.625

(6) Adjusted labor

Steps 2-4

=Lab*Dir Adj

=(1)*(5)

$8.33

$48.48

$3.59

$—

$3.83

$—

(7) Adjusted supplies

Steps 2-4

=Sup*Dir Adj

=(2)*(5)

$1.87

$4.59

$2.12

$—

$0.75

$—

(8) Adjusted equipment

Steps 2-4

=Eqp*Dir Adj

=(3)*(5)

$0.12

$0.41

$5.11

$—

$0.07

$—

(9) Adjusted direct

Steps 2-4

=(6)+(7)+(8)

$10.32

$53.48

$10.82

$—

$4.65

$—

(10) Conversion Factor (CF)

Step 5

MFS

36.0666

(11) Adj. labor cost converted

Step 5

=(Lab*Dir Adj)/CF

=(6)/(10)

0.23

1.34

0.10

—

0.11

—

(12) Adj. supply cost converted

Step 5

=(Sup*Dir Adj)/CF

=(7)/(10)

0.05

0.13

0.06

—

0.02

—

(13) Adj. equip cost converted

Step 5

=(Eqp*Dir Adj)/CF

=(8)/(10)

0.00

0.01

0.14

—

0.00

—

(14) Adj. direct cost converted

Step 5

=(11)+(12)+(13)

0.29

1.48

0.30

—

0.13

—

(15) Wrk RVU

Setup File

MFS

0.92

33.64

0.22

—

0.22

0.17

—

0.17

(16) Dir_pct

Steps 6, 7

Surveys

33.8%

32.6%

40.7%

37.7%

(17) Ind_pct

Steps 6, 7

Surveys

66.2%

67.4%

59.3%

62.3%

(18) Ind. Alloc. formula (1st part)

Step 8

See Step 8

((14)/(16))*(17)

(19) Ind. Alloc. (1st part)

Step 8

See (18)

0.56

3.06

0.44

—

0.21

—

(20) Ind. Alloc. formulas (2nd part)

Step 8

See Step 8

(15)

(15)+(11)

(11)

(15)

(15)+(11)

(11)

(15)

(21) Ind. Alloc. (2nd part)

Step 8

See (20)

0.92

33.64

0.32

0.10

0.22

0.28

0.11

0.17

(22) Indirect Allocator (1st+2nd)

Step 8

=(19)+(21)

1.48

36.70

0.76

0.54

0.22

0.49

0.32

0.17

(23) Indirect Adjustment (Ind Adj)

Steps 9-11

See footnote**

0.337

(24) Adjusted Indirect Allocator

Steps 9-11

=Ind Alloc * Ind Adj

0.50

12.37

0.26

0.18

0.07

0.16

0.11

0.06

(25) Ind.Practice Cost Index (PCI)

Steps 12-16

See Steps 12-16 = Adj. Ind

0.973

0.976

1.087

1.237

(26) Adjusted Indirect

Step 17

Alloc*PCI

=(24)*(25)

0.49

12.07

0.28

0.20

0.08

0.20

0.13

0.07

(27) PE RVU

Steps 18-19

=(Adj Dir+Adj Ind) *budn

=((14)+(26)) *budn

0.77

13.44

0.57

0.49

0.08

0.33

0.26

0.07

2. PE Proposals for CY 2009

a. RUC Recommendations for Direct PE Inputs

In the CY 2009 PFS proposed rule, we agreed with the AMA RUC PE recommendations for 23 codes except for the inclusion of the clinical staff for quality-related activities for 8 immunization injection services (73 FR 38512). The AMA RUC recommendations and other PE issues are addressed below.

Immunization Services

We did not accept the AMA RUC-recommended inclusion of 4 minutes of clinical staff time related to quality activities (QA) for the 4 immunization codes for the initial injection: CPT codes 90465, 90467, 90471, and 90473; nor did we accept the recommended 1 minute of QA time for the 4 “each additional” subsequent injection for CPT codes 90466, 90468, 90472 and 90474. As we explained, unlike the clinical staff time related to quality activities that is included for mammography services as required by the Mammography Quality Standards Act of 1992 (Pub. L. 102-539) (MQSA), there is no statutory requirement for quality-related clinical staff time inputs for these services.

Comment:

We received comments from individuals and group practice physicians, specialty societies, the AMA RUC, the AMA, two State medical societies, a vaccine manufacturer, a pharmaceutical research association, and the National Vaccine Advisory Committee regarding our omission of the QA clinical labor time for the immunization injection codes. These commenters requested that we add back the QA clinical time as recommended by the AMA RUC.

Response:

Based on the commenters' requests, we reexamined the issue. We have identified clinical QA time included in other services that is not based on a statutory requirement. For many cardiac and vascular ultrasound services, for example, QA time is included because it is directly related to compliance with accreditation requirements. After our review, we believe there was evidence to support the inclusion of this QA time in this case in order to comply with State and Federal regulatory guidelines. We have revised the PE database to reflect QA time for these immunization services.

Comment:

Other commenters representing specialty societies supported our acceptance of the AMA RUC recommendations for the 15 other services identified in Table 2 of the proposed rule.

Response:

We have finalized the AMA RUC PE recommendations for these services.

b. Equipment Time-in-Use

The formula for estimating the cost per minute for equipment is based upon a variety of factors, including the cost of the equipment, useful life, interest rate, maintenance cost, and utilization. The purpose of this formula is to identify an estimated cost per minute for the equipment that can be multiplied by the time the equipment is in use to obtain an estimated per use equipment cost to develop the resource-based PE RVU.

In calculating the estimated cost per minute for services that are in use 24 hours per day for 7 days per week, we have assumed that the maximum amount of time that the equipment can be in use is approximately 525,000 minutes (that is, 525,000 minutes = (24 hours per day) × (7 days per week) × (52 weeks per year) × (60 minutes per hour)).

For CY 2008, we used 525,000 minutes to calculate the per minute equipment cost for the equipment used in CPT code 93012,

Telephonic transmission of post-symptom electrocardiogram rhythm strip(s), 24-hour attended monitoring, per 30 day period of time; tracing only

and CPT code 93271,

Patient demand single or multiple event recording with presymptom memory loop, 24-hour attended monitoring, per 30 day period of time; monitoring, receipt of transmissions, and analysis.

Based on information presented to us by a provider group suggesting that the equipment was in use continuously, we determined that this equipment is used 24 hours a day, 7 days a week. Thus, we assigned the equipment a 100 percent usage rate. However, in subsequent discussions with a provider group, we determined that, although there may be a 100 percent usage rate for a particular month, this does not correspond to a 100 percent usage rate for a year. Therefore, for CY 2009 we proposed to apply our standard utilization rate of 50 percent to the 525,000 maximum minutes of use, consistent with our utilization rate assumption for other equipment. This results in 262,500 minutes (that is, 262,500 = 525,000 × 0.50) of average use over the course of the year.

In the CY 2008 PFS rule, we used 43,200 minutes (60 minutes per hour × 24 hours per day × 30 days per month) to estimate the per use cost of the equipment in these monthly services. We are continuing to use 43,200 minutes in determining the equipment cost per use for these codes.

Comment:

The majority of comments received supported our proposal to assign the standard 50 percent utilization rate to CPT codes 93012 and 93271. Other comments disagreed with our proposal and described it as an arbitrary method for changing equipment utilization rates. Many commenters suggested that we should develop a survey process that would obtain service specific utilization rates for all PFS services.

Response:

We agree with the commenters that support assigning the standard 50 percent equipment utilization rate to CPT codes 93012 and 93271 and we will finalize our proposal to use the standard 50 percent utilization rate for CPT codes 93012 and 93271. Although we did not make any proposals related to a comprehensive survey of services specific equipment costs, we plan to continue to work with interested parties to analyze the possibilities for potential inclusion in a future rulemaking cycle.

c. Change to PE Database Inputs for Certain Cardiac Stress Tests

In the CY 2009 PFS proposed rule, we proposed to change the PE database for CPT code 93025,

Microvolt T-wave alternans for assessment of ventricular arrhythmias

, to make the clinical labor staff type consistent with the other cardiac stress tests, CPT codes 93015 and 93017. In addition, we proposed to add the specific Microvolt T-wave testing equipment in place of the cardiac stress testing treadmill devices, as well as to revise the time-in-use for the equipment in CPT 93025 to reflect the service period. We also proposed to apply similar revisions to the equipment time-in-use to the other 2 CPT codes, CPT codes 93015 and 93017.

Comment:

The manufacturer of the equipment technology and the specialty society were supportive of these proposed changes. In addition, the AMA RUC noted that it would address this issue at the 2008 October AMA RUC meeting.

Response:

We have received and accepted the AMA RUC recommendations for CPT 93025, 93015 and 93017 which support all of the changes in our proposal. The PE database is revised to reflect these changes.

d. Revisions to § 414.22(b)(5)(i) Concerning Practice Expense

Current regulations at § 414.22(b)(5)(i) provide an explanation of the two levels of PE RVUs for the facility and nonfacility settings that are used in determining payment under the PFS. Section 414.22(b)(5)(i)(A) discusses

facility PE RVUs and § 414.22(b)(5)(i)(B) discusses nonfacility PE RVUs. Language in each of these sections incorrectly implies that the facility PE RVU is lower than or equal to the nonfacility PE RVUs. However, there are some instances where the facility PE RVUs may actually be greater than the nonfacility PE RVUs. In order to address this inaccuracy, we proposed to revise § 414.22(b)(5)(i)(A) and (B) to remove this language.

We received no comments on our proposed technical change and have revised the regulations at § 414.22(b)(5)(i)(A) and (B) as proposed.

e. Other PE Direct Input Issues

(i)

Removal of Conscious Sedation (CS) PE Inputs for Services in Which CS is not Inherent—Technical Correction

In reviewing the PE database, we noted that the conscious sedation (CS) PE inputs for 12 CPT codes in which CS is not inherent had not been removed after CPT 2005 began identifying these codes in a separate Addendum. The CS inputs for CPT codes 19300, 22520, 22521, 31717, 62263, 62264, 62268, 62269, 63610, 64585, 64590, and 64595 had been added by the AMA RUC's PEAC prior to CY 2005. At that time, the AMA RUC recommended deletion of the CS PE inputs for all procedures that were not identified in the CPT 2005 manual Addendum which lists the services in which CS is inherent; and thus include the associated direct PE inputs. Due to a technical error, these inputs were not removed for CY 2005. We have removed the CS PE inputs for the 12 CPT codes noted above. We ask that the AMA RUC permit specialty societies to bring any CPT codes forward to either the February or April 2009 AMA RUC meetings should any other discrepancies between the CPT Addendum and the PE database be identified.

(ii) Jejunostomy Tube Price

A comment received on the CY 2009 PFS proposed rule stated that we had mistakenly entered the price for a set of 2, rather than just 1, jejunostomy tube in each of the following CPT codes 49441, 49446, 49451, and 49452. So that the price of this PE supply can be properly valued as part of the PE RVUs for each of the four services in which it is found, we have changed the price of this supply from $198 to $97.50 in CPT codes 49441, 49446, 49451, and 49452. In addition, because it's correct price is less than $150, this item was erroneously placed on the list for re-pricing of higher-cost supplies on Table 29 in the proposed rule; and, as a result of this price correction, it has been removed from the list of supply items in need of repricing.

(iii) Supply Code SH079, Collagen, Dermal Implant (2.5ml uou) (Contigen)

We received comments from a specialty society representing urologists noting that the dermal collagen implant, priced at $317, was an inappropriate supply input for CPT 52330. The specialty society asked that we remove this supply from this service. We agree that inclusion of the dermal collagen implant as a supply input for CPT code 52330 is not appropriate. The PE RVUs for CPT 52330 reflect the removal of this supply item.

(iv) Contractor Pricing of CPT 77371 for Stereotactic Radiosurgery (SRS) Treatment Delivery

CPT code 77371,

Radiation treatment delivery, stereotactic radiosurgery (SRS) (complete course of treatment of cerebral lesion(s) consisting of one session); multi-source Cobalt 60 based

, (more commonly known as Gamma Knife) was a new CPT code for CY 2007. At that time, we accepted nearly all of the AMA RUC PE recommendations for this procedure (we did not accept the Cobalt 60 radiation source as a direct PE input) during CY 2007 rulemaking, and these recommendations are reflected in the PE RVUs for CPT 77371. The PE inputs for CPT 77371 had been proposed by the sitting AMA RUC specialty society representing therapeutic radiation oncology physicians. The AMA RUC discussed and amended the specialty's proposal for direct PE inputs (particularly the amount of clinical labor time) prior to agreeing on the final AMA RUC recommendation that was forwarded to CMS for CY 2007. Due to the equipment expense (nearly $4 million) along with the many Nuclear Regulatory Commission (NRC) requirements for construction of the facility required to furnish these procedures, all but one of these facilities is connected with a hospital setting, leaving a single free-standing nonfacility provider.

Comment:

We received 3 comments stating that the PE RVUs listed in Addendum B for CPT 77371 are exceptionally inadequate. All commenters, including the single freestanding nonfacility based provider, noted the difference in payments between those made under OPPS and the PFS for CPT 77371. For CY 2009, the commenters noted that the proposed OPPS payment is $7,608 and the PFS payment under the proposed rule would be $1,260. A freestanding nonfacility provider noted that it had worked with the Medicare contractor but was unsuccessful in securing a higher payment because the contractor could not deviate from the established PE RVUs. Two commenters also stated that they believe the direct PE inputs are incorrect since the cost data they had gathered from other facility providers of this stereotactic radiosurgery (SRS) service included extra clinical labor time due to Nuclear Regulatory Commission (NRC) requirements for both the physicist and the registered nurse. In addition, they disagreed with our decision to treat the Cobalt 60 radiation source (recommended by the AMA RUC as a 1-month renewable equipment item) as an indirect PE cost in the CY 2007 PFS final rule with comment period. The commenters have asked us to contractor-price CPT 77371 for CY 2009 if a payment correction cannot be made in the final rule.

Response:

We will ask the AMA RUC to review the direct PE inputs for this code in light of these comments. In the interim, we believe the commenters have raised sufficient questions regarding the propriety of the direct PE inputs and PE RVUs established for this new code in 2007 to warrant contractor-pricing for CPT 77371 for CY 2009.

f. Supply and Equipment Items Needing Specialty Input

We have identified some supply and equipment items from the CY 2008 final rule with comment period for which we were unable to verify the pricing information (see Table 2: Items Needing Specialty Input for Pricing and Table 3: Equipment Items Needing Specialty Input for Pricing). For the items listed in Tables 2 and 3, we are requesting that commenters provide pricing information. In addition, we are requesting acceptable documentation, as described in the footnote to each table, to support the recommended prices. For supplies or equipment that previously appeared on these lists, we may propose to delete these items unless we receive adequate information to support current pricing by the conclusion of the comment period for this final rule.

In Tables 4 and 5, we have listed specific supplies and equipment items related to new CY 2009 CPT codes that are discussed in section V. of this final rule with comment period. We have added these items to the PE database along with the associated prices (on an interim basis). We plan to propose finalized pricing information in the CY 2010 PFS proposed rule. Item prices identified in these tables are also reflected in the PE RVUs in Addendum B. In addition, we have asked commenters to submit specific information in response to the

discussion of the supply and equipment items for some each of the new CPT codes in section V. of this final rule with comment period. We have also specifically asked for public comment about the direct cost inputs for the 3 new 2009 CPT codes which we contractor-priced for CY 2009 (CPT codes 93229, 93299, and 95803).

Table 2—Supply Items Needing Specialty Input for Pricing

Code

2008/9 Description

Unit

Unit price

Primary

Associated

Specialties

Associated * CPT code(s)

Prior item status on table

Commenter

response and CMS action

2009 Item

status refer to note(s)

Gas, argon, cryoablation

Urology, Radiology, Interventional Radiology

50395

YES

New item 2008

A, D.

Gas, helium, cryoablation

Urology, Radiology, Interventional Radiology

50395

YES

New item 2008

A, D.

SL119

Sealant spray

Radiation Oncology

77333

YES

No comments received

Catheter, Kumpe

Item

Radiology, Interventional Radiology

50385, 50386

YES

New item 2008

A, D.

Disposable aspirating syringe

Oral and Maxillofacial Surgery

21073

YES

New item 2008

A, D.

Guidewire, angle tip (Terumo), 180 cm.

Radiology, Interventional Radiology

50385, 50386

YES

New item 2008

A, D.

Snare, Nitinol (Amplatz)

Item

Radiology, Interventional Radiology

50385, 50386

YES

New item 2008

A, D.

Agent, neurolytic

Orthopedic Surgery, Podiatry

64632

New item 2009

Strut, replacement, dynamic external

Item

1151

20697

New item 2009

Tube, anaerobic culture

Item

62267

Lab

New item 2009

A, B.

Tube, jejunsostomy

Item

97.50

49441, 49446, 49451 and 49452

Accessory

Price changed/CMS error. $195 price for 2 J-tubes. $97.50 accepted

Note:

Acceptable documentation includes detailed description (including system, kit or product components), source (multiple sources requested), and current pricing information. For most items, there will be multiple sources of documentation available—multiple products/models that can be used as acceptable substitutes in performing a procedure. We ask that documentation from multiple sources be submitted with verified prices of the various products which represent the price range. In these instances, only one specific item/model/product is available on the market for use in a given procedure, one source of documentation is required. However, CMS expects that all documentation reflect the market price for each product reflecting the manufacturer or vendor discounts, rebates, etc. Invoices from physician purchases are the preferred documentation. In cases where this is not possible, CMS may accept other documentation such as copies of catalog pages, hard copy from specific Web pages, physician invoices, and typical or average sales price “quotes” (letter format okay) from manufacturers, vendors, or distributors. Unacceptable documentation includes phone numbers and addresses of manufacturer, vendors or distributors, Web site links without pricing information, etc.

A. Additional documentation required. Need detailed description (including “kit”, system, or product contents and component parts), source, and current pricing information (including pricing per specified unit of measure in database).

B. No/Insufficient information received. Where applicable, retained price in database on an interim basis. Forward acceptable documentation promptly.

C. Submitted price accepted.

D. 2008/9 price retained on an interim basis. Forward acceptable documentation promptly.

Table 3—Equipment Items Needing Specialty Input for Pricing

Code

2008/9 Description

2008/9 Price

Primary specialties associated with item

* CPT code(s) associated with item

Prior status on table

Commenter

response and

CMS action

2009 Item status

refer to note(s)

Camera mount-floor

2300

Dermatology

96904

Yes

Specialty to submit, asap

A and D.

Cross slide attachment

500

Dermatology

96904

Yes

Specialty to submit, asap

A and D.

Plasma pheresis machine

37,900

Radiology, Dermatology

36481, G0341

Yes

Revised description based on comments received that light source was not part of item. Documentation requested

ED039

Psychology Testing Equipment

Psychology

96101, 96102

Yes

Specialty to submit, asap

Strobe, 400 watts (Studio)(2)

1500

Dermatology

96904

Yes

Documentation requested

Cryosurgery system (for tumor ablation).

Urology, Radiology, Interventional Radiology

50593

Yes

New item 2008

A and D.

Workstation, dual, echocardiography

85000

Cardiology

93351

New item 2009, Specialty submitted $173,509—CMS accept $85,000

EQ136

Infrared Coagulator (with hand applicator, includes light guide)

3659.50

46606, 46608, 46610, 46612, 46930

New price for 2009 with addition of light guide, Supply code, Eq136, descriptor changed to include the light guide

Note:

A. Additional documentation required. Need detailed description (including kit contents), source, and current pricing information (including pricing per specified unit of measure in database). Accept copies of catalog pages or hard copy from specific Web pages. Phone numbers or addresses of manufacturer, vendors, or distributors are not acceptable documentation.

B. No/Insufficient received. Retained price in database on an interim basis. Forward acceptable documentation promptly.

C. Submitted price accepted.

D. 2008/9 price, where specified, retained on an interim basis. Forward acceptable documentation promptly.

E. See discussion in section V. of this final rule with comment period. Forward requested documentation promptly, for example, whether item is typical.

Table 4—Practice Expense Supply Item Additions for CY 2009

Equip code

Supply description

Unit

Unit price

* CPT code(s) associated with item

Supply category

Comments

Agent, neurolytic

64632

Pharmacy, Rx

A, B and D.

IV infusion set, Sof-set (Minimed)

Item

11.5

96369 and 96371

Hypodermic, IV

Strut, replacement, dynamic external

Item

1151

20697

Accessory

Swab, patient prep, 1.5 ml (chloraprep)

Item

1.04

93352

Pharmacy, NonRx

Tube, anaerobic culture

Item

62267

Lab

Tube, jejunsostomy

Item

97.50

49441, 49446, 49451 and 49452

Accessory

A and C.

A. Price verification needed. Item(s) added to table of supplies requiring specialty input.

B. Request explanation/rationale as to why specific supply is necessary, how it differs from current PE database item, and why current PE item(s) cannot be used for procedure(s).

C. CMS price correction.

D. Also, see discussion in section V. of this final rule with comment period. Proxy in use on an interim basis: SH062 Sclerosing solution, inj.

Table 5—Practice Expense Equipment Item Additions for CY 2009

Item code

Equipment description

Equip life

Unit price

* CPT code(s) associated with item

Supply or equipment

category

Comments

Workstation, dual, echocardiography

85000

93351

DOCUMENTATION

A and D.

Pacemaker, Interrogation, System (CMS used Pacemaker, Monitoring, System as proxy for price)

123250

93693 and 93696

OTHER EQUIPMENT

B and D.

EQ198

Pacemaker follow-up system (incl software and hardware) (Paceart)

23507

93279, 93280, 93281, 93282, 93284, 93285, 93286, 93287, 93288, 93289, 93290, 93291, 93292, 93724

OTHER EQUIPMENT

C and D.

EQ136

Infrared Coagulator (with hand applicator, includes light guide)

3659.50

46606, 46608, 46610, 46612, 46930

OTHER EQUIPMENT

A and D.

A. Price verification needed. Item(s) added to table of equipment requiring specialty input.

B. Interim value, CY 2009 only. CMS assigned the pacemaker monitoring system to these two CPT codes that the specialty association requested a pacemaker “interrogation” system. Since the CMS PE database does not contain such an item, we assigned, on an interim basis, the pacemaker monitoring system that was assigned to these 2 codes previously. Although we remain uncertain as to the appropriate equipment that should be assigned, we will work with the specialty as they provide us with more information and documentation for the typical equipment needed for these 2 services when provided in the physician's office.

C. Interim value, CY 2009 only. CMS assigned EQ198 to all new cardiac monitoring codes for CY 2009 because the crosswalked codes (for CY 2008) each contained the equipment item EQ198. While the specialty requested the “pacemaker monitoring system” for these services, CMS was not provided any information to support the change in technology for these services provided in the physician's office setting.

D. Also, see discussion in Section V. of this final rule with comment period.

B. Geographic Practice Cost Indices (GPCI): Locality Discussion

1. Update

Section 1848(e)(1)(A) of the Act requires us to develop separate Geographic Practice Cost Indices (GPCIs) to measure resource cost differences among localities compared to the national average for each of the three fee schedule components (work, PE and malpractice). While requiring that the PE and malpractice GPCIs reflect the full relative cost differences, section 1848(e)(1)(A)(iii) of the Act requires that the physician work GPCIs reflect only one-quarter of the relative cost differences compared to the national average.

Section 1848(e)(1)(C) of the Act requires us to review and, if necessary, adjust the GPCIs at least every 3 years. This section also specifies that if more than 1 year has elapsed since the last GPCI revision, we must phase in the adjustment over 2 years, applying only one-half of any adjustment in each year. As discussed in the CY 2008 PFS final rule with comment period (72 FR 66243), we established new GPCIs for each Medicare locality in CY 2008 and implemented them. The CY 2008 adjustment to the GPCIs reflected the first year of the 2-year phase-in.

We noted in the CY 2009 PFS proposed rule (73 FR 38513), that the physician work GPCIs we calculated did not reflect the 1.000 floor that was in place during CY 2006 through June 30, 2008. However, as discussed in section III. of this preamble, section 134 of the MIPPA of 2008 extended the 1.000 work GPCI floor from July 1, 2008, through December 31, 2009. Additionally, section 134(b) of the MIPPA sets a permanent 1.500 work GPCI floor in Alaska for services furnished beginning January 1, 2009. As such, the CY 2009 GPCIs and summarized GAFs reflect these statutorily mandated work GPCI floors.

See Addenda D and E for the CY 2009 GPCIs and summarized geographic adjustment factors (GAFs).

For a detailed explanation of how the GPCI update was developed, see the CY 2008 PFS final rule with comment period (72 FR 66244).

2. Payment Localities

a. Background

As stated above in this section, section 1848(e)(1)(A) of the Act requires us to develop separate GPCIs to measure resource cost differences among localities compared to the national average for each of the three fee schedule components (work, PE, and malpractice). Payments under the PFS are based on the relative resources required to provide services, and are adjusted for differences in resource costs among payment localities using the GPCIs. As a result, PFS payments vary between localities. Although the PFS payment for a particular service is actually adjusted by applying a GPCI to each fee schedule component, for purposes of discussion and comparison, we calculate a geographic adjustment factor (GAF) for each locality. These GAFs reflect a weighted average of the GPCIs within the locality and can be used as a general proxy for area practice costs. A GAF is calculated to reflect a summarization of the GPCIs, (which is used only to make comparisons across localities). The GAFs are not an absolute measure of actual costs, nor are they used to calculate PFS payments. Rather, they are a tool that can be used as a proxy for differences in the cost of operating a medical practice among various geographic areas (for example counties) for the purpose of assessing the potential impact of alternative locality configurations.

Prior to 1992, Medicare payments for physicians' services were made on the basis of reasonable charges. Payment localities were established under the reasonable charge system by local Medicare carriers based on their knowledge of local physician charging patterns and economic conditions. A total of 210 localities were developed; including 22 “Statewide” localities where all areas within a State (whether urban or rural) received the same payment amount for a given service. These localities changed little between the inception of Medicare in 1966 and the beginning of the PFS in 1992. Following the inception of the PFS, we acknowledged that there was no consistent geographic basis for these localities and that they did not reflect the significant economic and demographic changes that had taken place since 1966. As a result, a study was begun in 1994 which culminated in a comprehensive locality revision which was implemented in 1997.

The 1997 payment locality revision was based and built upon the prior locality structure. The 22 previously existing Statewide localities remained Statewide localities. New localities were established in the remaining 28 States by comparing the area cost differences (using the GAFs as a proxy for costs) of the localities within these States. We ranked the existing localities within these States by GAFs in descending order. The GAF of the highest locality

within a State was compared to the weighted average GAF of other localities. If the differences between these GAFs exceeded 5 percent, the highest locality remained a distinct locality. If the GAFs associated with all the localities in a State did not vary by at least 5 percent, the State became a Statewide locality. If the highest locality remained a distinct locality, the process was repeated for the second highest locality and so on until the variation among remaining localities fell below the 5 percent threshold. The rest of the localities within the State were combined into a single rest-of-State locality as their costs were relatively homogeneous. The revised locality structure (which is the one currently in use) reduced the number of localities from 210 to 89. The number of Statewide localities increased from 22 to 34. The development of the current locality structure is described in detail in the CY 1997 PFS proposed rule (61 FR 34615) and the subsequent final rule (61 FR 59494).

Although there have been no changes to the locality structure since 1997, we have proposed changes in recent years, although we did not finalize them. As we have frequently noted, any changes to the locality configuration must be made in a budget neutral manner. Therefore, changes in localities can lead to significant redistributions in payments. For many years, we have not considered making changes to localities without the support of a State Medical Association, which we believed would demonstrate consensus for the change among the professionals who would be affected. However, we recognize that over time changes in demographics or local economic conditions may lead us to conduct a more comprehensive examination of existing payment localities, and consideration of potential alternatives.

Payment Locality Approaches Discussed in the CY 2008 PFS Proposed Rule

For the past several years, we have been involved in discussions with California physicians and their representatives about recent shifts in relative demographics and economic conditions among a number of counties within the current California payment locality structure. In the CY 2008 PFS proposed rule, we described three options for changing the payment localities in California. For a detailed discussion of the options for changing the payment localities in California, see the CY 2008 PFS proposed rule and final rule with comment period (72 FR 38139 and 72 FR 66245, respectively).

After evaluating the comments on these options, which included MedPAC's two suggestions for developing changes in payment localities for the entire country (not just California), other States expressing interest in having their payment localities reconfigured, and the California Medical Association's decision not to endorse any option, we decided not to proceed with any of the alternatives we presented. We explained in the CY 2008 final rule with comment period (72 FR 66248) that we intended to conduct a thorough analysis of potential approaches to reconfiguring localities and would address this issue again in future rulemaking. We also noted that some commenters wanted us to consider a national reconfiguration of localities rather than just making changes one State at a time.

b. Alternative Payment Locality Approaches

In the CY 2009 PFS proposed rule, we explained that as a follow-up to the CY 2008 PFS final rule with comment period, we contracted with Acumen, LLC to conduct a preliminary study of several options for revising the payment localities. To that end, we are currently reviewing several alternative approaches for reconfiguring payment localities on a nationwide basis. However, our study of possible alternative payment locality configurations is in the early stages of development. We also stated that we are not making any changes to our payment localities at this time. For a discussion of the alternative payment locality configurations currently under consideration, see the CY 2009 PFS proposed rule (73 FR 38514).

Our preliminary study of several options for revising the payment localities was posted on the CMS Web site on August 21, 2008. The report entitled, “Review of Alternative GPCI Payment Locality Structures”, which was produced by Acumen, LLC under contract to CMS, is accessible from the PFS Federal regulation notices Web page under the download section of the CY 2009 PFS proposed rule (CMS-1403-P). The report may also be accessed directly from the following link:

http://www.cms.hhs.gov/PhysicianFeeSched/downloads/ReviewOfAltGPCIs.pdf

. Comments on the interim report were accepted through November 3, 2008.

In the CY 2009 PFS proposed rule and on the CMS Web site, we encouraged interested parties to submit comments on the options presented in the proposed rule and in our interim report. We also requested comments on the administrative and operational issues associated with each option, as well as suggestions for other options.

Comment:

We received comments on the options discussed in the proposed rule from various specialty groups and medical societies, as well as a few group practices and individual practitioners. Generally, commenters commended us for acknowledging the need for intermittent reconfiguration of PFS payment localities and expressed support for our study of alternative locality configurations. Some commenters urged us to expedite changes in our payment localities and suggested that we do so as part of the CY 2009 final rule. Other commenters requested that, in any locality reconfiguration, we minimize the payment discrepancy between urban and rural areas to ensure continued access to care.

Response:

We would like to thank the public for the comments submitted on the options presented in the proposed rule and in the interim report posted on the CMS Web site. We will summarize all comments received in future rulemaking. As we have stated previously, we will provide extensive opportunities for public comment (for example, town hall meetings or open door forums, as well as a proposed rule) on any specific proposals for changes to the locality configuration before implementing any changes.

C. Malpractice RVUs (PC/TC Issue)

In the CY 1992 PFS final rule (56 FR 59527), we described in detail how malpractice (MP) RVUs are calculated for each physicians' service and, when professional liability insurance (PLI) premium data are not available, how we crosswalk or assign RVUs to services. Following the initial calculation of resource-based MP RVUs, the MP RVUs are then subject to review by CMS at 5-year intervals. Reviewing the MP RVUs every 5 years ensures that the MP relative values reflect any marketplace changes in the physician community's ability to acquire PLI. However, there are codes that define certain radiologic services that have never been part of the MP RVU review process. The MP RVUs initially assigned to these codes have not been revised because there is a lack of suitable data on the cost of PLI for technical staff or imaging centers (where most of these services are performed).

In the CY 2008 PFS proposed rule (72 FR 38143), we noted that the PLI workgroup, a subset of the Relative Value Update Committee (RUC) of the AMA, brought to our attention the fact that there are approximately 600 services that have TC MP RVUs that are

greater than the PC MP RVUs. The PLI workgroup requested that we make changes to these MP RVUs and suggested that it is illogical for the MP RVUs for the TC of a service to be higher than the MP RVUs for the PC.

We responded that we would like to develop a resource-based methodology for the technical portion of these MP RVUs; but that we did not have data to support such a change. We asked for information about how, and if, technicians employed by facilities purchase PLI or how their professional liability is covered. We also asked for comments on what types of PLI are carried by facilities that perform these technical services.

In the CY 2008 PFS final rule with comment period (72 FR 66248), one commenter suggested that we “flip” the MP RVUs between the PCs and TCs, or make them equal. Reversing the RVUs would reduce the MP RVUs for the TC and increase the MP RVUs for the PC. The AMA's PLI workgroup recommended that we reduce the MP RVUs for the TC for these codes to zero. The workgroup suggested that there are no identifiable separate costs for professional liability for the TC. The workgroup also recommended that the MP RVUs removed from the TC for these codes be redistributed across all physicians' services.

We responded that we did not believe it would be appropriate to “flip” the PC and TC MP RVU values because the professional part of the MP RVUs has undergone a resource-based review, is derived from actual data, and is consistent with the resource-based methodology for PFS payments. We stated that we would not simply equalize the PC and TC RVU values because we had no data to demonstrate that the MP costs for the technical portion of these services are the same as the professional portion.

We also noted that we have received several comments supporting the decision to examine the possibility of developing a resource-based methodology for the technical portion of the MP RVUs. The commenters supported the collection and analysis of appropriate MP premium data before making any changes to the MP RVU distribution.

We stated that we would continue to solicit, collect, and analyze appropriate data on this subject. We noted that when we had sufficient information we would be better able to make a determination as to what, if any, changes should be made and that we would propose any changes in future rulemaking.

In the CY 2009 PFS proposed rule (73 FR 38515), we stated that the issue of assigning MP RVUs for the TC of certain services continues to be a source of concern for several physician associations and for CMS. We noted that we did not receive a response to our CY 2008 request for additional data on this issue and that this issue is one of importance to CMS. We also stated that the lack of available PLI data affects our ability to make a resource-based evaluation of the TC MP RVUs for these codes. We indicated that as part of our work to update the MP RVUs in CY 2010, we would instruct our contractor to research available data sources for the MP costs associated with the TC portion of these codes and that we would also ask the contractor to look at what is included in general liability insurance versus PLI for physicians and other professional staff. We also stated that if data sources are available, we would instruct the contractor to gather the data so we will be ready to implement revised MP RVUs for the TC of these codes in conjunction with the update of MP RVUs for the PCs in 2010.

The following is a summary of the comments we received on the CY 2009 PFS proposed rule and our responses.

Comment:

Most commenters opposed any change to the MP RVUs that would make the TC MP RVUs zero. The commenters stated that there are identifiable MP expenses associated with allied health professionals and that for many radiation oncology centers there are separate MP insurance policies for the radiation oncologists and the nonphysician clinical personnel. The commenters requested that we ensure that the liability insurance associated with the nonphysician personnel is reflected in the MP RVUs for technical services. The commenters also stated that these expenses do not represent general insurance liability premiums which are part of the PE RVUs. The commenters were supportive of our plan for researching data sources for MP premium data for the TC of these codes. One commenter provided the name of a company that provides liability insurance to imaging facilities.

Other commenters, including the AMA, proposed that CMS reduce to zero the TC MP RVUs associated with the codes identified as having higher TC MP RVUs than PC MP RVUs. The commenters stated that any premium data received would represent general liability insurance, not liability insurance premium data related to nonphysician clinical personnel. The commenters suggested that premium data does not exist to support a resource-based computation of the MP RVUs for the TC and stated that general liability insurance premiums are included in the PE component and should not be part of the MP RVU calculation.

Response:

We appreciate the comments in support of our proposal to instruct our contractor to research available data sources for the MP costs associated with the TC portions of these codes. As we stated in the CY 2008 PFS final rule with comment period (72 FR 66248), we are not able to evaluate whether sufficient data exists or to make a judgment on the RUC's assertion that such data are not available. It is possible that the contractor responsible for collecting the data for the 5-year MP RVU update will identify providers of professional liability insurance for nonphysician clinical personnel. We plan to share the information received on a potential source of such data with our contractor. If such premium data can be identified, it will be incorporated into the MP RVU update. In the event that we adopt such data, we will ensure there is no duplication of costs between the PE and the MP RVUs. As noted in the CY 2009 PFS proposed rule, and discussed above in this section, we will be addressing this issue as part of the update to the malpractice RVUs for CY 2010.

D. Medicare Telehealth Services

1. Requests for Adding Services to the List of Medicare Telehealth Services

Section 1834(m)(4)(F) of the Act defines telehealth services as professional consultations, office visits, and office psychiatry services, and any additional service specified by the Secretary. In addition, the statute required us to establish a process for adding services to or deleting services from the list of telehealth services on an annual basis.

In the December 31, 2002

Federal Register

(67 FR 79988), we established a process for adding services to or deleting services from the list of Medicare telehealth services. This process provides the public an ongoing opportunity to submit requests for adding services. We assign any request to make additions to the list of Medicare telehealth services to one of the following categories:

• Category #1: Services that are similar to professional consultations, office visits, and office psychiatry services. In reviewing these requests, we look for similarities between the proposed and existing telehealth services for the roles of, and interactions among, the beneficiary, the physician (or other practitioner) at the distant site

and, if necessary, the telepresenter. We also look for similarities in the telecommunications system used to deliver the proposed service, for example, the use of interactive audio and video equipment.

• Category #2: Services that are not similar to the current list of telehealth services. Our review of these requests includes an assessment of whether the use of a telecommunications system to deliver the service produces similar diagnostic findings or therapeutic interventions as compared with the face to face “hands on” delivery of the same service. Requestors should submit evidence showing that the use of a telecommunications system does not affect the diagnosis or treatment plan as compared to a face to face delivery of the requested service.

Since establishing the process, we have added the following to the list of Medicare telehealth services: psychiatric diagnostic interview examination; ESRD services with two to three visits per month and four or more visits per month (although we require at least one visit a month to be furnished in-person “hands on”, by a physician, clinical nurse specialist (CNS), nurse practitioner (NP), or physician assistant (PA) to examine the vascular access site); individual medical nutrition therapy; and the neurobehavioral status exam.

Requests to add services to the list of Medicare telehealth services must be submitted and received no later than December 31 of each calendar year to be considered for the next rulemaking cycle. For example, requests submitted before the end of CY 2007 are considered for the CY 2009 proposed rule. Each request for adding a service to the list of Medicare telehealth services must include any supporting documentation you wish us to consider as we review the request. Because we use the annual PFS as a vehicle for making changes to the list of Medicare telehealth services, requestors should be advised that any information submitted is subject to disclosure for this purpose. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to directly mail these requests, visit our Web site at

http://www.cms.hhs.gov/telehealth/.

2. Submitted Requests for Addition to the List of Telehealth Services

We received the following requests in CY 2007 for additional approved services to become effective for CY 2009: (1) Diabetes self-management training (DSMT); and (2) critical care services. In addition, in the CY 2008 PFS final rule with comment period (72 FR 66250), we committed to continuing to evaluate last year's request to add subsequent hospital care to the list of approved telehealth services. In the CY 2009 PFS proposed rule (73 FR 38515), we responded to these requests. We did not propose to add DSMT or critical care services to the list of Medicare telehealth services. We proposed to create HCPCS codes specific to follow-up inpatient consultations delivered via telehealth, and we proposed to revise § 410.78 and § 414.65 to revise our regulations accordingly. The following is a summary of the discussion from the proposed rule and a summary of the comments we received and our responses.

a. Diabetes Self-Management Training (DSMT)

The American Telemedicine Association (ATA) and the Marshfield Clinic submitted a request to add individual and group diabetes self management training (DSMT) (as represented by Healthcare Common Procedure Coding System (HCPCS) codes G0108 and G0109) to the list of approved telehealth services. The requesters believe that DSMT services can be considered and approved for telehealth as Category 1 services because they are comparable to medical nutrition therapy (MNT) services approved for telehealth.

As discussed in the CY 2009 PFS proposed rule (73 FR 38516), § 414.65 provides for the payment of individual MNT furnished via telehealth. Group MNT is not an approved telehealth service, so it cannot be used as a point of comparison for group DSMT (as represented by HCPCS code G0109). In addition, group counseling services have a different interactive dynamic between the physician or practitioner at the distant site and beneficiary at the originating site as compared to services on the current list of Medicare telehealth services. (See 70 FR 45787 and 70 FR 70157 for a previous discussion of group services.) Since the interactive dynamic of group DSMT is not similar to individual MNT or any other service currently approved for telehealth, we believe that group DSMT must be evaluated as a category 2 service.

Section 1861(qq) of the Act provides that DSMT (which can be either a group or individual service) involves educational and training services to ensure therapy compliance or to provide necessary skills and knowledge to participate in managing the condition, including the skills necessary for the self administration of injectable drugs. We believe individual DSMT is not analogous to individual MNT because of the element of skill based training that is encompassed within individual DSMT, but is not an aspect of individual MNT (or any other services currently approved for telehealth). Due to the statutory requirement that DSMT services include teaching beneficiaries the skills necessary for the self administration of injectable drugs, we believe that DSMT, whether provided to an individual or a group, must be evaluated as a category 2 service.

Because we consider individual and group DSMT to be category 2 services, we needed to evaluate whether these are services for which telehealth can be an adequate substitute for a face to face encounter. After reviewing studies submitted with the request, we determined that we do not have sufficient comparative analysis that either individual or group DSMT delivered via telecommunications is equivalent to DSMT delivered face to face. We did not find evidence that providing DSMT via telehealth is an adequate substitute for providing DSMT in person. Therefore, we proposed not to add individual and group DSMT (as described by HCPCS codes G0108 and G0109) to the list of approved telehealth services.

Comment:

Some commenters disagreed with our proposal and noted that adding DSMT to the list of approved telehealth services would provide a physician or practitioner with an additional tool for supporting patient compliance with management of diabetes. One commenter acknowledged that training patients in the self-administration of injectable drugs, a required component of DSMT programs, would be difficult to perform via telehealth. However, the commenter disagreed that this concern should prevent diabetes patients from accessing the DSMT benefit through telehealth. The commenter believes that educating a patient on diet, exercise, medications, managing stress and illness, and managing blood sugar can be taught via telehealth.

Another commenter agreed that telehealth should not serve as a substitute for initial DSMT training that may involve hands-on teaching of injectable medications or appropriate usage of glucose monitors. However, the commenter believes that follow-up telehealth encounters can help to quickly identify any potential problems or health concerns.

Response:

The request we received was to add individual and group DSMT as described by HCPCS codes G0108 and G0109 to the list of Medicare

telehealth services. As discussed above, teaching beneficiaries the skills necessary for the self administration of injectable drugs is a statutorily required element of DSMT (and is typically provided as part of an individual DSMT session). This skill based training is typically not a component of any of the current Medicare telehealth services.

Group DSMT (which comprises the vast majority of DSMT; initial and follow up) is by definition furnished in a group setting and, therefore, the interactive dynamic is not similar to any existing telehealth service. No group services are approved for telehealth. For more information on our review of the use of telehealth to furnish group services, see the CY 2006 PFS proposed rule (70 FR 45787).

In order to consider addition of services for Medicare telehealth that are not similar to the existing list of telehealth services, we require comparative studies showing that the use of an interactive audio and video telecommunications system is an adequate substitute for the in person (face-to-face) delivery of the requested service. To date, requestors have not submitted sufficient comparative analyses supporting the approval of skill based training (such as teaching a patient how to administer self-injectable drugs) for telehealth. Likewise, requestors have not submitted comparative analyses showing that the use of a telecommunications system is an adequate substitute for group counseling services (DSMT or otherwise) furnished in person.

We agree with the commenters that skill-based training, such as teaching patients how to inject insulin, would be difficult to accomplish without the physical in person presence of the teaching practitioner. However, we disagree that this training element should be carved out of individual (or group) DSMT for purposes of providing Medicare telehealth services. The skill-based training involved in teaching beneficiaries the skills necessary for the self-administration of injectable drugs is a key component of this statutorily defined benefit (and therefore inherent in the codes that describe DSMT). We do not believe that it would be appropriate to carve out this statutorily required component of DSMT for purposes of telehealth.

b. Critical Care Services

The (UPMC) submitted a request to add critical care services (as defined by HCPCS codes 99291 and 99292) as a “Category 1” service. The requester draws similarities to the evaluation and management (E/M) consultation services currently approved for telehealth. The requester noted that the primary difference between critical care and other E/M services already approved for telehealth is that critical care is specific to patients with vital organ failure. Anecdotally, UPMC has found that the use of telecommunications systems and software gives stroke patients timely access to highly specialized physicians. According to the request, UPMC physicians are able to give “an equally effective examination, spend the same amount of time with the patient and develop the same course of treatment just as if they were bedside.”

The acuity of a critical care patient is significantly greater than the acuity generally associated with patients receiving the E/M services approved for telehealth. Because of the acuity of critically ill patients, we do not consider critical care services similar to any services on the current list of Medicare telehealth services. Therefore, we believe critical care must be evaluated as a Category 2 service.

Because we consider critical care services to be Category 2, we needed to evaluate whether these are services for which telehealth can be an adequate substitute for a face-to-face encounter. We had no evidence suggesting that the use of telehealth could be a reasonable surrogate for the face-to-face delivery of this type of care. As such, we did not propose to add critical care services (as defined by HCPCS codes 99291 and 99292) to the list of approved telehealth services.

Comment:

UPMC submitted a detailed description of their experiences using telehealth to support the treatment of acute stroke patients and provided supporting studies describing the use of telemedicine in remote stroke assessment. Per their comment, remote stroke assessment has specific and unique clinical importance because an urgent decision, based in part on a neurological examination, must be made regarding the administration of thrombolytic therapy within 3 hours of the onset of stroke symptoms. The elements of remote stroke assessment involve discrete interactions between physicians and patients, and the consultative input of specialists experienced in acute stroke treatment is considered in directing the bedside care of the patient.

Some commenters were concerned that our proposal will not permit the use of telehealth to treat critically ill patients. We received comments and supporting documentation regarding the feasibility and value of providing consultations via telehealth to patients who are critically ill.

Response:

Consultations are already included on the list of approved telehealth services. Our proposal not to add critical care services (as defined by 99291 and 99292) to the list of Medicare telehealth services does not preclude physicians or NPPs from providing medically necessary and clinically appropriate telehealth consultations to patients who are critically ill. We believe that permitting initial and follow up inpatient consultation via telehealth will help provide greater access to specialty care for critically ill patients (including stroke patients). If guidance or advice is needed regarding a critically ill patient, a consultation may be requested from an appropriate source and may be furnished as a telehealth service. (See the CMS Internet-Only Medicare Claims Processing Manual, Chapter 12, Section 30.6.10 for more information on Medicare policy regarding payment for consultation services.)

In support of the request to approve critical care services (as described by HCPCS codes 99291 through 99292), UPMC provided comparative analyses involving the use of an interactive audio and video telecommunications system as a substitute for an in-person (face-to-face) clinical assessment. However, the focus of these studies was limited to stroke patients (critical care services include a broad range of disease categories). Additionally, one study recruited clinically stable patients. This study noted that “because of the subacute nature of our test bed, the current data must be considered preliminary in determining their potential impact on actual clinical decision making.” The same study also noted that although the use of telehealth “may expedite stroke-related decision making, it cannot and should not be thought of as a substitute for the comprehensive clinical evaluation of the acute stroke patient, including thorough medical and cardiac evaluations.” In another study submitted, the patients selected were not randomized.

Comment:

A few commenters supported our proposal not to add critical care services to the list of Medicare approved telehealth services. The commenters believe that, within the current standards of practice, critical care services require the physical presence of the physician rendering the critical care services.

We received approximately 20 comments expressing opposition to our proposal not to add critical care services to the list of Medicare approved telehealth services which distinguished between their use of telehealth for

critical care services and the use of telehealth for remote stroke assessments, as described in the original request. Many of the commenters characterized our proposal as a “non-coverage determination” of remote critical care services and described an intensive care unit (ICU) model that integrates continuous surveillance of the ICU with an electronic medical records interface. This model is also programmed to automatically prompt the physician to rapidly respond and intervene in the event of certain changes in a patient's physiological status. Many of these commenters included documentation and references to studies that the adoption of this model reduced medical errors; enhanced patient safety; reduced complications; decreased overall length of stay in the ICU; and resulted in a statistically significant decrease in ICU mortality in comparison to the traditional ICU model. The commenters also noted that patient outcomes have been equivalent if not superior to patient outcomes prior to adopting this model of care.

The American Medical Association (AMA) recently developed Category III tracking codes for remote critical care services (0188T-0189T). Two specialty societies commented that they are working with other critical care organizations to collect and analyze data on remote critical care services, as requested by the CPT editorial panel.

Response:

In the CY 2009 PFS proposed rule, we explained that we have no evidence suggesting that the use of telehealth could be a reasonable surrogate for the face-to-face delivery of critical care services, as defined by HCPCS codes 99291 and 99292. We agree with the comments that, within the current standards of practice, critical care services require the physical presence of the physician rendering the critical care services.

Our proposal not to add critical care services to the list of approved telehealth services for Medicare was in no way a “non-coverage determination” for remote critical care services described by the AMA's Category III tracking codes, 0188T-0189T. Consistent with the AMA's creation of those tracking codes, we believe that remote critical care services are different from the telehealth delivery of critical care services (as defined by CPT codes 99291 through 99292). Category III CPT codes track utilization of a service, facilitating data collection on, and assessment of new services and procedures. We believe that the data collected for these tracking codes will help provide useful information on how to best categorize and value remote critical care services in the future. However, at the present time, we do not have sufficient evidence that the provision of critical care services (as represented by HCPCS codes 99291 and 99292) via telehealth is an adequate substitute for an in person (face-to-face) encounter.

c. Subsequent Hospital Care

Prior to 2006, follow-up inpatient consultations (as described by CPT codes 99261 through 99263) were approved for telehealth. CPT 2006 deleted the follow-up inpatient consultation codes and advised practitioners instead to bill for these services using the codes for subsequent hospital care (as described by CPT codes 99231 through 99233). For CY 2006, we removed the deleted codes for follow-up inpatient consultations from the list of approved telehealth services.

In the CY 2008 PFS proposed rule (72 FR 38144) and subsequent final rule with comment period (72 FR 66250), we discussed a request we received from the ATA to add subsequent hospital care to the list of approved telehealth services. Because there is currently no method for practitioners to bill for follow-up inpatient consultations delivered via telehealth, the ATA requested that we approve use of the subsequent hospital care codes to bill follow-up inpatient consultations furnished via telehealth, as well as to bill for subsequent hospital care services furnished via telehealth that are related to the ongoing E/M of the hospital inpatient (72 FR 66250). Since the subsequent hospital care codes describe a broader range of services than follow-up inpatient consultation, including some services that may not be appropriate for addition to the list of telehealth services, we did not add subsequent hospital care to the list of approved telehealth services. Instead, we committed to continue to evaluate whether, and if so, by what mechanism subsequent hospital care could be approved for telehealth when used for follow-up inpatient consultations (72 FR 66249).

In the CY 2009 PFS proposed rule, we proposed to create a new series of HCPCS codes for follow-up inpatient telehealth consultations. Practitioners would use these codes to submit claims to their Medicare contractors for payment of follow-up inpatient consultations provided via telehealth. We proposed that the new HCPCS codes would be limited to the range of services included in the scope of the previous CPT codes for follow-up inpatient consultations, and the descriptions would be modified to limit the use of such services for telehealth. The HCPCS codes would clearly designate these services as follow-up inpatient consultations provided via telehealth, and not subsequent hospital care used for inpatient visits. Utilization of these codes would allow for payment for these services, as well as enable us to monitor whether the codes are used appropriately. We also proposed to establish the RVUs for these services at the same level as the RVUs established for subsequent hospital care (as described by CPT codes 99231 through 99233). We believe this is appropriate because a physician or practitioner furnishing a telehealth service is paid an amount equal to the amount that would have been paid if the service had been furnished without the use of a telecommunication system. Since physicians and practitioners furnishing follow-up inpatient consultations in a face-to-face encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233), we believe it is appropriate to set the RVUs for the new telehealth G codes at the same level as for the subsequent hospital care codes.

Comment:

Several commenters enthusiastically supported our proposal to create a new series of HCPCS codes for follow-up inpatient telehealth consultations. Some commenters were concerned that our proposed definition of the new HCPCS codes did not clearly distinguish these consultations from subsequent hospital care, and they believed it would not preclude the use of telehealth for the ongoing E/M of an inpatient. Other commenters supported our effort to reinstitute follow-up inpatient consultations delivered via telehealth, but discouraged us from creating new HCPCS codes for the long-term. A few commenters recommended that instead we approve subsequent hospital care for telehealth. The AMA and others urged us to implement the proposed G codes as an interim measure, while working expeditiously with the CPT Editorial Panel and the RUC to develop appropriate codes and RVUs for the long-term.

Response:

We are pleased that the majority of commenters supported our proposal to create a new series of HCPCS codes for follow-up inpatient telehealth consultations. As discussed in the CY 2009 PFS proposed rule, we considered other approaches to provide and bill for follow-up inpatient consultations delivered via telehealth. In response to the comments requesting that we approve subsequent hospital care for telehealth only when the codes are used for follow-up inpatient consultations, we were concerned that

the other approaches under consideration would lead to a misuse of the service, and practitioners would provide a broader range of services via telehealth than was formerly approved, including the ongoing, day-to-day E/M of a hospital inpatient. We were also concerned that it could be difficult to implement sufficient controls and monitoring to ensure that whatever mechanism we created would be limited to the delivery of services that were formerly described as follow-up inpatient consultations. We continue to believe that creating HCPCS codes specific to the telehealth delivery of follow-up inpatient consultations allows us to provide payment for these services, as well as enables us to best monitor whether the codes are used appropriately.

As noted previously, CPT deleted the follow-up inpatient consultation codes. We determined that there was a need to establish a method by which practitioners could provide and bill Medicare for follow-up inpatient consultations delivered via telehealth, without allowing the ongoing E/M of a hospital inpatient via telehealth. Physicians and NPPs furnishing follow-up inpatient consultations in a face-to-face encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233).

In response to commenters concerns that the new HCPCS codes will not prevent the use of telehealth for the ongoing E/M of an inpatient, we have modified the definition of follow-up inpatient telehealth consultations. We clarified that the criteria for these services will be subject to and consistent with Medicare policy for consultation services, including criteria that would distinguish a follow-up consultation from a subsequent E/M visit.

Result of Evaluation of 2009 Requests

We will finalize our proposal not to add DSMT (as defined by HCPCS codes G0108 and G0109) and not to add critical care services (as defined by HCPCS codes 99291 and 99292) to the list of Medicare telehealth services.

We will finalize our proposal to add follow-up inpatient telehealth consultation, as represented by HCPCS codes G0406 through G0408, to the list of Medicare telehealth services. We will also finalize our proposal to add follow-up inpatient telehealth consultations to the list of Medicare services at § 410.78 and § 414.65.

Practitioners would use the new HCPCS codes to submit claims to their Medicare contractors for payment of follow-up inpatient consultations provided via telehealth. These new HCPCS codes are limited to the range of services included in the scope of the previous CPT codes for follow-up inpatient consultations, and the descriptions limit the use of such services for telehealth. The HCPCS codes clearly designate these services as follow-up inpatient consultations provided via telehealth, and not subsequent hospital care used for inpatient visits. Utilization of these codes will allow for payment for these services, as well as enable us to monitor whether the codes are used appropriately.

We also will finalize our proposal to establish the RVUs for these services at the same level as the RVUs established for subsequent hospital care (as described by CPT codes 99231 through 99233). Physicians and NPPs furnishing follow-up inpatient consultations in a face-to-face encounter must continue to utilize subsequent hospital care codes (as described by CPT codes 99231 through 99233).

We are finalizing our proposal to create HCPCS codes specific to the telehealth delivery of follow-up inpatient consultations solely to re-establish the ability for practitioners to provide and bill for follow-up inpatient consultations delivered via telehealth. These codes are intended for use by practitioners serving beneficiaries located at qualifying originating sites (as defined in § 410.78) requiring the consultative input of physicians who are not available for an in person (face-to-face) encounter. These codes are not intended to include the ongoing E/M of a hospital inpatient.

Claims for follow-up inpatient telehealth consultations will be submitted to the Medicare contractors that process claims for the area where the physician or practitioner who furnishes the service is located. Physicians/practitioners must submit the appropriate HCPCS procedure code for follow-up inpatient telehealth consultations along with the “GT” modifier (“via interactive audio and video telecommunications system”). By coding and billing the “GT” modifier with the inpatient follow-up inpatient telehealth consultation codes, the distant site physician/practitioner certifies that the beneficiary was present at an eligible originating site when the telehealth service was furnished. (See the CMS Internet-Only Medicare Claims Processing Manual, Pub. 100-04, Chapter 12, § 190.6.1 for instructions for submission of interactive telehealth claims.)

In the case of Federal telemedicine demonstration programs conducted in Alaska or Hawaii, store-and-forward technologies may be used as a substitute for an interactive telecommunications system. Covered store-and-forward telehealth services are billed with the “GQ” modifier, “via asynchronous telecommunications system.” By using the “GQ” modifier, the distant site physician/practitioner certifies that the asynchronous medical file was collected and transmitted to him or her at the distant site from a Federal telemedicine demonstration project conducted in Alaska or Hawaii. (See the CMS Internet-Only Medicare Claims Processing Manual, Pub. 100-04, Chapter 12, § 190.6.2 for instructions for submission of telehealth store and forward claims.)

Follow-Up Inpatient Telehealth Consultations Defined

Follow-up inpatient telehealth consultations are consultative visits furnished via telehealth to follow up on an initial consultation, or subsequent consultative visits requested by the attending physician. The initial inpatient consultation may have been provided in person or via telehealth. The conditions of payment for follow-up inpatient telehealth consultations, including qualifying originating sites and the types of telecommunications systems recognized by Medicare, are subject to the provisions of § 410.78. Payment for these services is subject to the provisions of § 414.65.

Follow-up inpatient telehealth consultations include monitoring progress, recommending management modifications, or advising on a new plan of care in response to changes in the patient's status or no changes on the consulted health issue. Counseling and coordination of care with other providers or agencies is included as well, consistent with the nature of the problem(s) and the patient's needs. The physician or practitioner who furnishes the inpatient follow-up consultation via telehealth cannot be the physician of record or the attending physician, and the follow-up inpatient consultation would be distinct from the follow-up care provided by a physician of record or the attending physician. If a physician consultant has initiated treatment at an initial consultation and participates thereafter in the patient's ongoing care management, such care would not be included in the definition of a follow-up inpatient consultation and is not appropriate for delivery via telehealth. Follow-up inpatient telehealth consultations are subject to the criteria for consultation services, as

described in the CMS Internet-Only Medicare Claims Processing Manual, Pub 100-04, Chapter 12, § 30.6.10.

Payment for follow-up inpatient telehealth consultations includes all consultation related services furnished before, during, and after communicating with the patient via telehealth. Pre-service activities would include, but would not be limited to, reviewing patient data (for example, diagnostic and imaging studies, interim lab work) and communicating with other professionals or family members. Intra-service activities must include at least two of the three key elements described below for each procedure code. Post-service activities would include, but would not be limited to, completing medical records or other documentation and communicating results of the consultation and further care plans to other health care professionals. No additional E/M service could be billed for work related to a follow-up inpatient telehealth consultation.

Follow-up inpatient telehealth consultations could be provided at various levels of complexity. To reflect this, we are establishing three codes.

Practitioners taking a problem focused interval history, conducting a problem focused examination, and engaging in medical decision making that is straightforward or of low complexity, would bill a limited service, using HCPCS code G0406. At this level of service, practitioners would typically spend 15 minutes communicating with the patient via telehealth.

Practitioners taking an expanded focused interval history, conducting an expanded problem focused examination, and engaging in medical decision making that is of moderate complexity, would bill an intermediate service using HCPCS code G0407. At this level of service, practitioners would typically spend 25 minutes communicating with the patient via telehealth.

Practitioners taking a detailed interval history, conducting a detailed examination, and engaging in medical decision making that is of high complexity, would bill a complex service, using HCPCS code G0408. At this level of service, practitioners would typically spend 35 minutes or more communicating with the patient via telehealth.

We are establishing the following HCPCS codes to describe follow-up inpatient consultations approved for telehealth:

• G0406,

Follow-up inpatient telehealth consultation, limited, typically 15 minutes communicating with the patient via telehealth.

• G0407,

Follow-up inpatient telehealth consultation, intermediate, typically 25 minutes communicating with the patient via telehealth.

• G0408,

Follow-up inpatient telehealth consultation, complex, typically 35 minutes or more communicating with the patient via telehealth.

3. Other Issues

Comment:

In 2005, CMS received a request to add the following procedure codes to the list of approved telehealth services: initial nursing facility care (as described by HCPCS codes 99304 through 99306); subsequent nursing facility care (HCPCS codes 99307 through 99310); nursing facility discharge services (HCPCS codes 99315 and 99316); and other nursing facility services (as described by HCPCS code 99318). In the CY 2007 PFS final rule with comment period, we did not add these nursing facility care services to the list of approved telehealth services because these procedure codes did not describe services that were appropriate to the originating sites eligible in CY 2007. At that time, SNFs were not defined in the statute as originating sites. (See 71 FR 69657.)

Section 149 of the MIPPA recognizes SNFs as telehealth originating sites, effective for services furnished on or after January 1, 2009. In light of this provision, the American Telemedicine Association (ATA) urged us to add nursing facility care codes to the list of telehealth services for CY 2009, as requested in 2005.

Response:

Section 149 of the MIPPA did not add any services to the approved telehealth list. Currently, telehealth may substitute for a face-to-face, “hands on” encounter for professional consultations, office visits, office psychiatry services, and a limited number of other PFS services that we have determined to be appropriate for telehealth. We will continue to review requests for additions to this list using our existing criteria.

Telehealth is a delivery mechanism for otherwise payable Part B services. Although the requested nursing facility services are not on the approved telehealth list, we will pay eligible distant site physicians or practitioners for eligible Medicare telehealth services if the service is separately payable under the PFS when furnished in a face-to-face encounter at a SNF effective January 1, 2009.

Since we believed it was not relevant to add these codes when SNFs were not eligible originating sites, we did not include a full review of these codes in the CY 2007 PFS proposed rule or final rule with comment period. We also note that in considering nursing facility care for telehealth, we would need to carefully evaluate the use of telehealth for the personal visits that are currently required under § 483.40, (which are billed using procedure codes included in this request). Overall, we believe that it would be more appropriate to consider the addition of nursing facility care services for telehealth through full notice and comment procedures.

In the CY 2010 PFS proposed rule, we will address the request to add nursing facility care services to the list of approved telehealth services, as received in 2005. In light of the previous request to add these services and the new legislation adding SNFs as permissible telehealth originating sites, we will accept additional information in support of this request for consideration in the CY 2010 proposed rule if received prior to December 31, 2008.

Comment:

We received a request to add health and behavior assessment and intervention codes (as described by HCPCS codes 96150 through 96154) to the list of approved telehealth services.

Response:

Requests submitted before the end of CY 2008 will be considered for the CY 2010 proposed rule. Requestors should be advised that each request to add a service to the list of Medicare telehealth services must include any supporting documentation the requestor wishes us to consider as we review the request. For more information on submitting a request for an addition to the list of Medicare telehealth services, including where to directly mail these requests, visit our Web site at

http://www.cms.hhs.gov/telehealth/.

E. Specific Coding Issues Related to the Physician Fee Schedule

1. Payment for Preadministration-Related Services for Intravenous Infusion of Immune Globulin

In the CY 2009 PFS proposed rule (73 FR 38518), we proposed to discontinue payment for HCPCS code G0332,

Services for intravenous infusion of immunoglobulin prior to administration (this service is to be billed in conjunction with administration of immunoglobulin),

for services furnished after December 31, 2008.

Immune globulin is a complicated biological product that is purified from human plasma obtained from human plasma donors. In past years, there have been issues reported with the supply of intravenous immune globulin (IVIG) due to numerous factors including decreased manufacturing capacity, increased usage, more sophisticated

processing steps, and low demand for byproducts from IVIG fractionation.

When IVIG is furnished to a patient in a physician's office, three different payments are usually recognized: payment for the IVIG product itself (described by a HCPCS J code); payment for the administration of the IVIG product (described by one or more CPT codes); and similar payment for the preadministration-related services (HCPCS code G0332). The Medicare payment rates for IVIG products are established through the Part B average sales price (ASP) drug payment methodology.

As explained in detail in the CY 2006, CY 2007 and CY 2008 PFS final rules with comment period (70 FR 70218 to 70221, 71 FR 69678 to 69679, and 72 FR 66254 to 66255, respectively), we created, in 2006, a temporary code in order to pay separately for the IVIG preadministration-related services in order to assist in ensuring appropriate access to IVIG during a period of market instability. Part of this instability was due to the implementation of the new ASP payment methodology for IVIG drugs which began in 2005. The payment for preadministration-related services was continued in 2007 and 2008 because of continued reported instability in the IVIG marketplace. The preadministration-related payment was designed to pay the physician practice for the added costs of obtaining adequate supplies of the appropriate IVIG product and scheduling the patient infusion during a period of market uncertainty.

The PFS rates for the pre-administration service codes were $72, $75, and $75 respectively in 2006, 2007, and 2008.

In the CY 2009 PFS proposed rule, we noted that the Office of the Inspector General's (OIG) study on the availability and pricing of IVIG published in a April 2007 report entitled, “Intravenous Immune Globulin: Medicare Payment and Availability (OEI-03-05-00404),” found that for the third quarter of CY 2006, just over half of IVIG sales to hospitals and physicians were at prices below Medicare payment amounts. Relative to the previous three quarters, this represented a substantial increase of the percentage of sales with prices below Medicare amounts. During the third quarter of 2006, 56 percent of IVIG sales to hospitals and over 59 percent of IVIG sales to physicians by the largest 3 distributors occurred at prices below the Medicare payment amounts. We reviewed national claims data for IVIG drug utilization as well as utilization of the preadministration-related services HCPCS code. The data show modest increases in the utilization of IVIG drugs and the preadministration-related services code, which suggest that IVIG pricing and access may be improving.

In the CY 2009 PFS proposed rule, we noted that these factors, taken as a whole, suggested a lessening of the instability of the IVIG market. As a result of these developments, we proposed to discontinue the preadministration-related service payment in 2009 for HCPCS code G0332. For CY 2009, under the Outpatient Prospective Payment System (OPPS), a proposal was made to package payment for HCPCS code G0332 (73 FR 41457).

The following is a summary of the comments received and our responses.

Comment:

We received several comments from beneficiaries, patient advocate groups, manufacturers, and physicians. Most commenters opposed the elimination of the preadministration-related services payment. A few commenters requested that the preadministration-related services payment become permanent for both the PFS and the OPPS. Some commenters stated that the market conditions for IVIG are not fundamentally different than they were when CMS initially instituted the preadministration-related services payment in CY 2006. The commenters requested that CMS continue the separate payment until there is more stability in the IVIG market. Several commenters stated that the information CMS presented in the CY 2009 PFS proposed rule did not conclusively prove that the IVIG market was stabilizing. The commenters stated that significant access problems remain.

In response to the findings of the OIG report, some commenters stated that the lag inherent in the ASP pricing system may have played a role in substantially increasing the percentage of IVIG sales at prices below the Medicare payment amounts in the third quarter of 2006. The preadministration-related service fee was cited as providing some assistance to physicians and hospitals that are experiencing problems obtaining IVIG. Several commenters noted that the OIG report could be interpreted as leaving a large percent of hospitals and physicians unable to acquire IVIG at prices below Medicare's payment amounts. Many commenters stated that they do not believe the introduction of new brand-specific reporting codes for IVIG will result in a more stable marketplace.

One commenter presented patient surveys conducted in CYs 2006, 2007 and 2008 which described access limitations and shifts in the site of service. These surveys were limited in size and surveyed only patients receiving IVIG for primary immune deficiency. Another commenter referred to a report on IVIG issued in February 2007 titled,

“Analysis of Supply, Distribution, Demand and Access Issues Associated with Immune Globulin Intravenous”

prepared by the Eastern Research Group under contract (Contract No. HHSP23320045012XI) to the Assistant Secretary of Planning and Evaluation in the U.S. Department of Health and Human Services and cited this report as an important source of information on IVIG usage and patient access.

Response:

The separate payment for IVIG preadministration-related service was designed to compensate the physician practice for the additional, unusual, and temporary costs associated with obtaining IVIG products and scheduling patient infusions during a temporary period of market instability. This payment was never intended to subsidize payment for drugs made under the ASP system.

In the CY 2009 PFS proposed rule, we referred to data from the OIG study that indicated that for the third quarter of 2006, just over half of IVIG sales to hospitals and physicians were at prices below Medicare payment amounts. Relative to the previous three quarters, this represented a substantial increase of the percentage of sales with prices below Medicare amounts. We agree with the commenters that it is likely that increased ASP payments were the result of previous price increases from past quarters influencing future ASP data. Furthermore, the new HCPCS codes for IVIG products allow the physician to report and receive payment for the specific product furnished to the patient. We stated clearly in the CY 2006 PFS final rule with comment period that the preadministration-related services payment policy was a temporary measure to pay physicians for the unusual and temporary costs associated with procuring IVIG. We expected that these costs would decline over time as practices became more familiar with the nuances of the IVIG market and the availability of the limited primary and secondary suppliers in their areas.

We did not reference the report conducted by the Eastern Research Group (Contract No. HHSP23320045012XI) in the proposed rule. As the commenter noted, this report provides important comprehensive background on the IVIG marketplace. For example, it provides an analysis of IVIG supply and distribution, and an analysis of the

demand for and utilization of IVIG products. This report describes how IVIG is administered and paid and includes information from the industry and others on physician and patient problems with access to IVIG. The study is a collection of multi-source information that provides an understanding of the IVIG marketplace. One limitation of the study is it depicts the market only up through the first quarter of 2006 and it does not have detailed information on IVIG pricing as the OIG report did. The OIG report also contains data from a later time period because it includes data through the third quarter of 2006.

We note, based on the information that follows, that the IVIG market today appears more stable than it was in CY 2006. We have reviewed national claims data for IVIG drug utilization, as well as the utilization of the preadministration-related services HCPCS code. These data show a modest increase in the utilization of IVIG and the preadministration-related services code in both physicians' offices and hospital outpatient departments from CY 2006 to CY 2007, after a period of decreased IVIG utilization in physicians' offices with a shift of IVIG infusions to the hospital outpatient department in the previous year, which suggests that IVIG pricing and access may be improving.

National Medicare claims history data show that there were about 3.1 million units of IVIG administered in physicians' offices in CY 2006, and 7.3 million units in hospital outpatient departments. In CY 2007, those numbers rose to estimates of 3.3 million units and 8.1 million units in the office and hospital outpatient department settings, respectively. Under the OPPS, the total number of days of IVIG administration increased modestly from CY 2006 to CY 2007, from 113,000 to 119,000. Aggregate allowed IVIG charges in the physician's office setting for CY 2006 were $82 million, while total payments (including beneficiary copayments) under the OPPS were $184 million for the same time period. In CY 2007, aggregate allowed charges in the physician's office setting are estimated at $8 million, while total OPPS payments are estimated at $246 million.

In summary, beginning in CY 2007, IVIG utilization increased modestly in both the physician's office setting and the hospital outpatient department, after a prior shift to the hospital and away from the physicians' offices, presumably reflecting increasing availability of IVIG and appropriate payment for the drug in both settings.

According to information on the Plasma Protein Therapeutics Association (PPTA) Web site regarding the supply of IVIG, in the past year, while the supply has spiked at various times throughout the year, the supply has remained above or near the 12-month moving average. While we acknowledge that the supply is only one of several factors that influence the market, we believe that an adequate supply is one significant factor that contributes to better access to IVIG for patients.

Therefore, because we believe that the reported transient market conditions that led us to adopt the separate payment for IVIG preadministration-related services have improved, we believe that continuation of the separate payment for preadministration services beyond CY 2008 is not warranted.

After consideration of the public comments received, we are finalizing our CY 2009 proposal, without modification, to discontinue separate payment under the PFS for IVIG preadministration-related services described by HCPCS code G0332. The treatment of payment for preadministration-related ser

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