[Federal Register Volume 75, Number 133 (Tuesday, July 13, 2010)]
[Proposed Rules]
[Pages 40039-40709]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15900]



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Part II

Book 2 of 2 Books

Pages 40039-40718





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 409, et al.



Medicare Program; Payment Policies Under the Physician Fee Schedule and 
Other Revisions to Part B for CY 2011; Proposed Rule

Federal Register / Vol. 75, No. 133 / Tuesday, July 13, 2010 / 
Proposed Rules

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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, and 424

[CMS-1503-P]
RIN 0938-AP79


Medicare Program; Payment Policies Under the Physician Fee 
Schedule and Other Revisions to Part B for CY 2011

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule addresses proposed 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 addresses, implements or 
discusses certain provisions of both the Affordable Care Act and the 
Medicare Improvements for Patients and Providers Act of 2008. In 
addition, this proposed rule discusses payments under the Ambulance Fee 
Schedule, Clinical Laboratory Fee Schedule, payments to ESRD 
facilities, and payments for Part B drugs. Finally, the proposed rule 
includes a discussion regarding the Chiropractic Services Demonstration 
program, the Competitive Bidding Program for Durable Medical Equipment 
and Provider and Supplier Enrollment Issues associated with Air 
Ambulances. (See the Table of Contents for a listing of the specific 
issues addressed in this proposed rule.)

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on August 24, 2010.

ADDRESSES: In commenting, please refer to file code CMS-1503-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``submitting a comment.''
    2. 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-1503-P, 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.
    3. 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-1503-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey 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.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT: 
Rebecca Cole, (410) 786-4497, for issues related to physician payment 
and for all other issues not identified below.
Cheryl Gilbreath, (410) 786-5919, for issues related to payment for 
covered outpatient drugs and biologicals.
Roechel Kujawa, (410) 786-9111, for issues related to ambulance 
services.
Glenn McGuirk, (410) 786-5723, for clinical laboratory issues.
Randall Ricktor, (410) 786-4632, for Federally Qualified Health Center 
Issues.
Pauline Lapin, (410) 786-6883, for issues related to the chiropractic 
services demonstration BN issue.
Troy Barsky, (410)786-8873, or Kristin Bohl, (410)786-8680, for issues 
related to physician self-referral.
Troy Barsky, (410)786-8873, or Fred Grabau (410)786-0206, for issues 
related to timely filing rules.
Henry Richter, (410)786-4562, or Lisa Hubbard, (410)786-5472, for 
issues related to renal dialysis provisions and payments for end-stage 
renal disease facilities.
Diane Stern, (410)786-1133, for issues related to the physician quality 
reporting initiative and incentives for e-prescribing.
Sheila Roman, 410-786-6004, or Pamela Cheetham, 410-786-2259, for 
issues related to the Physician Resource Use Feedback Program and 
value-based purchasing.
Joel Kaiser, (410)786-4499, for issues related to the DME provisions.
Jim Bossenmeyer, (410)786-9317, for issues related to provider and 
supplier enrollment issues.

SUPPLEMENTARY INFORMATION: 
    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 discussed exclusively in section V. of 
this proposed rule.

I. Background
    A. Development of the Relative Value System

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    1. Work RVUs
    2. Practice Expense Relative Value Units (PE RVUs)
    3. Resource-Based Malpractice (MP) 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 Rule for the Physician Fee Schedule
    A. Resource-Based Practice Expense (PE) Relative Value Units 
(RVUs)
    1. Overview
    2. Practice Expense Methodology
    a. Direct Practice Expense
    b. Indirect Practice Expense per Hour Data
    c. Allocation of PE to Services
    (i) Direct Costs
    (ii) Indirect Costs
    d. Facility and Nonfacility Costs
    e. Services with Technical Components (TCs) and Professional 
Components (PCs)
    f. Alternative Data Sources and Public Comments on Final Rule 
for 2010
    g. PE RVU Methodology
    (i) Setup File
    (ii) Calculate the Direct Cost PE RVUs
    (iii) Create the Indirect Cost PE RVUs
    (iv) Calculate the Final PE RVUs
    (v) Setup File Information
    (vi) Equipment Cost per Minute
    3. Proposed PE Revisions for CY 2011
    a. Equipment Utilization Rate
    b. HCPCS Code-Specific PE Proposals
    (1) Biohazard Bags
    (2) PE Inputs for Professional Component (PC) Only and Technical 
Component (TC) Only Codes Summing to Global Only Codes
    (3) Equipment Time Inputs for Certain Diagnostic Tests
    (4) Cobalt-57 Flood Source
    (5) Venom Immunotherapy
    (6) Equipment Redundancy
    (7) Equipment Duplication
    (8) Establishing Overall Direct PE Supply Price Inputs Based on 
Unit Prices and Quantities
    c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE 
Inputs
    (1) Electrogastrography and Esophageal Function Test
    (2) 64-Slice CT Scanner and Software
    (3) Cystometrogram
    (4) Breath Hydrogen Test
    (5) Radiographic Fluoroscopic Room
    d. Referral of Existing CPT Codes for AMA RUC Review
    e. Updating Equipment and Supply Price Inputs for Existing Codes
    B. Malpractice Relative Value Units (RVUs)
    1. Background
    2. Malpractice RVUs for New and Revised Services Effective 
Before the Next 5-Year Review
    3. Revised Malpractice RVUs for Selected Disc Arthroplasty 
Services
    C. Potentially Misvalued Codes Under the Physician Fee Schedule
    1. Valuing Services Under the PFS
    2. Identifying, Reviewing, and Validating the RVUs of 
Potentially Misvalued Services Under the PFS
    a. Background
    b. Progress in Identifying and Reviewing Potentially Misvalued 
Codes
    c. Validating RVUs of Potentially Misvalued Codes
    3. CY 2011 Identification and Review of Potentially Misvalued 
Services
    a. Codes on the Multi-Specialty Points of Comparison List
    b. Codes With Low Work RVUs Commonly Billed in Multiple Units 
Per Single Encounter
    c. Codes With High Volume and Low Work RVUs
    d. Codes With Site-of-Service-Anomalies
    e. Codes With ``23-hour'' Stays
    4. Expanding the Multiple Procedure Payment Reduction (MPPR) 
Policy to Additional Nonsurgical Services
    a. Background
    b. Proposed CY 2011 Expansion of the Imaging Technical Component 
MPPR Policy to Additional Combinations of Imaging Services
    c. Proposed CY 2011 Expansion of the MPPR Policy to Therapy 
Services
    5. High Cost Supplies
    a. Background
    b. Future Updates to the Prices of High-Cost Supplies
    D. Geographic Practice Cost Indices (GPCIs)
    1. Background
    2. GPCI Update
    a. Physician Work GPCIs
    b. Practice Expense GPCIs
    (1) The Affordable Care Act Requirements for PE GPCIs
    (2) Summary of CY 2011 Proposed PE GPCIs
    c. Malpractice GPCIs
    d. General GPCI Update Process
    3. Payment Localities
    E. Physician Fee Schedule Update for CY 2011
    1. Rebasing the Medicare Economic Index (MEI)
    a. Background
    b. Use of More Current Data
    c. Rebasing and Revising Expense Categories in the MEI
    (1) Developing the Weights for Use in the MEI
    (2) Physician's Own Time
    (3) Physician's Practice Expenses
    (A) Non-Physician Employee Compensation
    (B) Office Expenses
    (C) Professional Liability Insurance (PLI) Expense
    (D) Medical Equipment Expenses
    (E) Medical Supplies Expenses
    (F) All Other Professional Expenses
    d. Selection of Price Proxies for Use in the MEI
    (1) Expense Categories in the MEI
    (A) Physician's Own Time (Physician Compensation)
    (B) Nonphysician Employee Compensation
    (C) Utilities
    (D) Chemicals
    (E) Paper
    (F) Rubber and Plastics
    (G) Telephone
    (H) Postage
    (I) All Other Labor-Intensive Services
    (J) Fixed Capital
    (K) Moveable Capital
    (L) Professional Liability Insurance
    (M) Medical Equipment
    (N) Other Professional Expenses
    (2) Productivity Adjustment to the MEI
    e. Results of Rebasing
    f. Adjustments to the RVU Shares to Match the Proposed Rebased 
MEI Weights
III. Code-Specific Issues for the PFS
    A. Therapy Services
    1. Outpatient Therapy Caps for CY 2011
    2. Alternatives to Therapy Caps
    a. Background
    b. Current Activities
    c. Potential Short-Term Approaches to Therapy Caps
    B. Diabetes Self-Management Training (DSMT) Services (HCPCS 
Codes G0108 and G0109)
    1. Background
    2. Proposed Payment for DSMT Services
    C. End-State Renal Disease Related Services for Home Dialysis 
(CPT Codes 90963, 90964, 90965, and 90966)
    1. End-Stage Renal Disease Home Dialysis Monthly Capitation 
Payment Services (CPT Codes 90963, 90964, 90965, and 90966)
    2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 
Through 90970)
    D. Portable X-Ray Set-Up (HCPCS Code Q0092)
    E. Pulmonary Rehabilitation Services (HCPCS Code G0424)
    F. Application of Tissue-Cultured Skin Substitutes to Lower 
Extremities (HCPCS Codes GXXX1 and GXXX2)
    G. Canalith Repositioning (CPT Code 95992)
    H. Intranasal/Oral Immunization Codes (CPT Codes 90467, 90468, 
90473, and 90474)
    I. Refinement Panel Process
    J. Remote Cardiac Monitoring Services (CPT Codes 93012, 93229, 
93268, and 93271)
IV. Medicare Telehealth Services for the Physician Fee Schedule
    A. Billing and Payment for Telehealth Services
    1. History
    2. Current Telehealth Billing and Payment Policies
    B. Requests for Adding Services to the List of Medicare 
Telehealth Services
    C. Submitted Requests for Addition to the List of Telehealth 
Services for CY 2011
    (1) Individual KDE Services
    (2) Individual DSMT Services
    (3) Group KDE, MNT, DSMT, and HBAI Services
    (4) Initial, Subsequent, and Discharge Day Management Hospital 
Care Services
    (5) Initial, Subsequent, Discharge Day Management, and Other 
Nursing Facility Care Services
    (6) Neuropsychological Testing Services
    (7) Speech-Language Pathology Services
    (8) Home Wound Care Services
    D. Summary of CY 2011 Telehealth Proposals
V. Provisions of the Patient Protection and Affordable Care Act of 
2010
    A. Section 3002: Improvements to the Physician Quality Reporting 
System

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    B. Section 3003: Improvements to the Physician Feedback Program 
and Section 3007: Value-Based Payment Modifier Under the Physician 
Fee Schedule
    1. Background
    2. Effect of the Patient Protection and Affordable Care Act on 
the Program
    3. Implementation of Sections 3003 and 3007 of the Affordable 
Care Act
    4. Comments Sought on Specific Policy Topics Related to Both 
PPACA Sections 3003 and 3007
    a. Risk Adjustment
    b. Attribution
    c. Benchmarking and Peer Groups
    d. Cost and Quality Measures and Composite Measurement
    C. Section 3102: Extension of the Work Geographic Index Floor 
and Revisions to the Practice Expense Geographic Adjustment Under 
the Medicare Physician Fee Schedule, and Protections for Frontier 
States as Amended by Section 10324 of the Affordable Care Act
    D. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    E. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    F. Section 3105: Extension of Ambulance Add-On
    G. Section 3107: Extension of Physician Fee Schedule Mental 
Health Add-On
    H. Section 3108: Permitting Physician Assistants to Order Post-
Hospital Extended Care Services
    I. Section 3111: Payment for Bone Density Tests
    J. Section 3114: Improved Access for Certified Nurse Midwife 
Services
    K. Section 3122: Extension of Medicare Reasonable Costs Payments 
for Certain Clinical Diagnostic Laboratory Tests Furnished to 
Hospital Patients in Certain Rural Areas
    L. Section 3134: Misvalued Codes Under the Physician Fee 
Schedule
    M. Section 3135: Modification of Equipment Utilization Factor 
for Advanced Imaging Services
    1. Adjustment in Practice Expense to Reflect Higher Presumed 
Utilization
    2. Adjustment in Technical Component ``Discount'' on Single-
Session Imaging to Consecutive Body Parts
    N. Section 3136: Revision for Payment for Power-Driven 
Wheelchairs
    a. Payment Rules for Power Wheelchairs
    b. Elimination of Lump Sum Payment for Standard Power 
Wheelchairs
    c. Revision of Payment Amounts for Power Wheelchairs
    O. Section 3139: Payment for Biosimilar Biological Products
    P. Section 3401: Revision of Certain Market Basket Updates and 
Incorporation of Productivity Improvements Into Market Basket 
Updates That Do Not Already Incorporate Such Improvements
    1. ESRD Market Basket Discussion
    2. Productivity Adjustment Regarding Ambulance and Clinical 
Laboratory Fee Schedules
    a. Ambulatory Surgery Centers (ASCs)
    b. Ambulance Fee Schedule (AFS)
    c. Clinical Lab Fee Schedule
    Q. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan
    1. Background
    a. Medicare Coverage of Preventive Physical Examinations and 
Routine Checkups
    b. Requirements for Coverage of an Annual Wellness Visit
    2. Proposed Revisions
    a. Proposed Revisions to Sec.  411.15, Particular Services 
Excluded From Coverage
    b. Proposed Revisions to Part 410, Subpart B--Medical and Other 
Health Services
    (1) Definitions
    (2) Requirements of the First Visit for Personalized Prevention 
Plan Services
    (3) Requirements of Subsequent Visits for Personalized 
Prevention Plan Services
    3. Payment for the Annual Wellness Visit Providing Personalized 
Prevention Plan Services (PPPS)
    R. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    1. Definition of ``Preventive Services''
    2. Deductible and Coinsurance for Preventive Services
    3. Extension of Waiver of Deductible to Services Furnished in 
Connection With or in Relation to a Colorectal Cancer Screening Test 
that Becomes Diagnostic or Therapeutic
    S. Section 5501: Expanding Access to Primary Care Services and 
General Surgery Services
    1. Section 5501(a): Incentive Payment Program for Primary Care 
Services
    a. Background
    b. Proposed Primary Care Incentive Payment Program (PCIP)
    2. Section 5501(b): Incentive Payment Program for Major Surgical 
Procedures Furnished in Health Professional Shortage Areas
    a. Background
    b. Proposed HPSA Surgical Incentive Payment Program (HSIP)
    3. Sections 5501(a) and (b) of the Affordable Care Act and 
Payment for Critical Access Hospital Professional Services Under the 
Optional Method
    T. Section 6003: Disclosure Requirements for In-Office Ancillary 
Services Exception to the Prohibition on Physician Self-Referral for 
Certain Imaging Services
    1. Background
    2. Proposed Disclosure Requirement
    U. Section 6404: Maximum Period for Submission of Medicare 
Claims Reduced to Not More Than 12 Months
    1. Background
    2. Provisions of Affordable Care Act
V. Section 6410 and MIPPA: Adjustments to the Medicare Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive 
Acquisition Program
    1. Background
    2. Subdividing Large MSAs Under Round 2
    3. Exclusions of Certain Areas After Round 2 and Prior to 2015
    4. Expansion of Round 2
    W. Section 10501(i)(3)--Proposed Collection of HCPCS Data for 
Development and Implementation of a Prospective Payment System for 
the Medicare Federally Qualified Health Center Program
VI. Other Provisions of the Proposed Regulation
    A. Part B Drug Payment: Average Sales Price (ASP) Issues
    1. ``Carry Over'' ASP
    2. Partial Quarter ASP Data
    3. Determining the Payment Amount for Drugs and Biologicals 
Which Include Intentional Overfill
    4. WAMP/AMP
    5. Price Substitutions
    a. AMP threshold
    b. AMP Price Substitution
    B. Ambulance Fee Schedule: Proposed Policy for Reporting Units 
When Billing for Ambulance Fractional Mileage
    1. Policy for Reporting Units When Billing for Ambulance 
Fractional Mileage or Other Services
    a. History of Medicare Ambulance Services
    (1) Statutory Coverage of Ambulance Services
    (2) Medicare Regulations for Ambulance Services
    b. Mileage Reporting
    (1) Background and Current Process for Reporting Ambulance 
Mileage
    (2) Potential for Inaccuracies in Reporting Units and Associated 
Risks
    (3) Billing of Fractional Units for Mileage
    C. Clinical Laboratory Fee Schedule: Signature on Requisition
    D. Discussion of Chiropractic Services Demonstration
    E. Provisions Related to Payment for Renal Dialysis Services 
Furnished by End-Stage Renal Disease (ESRD) Facilities
    1. CY 2005 Provisions
    2. CY 2006 Provisions
    3. CY 2007 Provisions
    4. CY 2008 Provisions
    5. CY 2009 Updates
    6. CY 2010 Updates
    7. Proposals for CY 2011
    a. MIPPA Provisions
    b. Affordable Care Act Provision
    8. Proposed Update to the Drug Add-On Adjustment to the 
Composite Rate
    a. Estimating Growth in Expenditures for Drugs and Biologicals 
for CY 2010
    b. Estimating Growth in Expenditures for Drugs and Biologicals 
in CY 2011
    c. Estimating Per Patient Growth
    d. Applying the Proposed Growth Update to the Drug Add-On 
Adjustment
    e. Proposed Update to the Drug Add-On Adjustment
    f. Proposed Update to the Geographic Adjustments to the 
Composite Rate
    g. Proposed Updates to Core-Based Statistical Area (CBSA) 
Definitions
    h. Proposed Updated Wage Index Values
    i. Reduction to the ESRD Wage Index Floor
    j. Proposed Wage Index Values for Areas With No Hospital Data
    k. Budget Neutrality Adjustment
    l. ESRD Wage Index Tables
    F. Issues Related to the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA)
    1. Section 131: Physician Payment, Efficiency, and Quality 
Improvements--

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Physician Quality Reporting Initiative (PQRI)
    a. Program Background and Statutory Authority
    b. Incentive Payments for the 2011 PQRI
    c. Proposed 2011 Reporting Periods for Individual Eligible 
Professionals
    d. Proposed 2011 PQRI Reporting Mechanisms for Individual 
Eligible Professionals
    (1) Proposed Requirements for Individual Eligible Professionals 
Who Choose the Claims-Based Reporting Mechanism
    (2) Proposed Requirements for Individual Eligible Professionals 
Who Choose the Registry-Based Reporting Mechanism
    (3) Proposed Requirements for Individual Eligible Professionals 
Who Choose the EHR-Based Reporting Mechanism
    (4) Proposed Qualification Requirements for Registries
    (5) Proposed Qualification Requirements for EHR Vendors and 
Their Products
    e. Proposed Criteria for Satisfactory Reporting of Individual 
Quality Measures for Individual Eligible Professionals
    f. Proposed Criteria for Satisfactory Reporting Measures Groups 
for Individual Eligible Professionals
    g. Proposed Reporting Option for Satisfactory Reporting on 
Quality Measures by Group Practices
    (1) Group Practice Reporting Option--GPRO I
    (2) Process for Physician Group Practices to Participate as 
Group Practices and Criteria for Satisfactory Reporting
    h. Statutory Requirements and Other Considerations for 2011 PQRI 
Measures
    (1) Statutory Requirements for 2011 PQRI Measures
    (2) Other Considerations for Measures Proposed for Inclusion in 
the 2011 PQRI
    i. Proposed 2011 PQRI Quality Measures for Individual Eligible 
Professionals
    (1) Proposed 2011 Individual Quality Measures Selected From the 
2010 PQRI Quality Measures Set Available for Claims Based Reporting 
and Registry-Based Reporting
    (2) Proposed 2011 Individual Quality Measures Selected From the 
2010 PQRI Quality Measures Set Available for Registry Based 
Reporting Only
    (3) New Individual Quality Measures Selected for Proposed for 
2011
    (4) Proposed 2011 Measures Available for EHR-Based Reporting
    (5) Measures Proposed for Inclusion in 2011 Measures Groups
    j. Proposed 2011 PQRI Quality Measures for Physician Groups 
Selected to Participate in the Group Practice Reporting Option
    k. Public Reporting of PQRI Data
    l. Affordable Care Act Extension of Incentive for PQRI Program
    m. Affordable Care Act Timely Feedback Reports
    n. Affordable Care Act Informal Appeals Process
    o. Affordable Care Act Maintenance of Certification Program
    p. Affordable Care Act Physician Compare Web Site
    q. Affordable Care Act Integration of PQRI EHR Measures and 
HITECH Measures in Years After 2011
    2. Section 132: Incentives for Electronic Prescribing (eRx)--The 
Electronic Prescribing Incentive Program
    a. Program Background and Statutory Authority
    b. The 2011 Reporting Period for the eRx Incentive Program
    c. Proposed Criteria for Determination of Successful Electronic 
Prescriber for Eligible Professionals
    (1) Reporting the Electronic Prescribing Measure
    (2) The Reporting Denominator for the Electronic Prescribing 
Measure
    (3) Qualified Electronic Prescribing System--Required 
Functionalities and Part D eRx Standards
    (4) The Reporting Numerator for the Electronic Prescribing 
Measure
    (5) Criteria for Successful Reporting of the Electronic 
Prescribing Measure
    d. Determination of the 2011 Incentive Payment Amount for 
Individual Eligible Professionals Who Are Successful Electronic 
Prescribers
    e. Proposed Reporting Option for Satisfactory Reporting of the 
Electronic Prescribing Measure by Group Practices
    (1) Definition of ``Group Practice''
    (2) Process for Group Practices to Participate as Group 
Practices and Criteria for Successful Reporting of the Electronic 
Prescribing Measure by Group Practices
    f. Public Reporting of Names of Successful Electronic 
Prescribers
    G. DMEPOS Competitive Bidding Program Issues
    1. Implementation of a National Mail Order Competitive Bidding 
Program for Diabetic Testing Supplies
    a. Revision of the Definition of ``Mail Order''
    (1) Legislative and Regulatory History of the Medicare Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
Competitive Bidding Program
    (2) National Mail Order Competitive Bidding Program
    (3) The MIPPA and the Medicare DMEPOS Competitive Bidding 
Program
    (4) Competition for Mail Order Diabetic Supplies Under Round 1 
of the Medicare DMEPOS Competitive Bidding Program
    b. Overview of Proposed Rule
    c. Future Competitions for Diabetic Testing Supplies
    d. Definition of Mail Order Item
    e. Special Rule in Case of National Mail Order Competition for 
Diabetic Testing Strips
    f. Anti-Switching Rule in Case of National Mail Order 
Competition for Diabetic Test Strips
    2. Off-the-Shelf (OTS) Orthotics Exemption
    3. Changes to Payment for Oxygen and Oxygen Equipment
    a. Background
    b. Furnishing Oxygen Equipment After the 36-Month Rental Period 
(Cap)
    c. Furnishing Oxygen Equipment During the 36-Month Rental Period 
(Cap)
    4. Grandfathering Rules Resulting in Extra Payments to Contract 
Suppliers Under the DMEPOS Competitive Bidding Program
    5. Appeals Process
    a. Background
    b. Proposed Appeals Process
    (1) Purpose and Definitions: (Sec.  414.402)
    (2) Applicability
    (3) Contract Termination
    (4) Notice of Termination
    (5) Corrective Action Plan
    (6) Right to Request a Hearing by the CBIC Hearing Officer
    (7) Scheduling of the Hearing
    (8) Burden of Proof
    (9) Role of the Hearing Officer
    (10) CMS's Final Determination
    (11) Effective Date of the Contract Termination
    (12) Effect of Contract Termination
    H. Provider and Supplier Enrollment Issue: Air Ambulance 
Provision
    I. Technical Corrections
    1. Physical Therapy, Occupational Therapy, and Speech-Language 
Pathology
    2. Scope of Benefits
VII. Collection of Information Requirements
VIII. Response to Comments
IX. Regulatory Impact Analysis
    A. RVU Impacts
    1. Resource Based Work, PE, and Malpractice RVUs
    2. CY 2011 PFS Impact Discussion
    a. Changes in RVUs
    b. Combined Impact
    B. Geographic Practice Cost Indices (GPCIs)
    C. Rebasing and Revising of the MEI
    D. The Affordable Care Act Provisions
    1. Section 3103: Extension of Exceptions Process for Medicare 
Therapy Caps
    2. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services
    3. Sections 3105 and 10311: Extension of Ambulance Add-Ons
    4. Section 3107: Extension of Physician Fee Schedule Mental 
Health Add-On
    5. Section 3111: Payment for Bone Density Tests
    6. Section 3122: Extension of Medicare Reasonable Costs Payments 
for Certain Clinical Diagnostic Laboratory Tests Furnished to 
Hospital Patients in Certain Rural Areas
    7. Section 3135: Modification of Equipment Utilization Factor 
for Advanced Imaging Services
    8. Section 3136: Revisions in Payments for Power Wheelchairs
    9. Section 3401: Revisions of Certain Market Basket Updates and 
Incorporation of Productivity Adjustments
    10. Section 4103: Medicare Coverage of Annual Wellness Visit 
Providing a Personalized Prevention Plan
    11. Section 4104: Removal of Barriers to Preventive Services in 
Medicare
    12. Section 5501: Expanding Access to Primary Care Services and 
General Surgery Services
    13. Section 6003: Disclosure Requirements for In-Office 
Ancillary Services Exception to the Prohibition of Physician Self-
referral for Certain Imaging Services

[[Page 40044]]

    14. Section 6404: Maximum Period for Submission of Medicare 
Claims Reduced to Not More Than 12 Months
    E. Other Provisions of the Proposed Regulation
    1. Part B Drug Payment: ASP Issues
    2. Ambulance Fee Schedule: Proposed Policy for Reporting Units 
When Billing for Ambulance Fractional Mileage
    3. Chiropractic Services Demonstration
    4. Renal Dialysis Services Furnished by ESRD Facilities
    5. Section 131(b) of the MIPPA: Physician Payment, Efficiency, 
and Quality Improvements--Physician Quality Reporting Initiative 
(PQRI)
    6. Section 132 of the MIPPA: Incentives for Electronic 
Prescribing (eRx)--The eRx Incentive Program
    7 RHC/FQHC Issues
    8. Durable Medical Equipment-Related Issues
    a. Off-the-Shelf (OTS) Orthotics Exemption
    b. Changes to Payment for Oxygen Equipment
    F. Alternatives Considered
    G. Impact on Beneficiaries
    H. Accounting Statement
Regulation Text
Addendum A--Explanation and Use of Addendum B
Addendum B--Proposed Relative Value Units and Related Information 
Used in Determining Medicare Payments for CY 2011
Addendum C--[Reserved]
Addendum D--Proposed CY 2011 Geographic Adjustment Factors (GAFs)
Addendum E--Proposed CY 2011 Geographic Practice Cost Indices 
(GPCIs) by State and Medicare Locality
Addendum F--Proposed CY 2011 Diagnostic Imaging Services Subject to 
the Multiple Procedure Payment Reduction
Addendum G--CPT/HCPCS Imaging Codes Defined by Section 5102(b) of 
the DRA
Addendum H--Proposed CY 2011 ``Always Therapy'' Services* Subject to 
the Multiple Procedure Payment Reduction
Addendum I--[Reserved]
Addendum J--[Reserved]
Addendum K--Proposed CY 2011 ESRD Wage Index for Urban Areas Based 
on CBSA Labor Market Areas
Addendum L--Proposed CY 2011 ESRD Wage Index for Rural Areas Based 
on CBSA Labor Market Areas

Acronyms

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

AA Anesthesiologist assistant
AACVPR American Association of Cardiovascular and Pulmonary 
Rehabilitation
AANA American Association of Nurse Anesthetists
ABMS American Board of Medical Specialties
ABN Advanced Beneficiary Notice
ACA ``Affordable Care Act''
ACC American College of Cardiology
ACGME Accreditation Council on Graduate Medical Education
ACLS Advanced cardiac life support
ACR American College of Radiology
AED Automated external defibrillator
AFROC Association of Freestanding Radiation Oncology Centers
AHA American Heart Association
AHFS-DI American Hospital Formulary Service--Drug Information
AHRQ [HHS'] Agency for Healthcare Research and Quality
AMA American Medical Association
AMA-DE American Medical Association Drug Evaluations
AMP Average manufacturer price
AO Accreditation organization
AOA American Osteopathic Association
APA American Psychological Association
APTA American Physical Therapy Association
ARRA American Recovery and Reinvestment Act (Pub. L. 111-5)
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 Basic Life support
BN Budget neutrality
BPM Benefit Policy Manual
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
CBIC Competitive Bidding Implementation Contractor
CBP Competitive Bidding Program
CBSA Core-Based Statistical Area
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
COPD Chronic obstructive pulmonary disease
CORF Comprehensive Outpatient Rehabilitation Facility
COS Cost of service
CPEP Clinical Practice Expert Panel
CPI Consumer Price Index
CPI-U Consumer price index for urban customers
CPR Cardiopulmonary resuscitation
CPT [Physicians'] Current Procedural Terminology (4th Edition, 2002, 
copyrighted by the American Medical Association)
CR Cardiac rehabilitation
CRNA Certified registered nurse anesthetist
CRP Canalith repositioning
CRT Certified respiratory therapist
CSW Clinical social worker
CY Calendar year
DEA Drug Enforcement Agency
DHS Designated health services
DME Durable medical equipment
DMEPOS Durable medical equipment, prosthetics, orthotics, and 
supplies
DOQ Doctor's Office Quality
DOS Date of service
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
FR Federal Register
GAF Geographic adjustment factor
GAO General Accounting Office
GEM Generating Medicare [Physician Quality Performance Measurement 
Results]
GFR Glomerular filtration rate
GPO Group purchasing organization
GPCI Geographic practice cost index
HAC Hospital-acquired conditions
HBAI Health and behavior assessment and intervention
HCPAC Health Care Professional Advisory Committee
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HDRT High dose radiation therapy
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
HITECH Health Information Technology for Economic and Clinical 
Health Act (Title IV of Division B of the Recovery Act, together 
with Title XIII of Division A of the Recovery Act)
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)
IACS Individuals Access to CMS Systems
ICD International Classification of Diseases

[[Page 40045]]

ICF Intermediate care facilities
ICR Intensive cardiac rehabilitation
ICR Information collection requirement
IDTF Independent diagnostic testing facility
IFC Interim final rule with comment period
IMRT Intensity-Modulated Radiation Therapy
IPPE Initial preventive physical examination
IPPS Inpatient prospective payment system
IRS Internal Revenue Service
ISO Insurance services office
IVD Ischemic Vascular Disease
IVIG Intravenous immune globulin
IWPUT Intra-service work per unit of time
JRCERT Joint Review Committee on Education in Radiologic Technology
KDE Kidney disease education
LCD Local coverage determination
MA Medicare Advantage
MA-PD Medicare Advantage--Prescription Drug Plans
MAV Measure Applicability Validation
MCMP Medicare Care Management Performance
MDRD Modification of Diet in Renal Disease
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
MOC Maintenance of certification
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
MSA Metropolitan statistical area
NBRC National Board for Respiratory Care
NCD National Coverage Determination
NCQDIS National Coalition of Quality Diagnostic Imaging Services
NDC National drug code
NF Nursing facility
NISTA National Institute of Standards and Technology Act
NP Nurse practitioner
NPI National Provider Identifier
NPP Nonphysician practitioner
NQF National Quality Forum
NRC Nuclear Regulatory Commission
OACT [CMS'] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act
ODF Open door forum
OGPE Oxygen generating portable equipment
OIG Office of Inspector General
OMB Office of Management and Budget
ONC [HHS'] Office of the National Coordinator for Health IT
OPPS Outpatient prospective payment system
OSCAR Online Survey and Certification and Reporting
PA Physician assistant
PAT Performance assessment tool
PC Professional component
PCI Percutaneous coronary intervention
PDP Prescription drug plan
PE Practice expense
PE/HR Practice expense per hour
PEAC Practice Expense Advisory Committee
PERC Practice Expense Review Committee
PFS Physician Fee Schedule
PGP [Medicare] Physician Group Practice
PHI Protected health information
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
PPIS Physician Practice Information Survey
PPS Prospective payment system
PPTA Plasma Protein Therapeutics Association
PQRI Physician Quality Reporting Initiative
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
PSA Physician scarcity areas
PT Physical therapy
PTCA Percutaneous transluminal coronary angioplasty
PVBP Physician and Other Health Professional Value-Based Purchasing 
Workgroup
RA Radiology assistant
RBMA Radiology Business Management Association
RFA Regulatory Flexibility Act
RHC Rural health clinic
RIA Regulatory impact analysis
RN Registered nurse
RNAC Reasonable net acquisition cost
RPA Radiology practitioner assistant
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
STARS Services Tracking and Reporting System
TC Technical Component
TIN Tax identification number
TRHCA Tax Relief and Health Care Act of 2006 (Pub. L. 109-432)
TTO Transtracheal oxygen
UPMC University of Pittsburgh Medical Center
USDE United States Department of Education
USP-DI United States Pharmacopoeia-Drug Information
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) are 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. We note that throughout this proposed rule, unless 
otherwise noted, the term ``practitioner'' is used to describe both 
physicians and eligible nonphysician practitioners (such as physician 
assistants, nurse practitioners, clinical nurse specialists, certified 
nurse midwives, psychologists, or social workers) that are permitted to 
furnish and bill Medicare under the PFS for the services under 
discussion.

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, with appropriate adjustment of the

[[Page 40046]]

conversion factor (CF), in a manner to assure that fee schedule amounts 
for anesthesia services are consistent with those for other services of 
comparable value. We established a separate 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 
our review of 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 physicians' 
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 the calendar year (CY) 2007 PFS final rule with comment period 
(71 FR 69624), we revised the methodology for calculating direct PE 
RVUs from the top-down to the bottom-up methodology beginning in CY 
2007 and provided for a 4-year transition for the new PE RVUs under 
this new methodology. This transition ended in CY 2010 and direct PE 
RVUs are calculated in CY 2011 using this methodology, unless otherwise 
noted.
    In the CY 2010 PFS final rule with comment period, we updated the 
PE/hour (HR) data that are used in the calculation of PE RVUs for most 
specialties (74 FR 61749). For this update, we used the Physician 
Practice Information Survey (PPIS) conducted by the AMA. The PPIS is a 
multispecialty, nationally representative, PE survey of both physicians 
and nonphysician practitioners (NPPs) using a survey instrument and 
methods highly consistent with those of the SMS and the supplemental 
surveys used prior to CY 2010. We note that in CY 2010, for oncology, 
clinical laboratories, and independent diagnostic testing facilities 
(IDTFs), we continued to use the supplemental survey data to determine 
PE/HR values (74 FR 61752).
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 Five-Year Review of 
the physician work RVUs was published on November 22, 1996 (61 FR 
59489) and was effective in 1997. The second Five-Year Review was 
published in the CY 2002 PFS final rule with comment period (66 FR 
55246) and was effective in 2002. The third Five-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 Five-Year Review of 
physician work RVUs were addressed in the CY 2008 PFS final rule with 
comment period (72 FR 66360).) The fourth Five-Year Review of physician 
work RVUs was initiated in the CY 2010 PFS final rule with comment 
period where we solicited candidate codes from the public for this 
review (74 FR 61941). Changes due to the fourth Five-Year Review of 
physician work RVUs will be effective January 1, 2012.
    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 bottom-up methodology for determining resource-based PE RVUs and 
transitioned the new methodology over a 4-year period. A comprehensive 
review of PE was undertaken prior to the 4-year transition period for 
the new PE methodology from the top-down to the bottom-up methodology, 
and this transition was completed in CY 2010. In

[[Page 40047]]

CY 2010, we also incorporated the new PPIS data to update the 
specialty-specific PE/HR data used to develop PE RVUs. Therefore, the 
next Five-Year Review of PE RVUs will be addressed in CY 2014.
    In the CY 2005 PFS final rule with comment period (69 FR 66236), we 
implemented the first Five-Year Review of the MP RVUs (69 FR 66263). 
Minor modifications to the methodology were addressed in the CY 2006 
PFS final rule with comment period (70 FR 70153). The second Five-Year 
Review and update of resource-based malpractice RVUs was published in 
the CY 2010 PFS final rule with comment period (74 FR 61758) and was 
effective in CY 2010.
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 revisions to the 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 2009 PFS final rule with comment period 
(73FR 69730), as required by section 133(b) of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 
110-275), the separate budget neutrality (BN) adjustor resulting from 
the third Five-Year Review of physician work RVUs is being applied to 
the CF beginning in CY 2009 rather than to the work RVUs.
    For CY 2010, we adopted a number of new payment policies for which 
we estimated the potential for a redistributive effect under the PFS, 
including the use of the new PPIS data to develop the specialty-
specific PE/HR used for the PE RVUs (74 FR 61749 through 61752) and the 
elimination of the reporting of all CPT consultation codes in order to 
allow for correct and consistent coding and appropriate payment for 
evaluation and management services under the PFS (74 FR 61767 through 
61775). We recognize that clinical experience with these new PFS 
policies has been growing over the first 6 months of CY 2010 and, as we 
seek to improve future PFS payment accuracy for services, we are 
interested in public comments on the perspectives of physicians and 
nonphysician practitioners caring for Medicare beneficiaries under the 
current PFS coding and payment methodologies for physicians' services.

B. Components of the Fee Schedule Payment Amounts

    To calculate the payment for every physicians' 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 expense 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 x GPCI work) + (RVU PE x GPCI PE) + (RVU 
malpractice x GPCI malpractice)] x CF

C. Most Recent Changes to the Fee Schedule

    The CY 2010 PFS final rule with comment period (74 FR 61738) 
implemented changes to the PFS and other Medicare Part B payment 
policies. It also finalized some of the CY 2009 interim RVUs and 
implemented interim RVUs for new and revised codes for CY 2010 to 
ensure that our payment systems are updated to reflect changes in 
medical practice and the relative value of services. The CY 2010 PFS 
final rule with comment period also addressed other policies, as well 
as certain provisions of the MIPPA.
    As required by the statute at the time of its issuance on October 
30, 2009, the CY 2010 PFS final rule with comment period announced the 
following for CY 2010: The PFS update of -21.2 percent; the initial 
estimate for the sustainable growth rate of -8.8 percent; and the CF of 
$28.4061.
    On December 10, 2009, we published a correction notice (74 FR 
65449) to correct several technical and typographical errors that 
occurred in the CY 2010 PFS final rule with comment period. This 
correction notice announced a revised CF for CY 2010 of $28.3895.
    On December 19, 2009, the Department of Defense Appropriations Act, 
2010 (Pub. L. 111-118) was signed into law. Section 1011 of Pub. L. 
111-118 provided a 2-month zero percent update to the CY 2010 PFS 
effective only for dates of service from January 1, 2010 through 
February 28, 2010.
    On March 2, 2010, the Temporary Extension Act of 2010 (Pub. L. 111-
144) was signed into law. Section 2 of Pub. L. 111-144 extended the 
zero percent update to the PFS through March 31, 2010 that was in 
effect for claims with dates of service from January 1, 2010 through 
February 28, 2010.
    In addition, on April 15, 2010, the Continuing Extension Act of 
2010 (Pub. L. 111-157) was signed into law. Section 4 of Public Law 
111-157 extended through May 31, 2010 the zero percent update to the 
PFS that was in effect for claims with dates of services from January 
1, 2010 through March 31, 2010. The law is retroactive to April 1, 
2010.
    In the May 11, 2010 Federal Register (75 FR 26350), we published a 
subsequent correction notice to correct several technical and 
typographical errors that occurred in the CY 2010 PFS final rule with 
comment period and the December 10, 2009 correction notice. The May 11, 
2010 correction notice announced a revised CF for CY 2010 of $28.3895.
    Finally, on March 23, 2010 the Patient Protection and Affordable 
Care Act (Pub. L. 111-148) was signed into law. Shortly thereafter, on 
March 30, 2010, the Health Care and Education Reconciliation Act of 
2010 (Pub. L. 111-152) was signed into law. These two laws are 
discussed in this proposed rule and are collectively referred to as the 
``Affordable Care Act'' (ACA) throughout this proposed rule.

II. Provisions of the Proposed Rule for the Physician Fee Schedule

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

1. Overview
    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. We develop PE RVUs by looking at the 
direct and indirect physician practice resources involved in furnishing 
each service. Direct expense categories include clinical labor, medical 
supplies and medical equipment. Indirect expenses include 
administrative labor, office expense, and all other expenses. The 
sections that follow provide more

[[Page 40048]]

detailed information about the methodology for translating the 
resources involved in furnishing each service into service-specific PE 
RVUs. In addition, we note that 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. Therefore, if revisions to 
the 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. We refer readers to the CY 2010 PFS final rule 
with comment period (74 FR 61743 through 61748) for a more detailed 
history of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
    We use a bottom-up approach to 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 American Medical Association's 
(AMA's) Relative Value Update Committee (RUC). For a detailed 
explanation of the bottom-up direct PE methodology, including examples, 
we refer readers to the Five-Year Review of Work Relative Value Units 
Under the PFS and Proposed Changes to the Practice Expense Methodology 
proposed notice (71 FR 37242) and the CY 2007 PFS final rule with 
comment period (71 FR 69629).
b. Indirect Practice Expense per Hour Data
    We use survey data on indirect practice expenses incurred per hour 
worked (PE/HR) in developing the indirect portion of the PE RVUs. Prior 
to CY 2010, we primarily used the practice expense per hour (PE/HR) by 
specialty that was obtained from the AMA's Socioeconomic Monitoring 
Surveys (SMS). These surveys were conducted from 1995 through 1999. For 
several specialties that collected additional PE/HR data through 
supplemental surveys, we incorporated these data in developing the PE/
HR values used annually.
    While the SMS was not specifically designed for the purpose of 
establishing PE RVUs, we found these data to be the best available at 
the time. The SMS was a multispecialty survey effort conducted using a 
consistent survey instrument and method across specialties. The survey 
sample was randomly drawn from the AMA Physician Masterfile to ensure 
national representativeness. The AMA discontinued the SMS survey in 
1999. As required by the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113), we also established a process by which specialty 
groups could submit supplemental PE data. In the May 3, 2000 Federal 
Register, we issued the Medicare Program; Criteria for Submitting 
Supplemental Practice Expense Survey Data interim final rule (65 FR 
25664) in which we established criteria for acceptance of supplemental 
data. The criteria were modified in the CY 2001 and CY 2003 PFS final 
rules with comment period (65 FR 65380 and 67 FR 79971, respectively). 
In addition to the SMS, we previously used supplemental survey data for 
the following specialties: Cardiology; dermatology; gastroenterology; 
radiology; cardiothoracic surgery; vascular surgery; physical and 
occupational therapy; independent laboratories; allergy/immunology; 
independent diagnostic testing facilities (IDTFs); radiation oncology; 
medical oncology; and urology.
    Because the SMS data and the supplemental survey data were from 
different time periods, we historically inflated them by the Medicare 
Economic Index (MEI) to put them on as comparable a time basis as we 
could when calculating the PE RVUs. This MEI proxy was necessary in the 
past due to the lack of contemporaneous, consistently collected, and 
comprehensive multispecialty survey data.
    The AMA administered a new survey in CY 2007 and CY 2008, the 
Physician Practice Expense Information Survey (PPIS), which was 
expanded (relative to the SMS) to include nonphysician practitioners 
(NPPs) paid under the PFS. The PPIS was designed to update the 
specialty-specific PE/HR data used to develop PE RVUs. The AMA and the 
CMS contractor, The Lewin Group (Lewin), analyzed the PPIS data and 
calculated the PE/HR for physician and nonphysician specialties, 
respectively. The AMA's summary worksheets and Lewin's final report are 
available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=4&sortOrder=descending&itemID=CMS1223902&intNumPerPage=10. 
(See downloads labeled AMA PPIS Worksheets 1-3 and Physician Practice 
Expense non MDDO Final Report)
    The PPIS is a multispecialty, nationally representative, PE survey 
of both physicians and NPPs using a consistent survey instrument and 
methods highly consistent with those used for the SMS and the 
supplemental surveys. The PPIS gathered information from 3,656 
respondents across 51 physician specialty and healthcare professional 
groups.
    We believe the PPIS is the most comprehensive source of PE survey 
information available to date. Therefore, we used the PPIS data to 
update the PE/HR data for almost all of the Medicare-recognized 
specialties that participated in the survey for the CY 2010 PFS. When 
we changed over to the PPIS data beginning in CY 2010, we did not 
change the PE RVU methodology itself or the manner in which the PE/HR 
data are used in that methodology. We only updated the PE/HR data based 
on the new survey. Furthermore, as we explained in the CY 2010 PFS 
final rule with comment period (74 FR 61751), because of the magnitude 
of payment reductions for some specialties resulting from the use of 
the PPIS data, we finalized a 4-year transition (75/25 for CY 2010, 50/
50 for CY 2011, 25/75 for CY 2012, and 0/100 for CY 2013) from the 
previous PE RVUs to the PE RVUs developed using the new PPIS data.
    Section 303 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) added section 
1848(c)(2)(H)(i) of the Act, which requires us to use the medical 
oncology supplemental survey data submitted in 2003 for oncology drug 
administration services. Therefore, the PE/HR for medical oncology, 
hematology, and hematology/oncology reflects the continued use of these 
supplemental survey data.
    We do not use the PPIS data for reproductive endocrinology, sleep 
medicine, and spine surgery since these specialties are not separately 
recognized by Medicare, and we do not know how to blend these data with 
Medicare-recognized specialty data.
    Supplemental survey data on independent labs, from the College of 
American Pathologists, were implemented for payments in CY 2005. 
Supplemental survey data from the National Coalition of Quality 
Diagnostic Imaging Services (NCQDIS), representing IDTFs, were blended 
with supplementary survey data from the American College of Radiology 
(ACR) and implemented for payments in CY 2007. Neither IDTFs nor 
independent labs participated in the PPIS. Therefore, we continue to 
use the PE/HR that was

[[Page 40049]]

developed from their supplemental survey data.
    Finally, consistent with our past practice, the previous indirect 
PE/HR values from the supplemental surveys for medical oncology, 
independent laboratories, and IDTFs were updated to CY 2006 using the 
MEI to put them on a comparable basis with the PPIS data. In the CY 
2010 PFS final rule with comment period (74 FR 61753), we miscalculated 
the indirect PE/HR for IDTFs as part of this update process. Therefore, 
for CY 2011, we are proposing to use a revised indirect PE/HR of 
$479.81 for IDTFs, consistent with our final policy to update the 
indirect PE/HR values from prior supplemental survey data that we are 
continuing to use in order to put these data on a comparable basis with 
the PPIS data. This revision changes the IDTF indirect percentage from 
51 percent to 50 percent.
    Previously, CMS has established PE/HR values for various 
specialties without SMS or supplemental survey data by crosswalking 
them to other similar specialties to estimate a proxy PE/HR. For 
specialties that were part of the PPIS for which we previously used a 
crosswalked PE/HR, we instead use the PPIS-based PE/HR. We continue 
previous crosswalks for specialties that did not participate in the 
PPIS. However, beginning in CY 2010 we changed the PE/HR crosswalk for 
portable x-ray suppliers from radiology to IDTF, a more appropriate 
crosswalk because these specialties are more similar to each other with 
respect to physician time.
    In the CY 2010 PFS final rule with comment period (74 FR 61752), we 
agreed that, under the current PE methodology, the PPIS data for 
registered dieticians should not be used in the calculation of PE RVUs 
since these dieticians are paid 85 percent of what a physician would be 
paid for providing the service. To include their survey data in the PE 
calculation would influence the ratesetting by incorporating what the 
services would be paid if performed by registered dieticians and not 
strictly what the payment rates would be if provided by physicians. We 
further stated that we would utilize the ``All Physicians'' PE/HR, as 
derived from the PPIS, in the calculation of resource-based PE RVUs in 
lieu of the PE/HR associated with registered dieticians. In the 
resource-based PE methodology for CY 2010, while we removed the 
specialty of registered dieticians from the ratesetting step we did not 
assign the ``All Physicians'' PE/HR to services furnished by registered 
dieticians. Instead, we allowed the PE/HR for those services to be 
generated by a weighted average of all the physician specialties that 
also furnished the services. This method was consistent with our policy 
to not use the registered dietician PPIS PE/HR in calculating the PE 
RVUs for services furnished by registered dieticians but we did not 
actually crosswalk the specialty of registered dietician to the ``All 
Physicians'' PE/HR data as we had intended according to the final 
policy. Nevertheless, we are affirming for CY 2011 that the proposed 
resource-based PE RVUs have been calculated in accordance with the 
final policy adopted in the CY 2010 PFS final rule with comment period 
(74 FR 61752) for registered dietician services that crosswalks the 
specialty to the ``All Physicians'' PE/HR data.
    As provided in the CY 2010 PFS final rule with comment period (74 
FR 61751), CY 2011 is the second year of the 4-year transition to the 
PE RVUs calculated using the PPIS data. Therefore, in general, the CY 
2011 PE RVUs are a 50/50 blend of the previous PE RVUs based on the SMS 
and supplemental survey data and the new PE RVUS developed using the 
PPIS data as described above. Note that the reductions in the PE RVUs 
for expensive diagnostic imaging equipment attributable to the change 
to an equipment utilization rate assumption of 75 percent (see 74 FR 
61753 through 61755 and section II.A.3. of this proposed rule) are not 
subject to the transition.
c. Allocation of PE to Services
    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 relative relationship between the direct cost 
portions of the PE RVUs for any two services is determined by the 
relative relationship between the sum of the direct cost resources 
(that is, the clinical staff, equipment, and supplies) typically 
required to provide the services. The costs of these resources are 
calculated from the refined direct PE inputs in our PE database. For 
example, if one service has a direct cost sum of $400 from our PE 
database and another service has a direct cost sum of $200, the direct 
portion of the PE RVUs of the first service would be twice as much as 
the direct portion of the PE RVUs for the second service.
    (ii) Indirect costs. Section II.A.2.b. of this proposed rule 
describes the current data sources for specialty-specific indirect 
costs used in our PE calculations. We allocate the indirect costs to 
the code level on the basis of the direct costs specifically associated 
with a code and the greater of either the clinical labor costs or the 
physician work RVUs. We also incorporate the survey data described 
earlier in the PE/HR discussion. The general approach to developing the 
indirect portion of the PE RVUs is described below.
     For a given service, we use the direct portion of the PE 
RVUs calculated as described above and the average percentage that 
direct costs represent of total costs (based on survey data) across the 
specialties that perform the service to determine an initial indirect 
allocator. For example, if the direct portion of the PE RVUs for a 
given service were 2.00 and direct costs, on average, represented 25 
percent of total costs for the specialties that performed the service, 
the initial indirect allocator would be 6.00 since 2.00 is 25 percent 
of 8.00.
     We then add the greater of the work RVUs or clinical labor 
portion of the direct portion of the PE RVUs to this initial indirect 
allocator. In our example, if this service had work RVUs of 4.00 and 
the clinical labor portion of the direct PE RVUs was 1.50, we would add 
6.00 plus 4.00 (since the 4.00 work RVUs are greater than the 1.50 
clinical labor portion) to get an indirect allocator of 10.00. In the 
absence of any further use of the survey data, the relative 
relationship between the indirect cost portions of the PE RVUs for any 
two services would be determined by the relative relationship between 
these indirect cost allocators. For example, if one service had an 
indirect cost allocator of 10.00 and another service had an indirect 
cost allocator of 5.00, the indirect portion of the PE RVUs of the 
first service would be twice as great as the indirect portion of the PE 
RVUs for the second service.
     We next incorporate the specialty-specific indirect PE/HR 
data into the calculation. As a relatively extreme example for the sake 
of simplicity, assume in our example above that, based on the survey 
data, the average indirect cost of the specialties performing the first 
service with an allocator of 10.00 was half of the average indirect 
cost of the specialties performing the second service with an indirect 
allocator of 5.00. In this case, the indirect portion of the PE RVUs of 
the first service would be equal to that of the second service.
d. Facility and Nonfacility Costs
    For procedures that can be furnished in a physician's office, as 
well as in a hospital or facility setting, we establish two PE RVUs: 
facility and nonfacility.

[[Page 40050]]

The methodology for calculating PE RVUs is the same for both the 
facility and nonfacility RVUs, but is applied independently to yield 
two separate PE RVUs. Because Medicare makes a separate payment to the 
facility for its costs of furnishing a service, the facility PE RVUs 
are generally lower than the nonfacility PE RVUs.
e. 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), each of 
which may be performed independently or by different providers, or they 
may be performed together as a ``global'' service. When services have 
PC and TC 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.)
f. Alternative Data Sources and Public Comments on Final Rule for 2010.
    In the CY 2010 PFS final rule with comment period (74 FR 61749 
through 61750), we discussed the Medicare Payment Advisory Commission's 
(MedPAC's) comment that in the future, ``CMS should consider 
alternatives to collecting specialty-specific cost data or options to 
decrease the reliance on such data.'' We agreed with MedPAC that it 
would be appropriate to consider the future of the PE RVUs moving 
forward. We sought comments from other stakeholders on the issues 
raised by MedPAC for the future. In particular, we requested public 
comments regarding MedPAC's suggestion that we consider alternatives 
for collecting specialty-specific cost data or options to decrease the 
reliance on such data. We noted MedPAC's comment that, ``CMS should 
consider if Medicare or provider groups should sponsor future data 
collection efforts, if participation should be voluntary (such as 
surveys) or mandatory (such as cost reports), and whether a nationally 
representative sample of practitioners would be sufficient for either a 
survey or cost reports.'' MedPAC also stated that one option for 
decreasing the reliance on specialty-specific cost data would be the 
elimination of the use of indirect PE/HR data in the last step of 
establishing the indirect cost portion of the PE RVUs as described 
previously.
    Almost all of the commenters on the CY 2010 PFS final rule with 
comment period that addressed this issue expressed a general 
willingness to work with CMS on methodological improvements or future 
data collection efforts. Although no commenters detailed a 
comprehensive overall alternative methodology, several commenters did 
provide suggestions regarding future data collection efforts and 
specific aspects of the current methodology.
    The commenters that addressed the issue of surveys supported the 
use of surveys if they yielded accurate PE information. The few 
commenters that addressed the issue of cost reports were opposed to 
physician cost reports. The commenters varied with respect to their 
opinions regarding whether data collection efforts should be led by 
organized medicine, individual specialty societies, or CMS. Several 
commenters that addressed the issue of voluntary versus mandatory data 
collection efforts supported voluntary data collection efforts and 
opposed mandatory data collection efforts.
    Some commenters recommended no changes to the methodology or PE 
data in the near future. Other commenters indicated that the 
methodology and data changes needed to be made for CY 2011. Although 
most commenters did not directly address the use of the indirect PE/HR 
data, those that did predominately opposed the elimination of the use 
of these data.
    Many commenters addressed specifics of the PE methodology (as 
further described in section II.A.2.c. of this proposed rule). Some 
were opposed to the scaling factor applied in the development of the 
direct PE portion of the PE RVUs so that in the aggregate the direct 
portion of the PE RVUs do not exceed the proportion indicated by the 
survey data (See Step 4 in g.(ii) below). Several of these commenters 
advocated the elimination of this direct scaling factor, while others 
indicated that the issue should be examined more closely.
    A few commenters recommended that physician work not be used as an 
allocator in the development of the indirect portion of the PE RVUs as 
described earlier in this section. A few indicated that physician time, 
but not physician work, should be used in the allocation. Other 
commenters suggested that indirect costs should be allocated solely on 
the basis of direct costs.
    We note that many of the issues raised by commenters on the CY 2010 
PFS final rule with comment period are similar to issues raised in the 
development of the original resource-based PE methodology and in 
subsequent revisions to the methodology, including the adoption of the 
bottom-up methodology. While we are not proposing a broad 
methodological change or broad data collection effort in this CY 2011 
PFS proposed rule, we invite comments on our summary of the issues 
raised by the commenters on the CY 2010 PFS final rule with comment 
period, as presented above. The complete public comments on that final 
rule are available for public review at http://www.regulations.gov by 
entering ``CMS-1413-FC'' in the search box on the main page.
g. PE RVU Methodology
    For a more detailed description of the PE RVU methodology, we refer 
readers to the CY 2010 PFS final rule with comment period (74 FR 61745 
through 61746).
(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 PE/HR data from the surveys.
(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. Apply 
a scaling adjustment to the direct inputs.
    Step 2: Calculate the current aggregate pool of direct PE costs. 
This is the product of the current aggregate PE (aggregate direct and 
indirect) RVUs, the CF, and the average direct PE percentage from the 
survey data.
    Step 3: Calculate the aggregate pool of direct costs. This is the 
sum of 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 scaling 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 CF. Note that 
the actual value of the CF used in this calculation does not influence 
the final direct cost PE RVUs, as long as the same CF is used in Step 2 
and Step 5. Different CFs will result

[[Page 40051]]

in different direct PE scaling factors, but this has no effect on the 
final direct cost PE RVUs since changes in the CFs and changes in the 
associated direct scaling factors offset one another.
(iii) Create the Indirect Cost PE RVUs
    Create indirect allocators.
    Step 6: Based on the 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, the direct and indirect percentages for a given service do not 
vary by the PC, TC, and global components.
    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 RVUs, the 
clinical PE RVUs, and the work RVUs.
    For most services the indirect allocator is:

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

    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 RVUs/direct percentage) 
+ clinical PE RVUs + work RVUs.
     If the clinical labor PE RVUs exceed the work RVUs (and 
the service is not a global service), then the indirect allocator is: 
indirect percentage * (direct PE RVUs/direct percentage) + clinical PE 
RVUs.
    (Note: For global services, the indirect allocator is based on both 
the work RVUs and the clinical labor PE RVUs. We do this to recognize 
that, for the PC service, indirect PEs will be allocated using the work 
RVUs, and for the TC service, indirect PEs will be allocated using the 
direct PE RVUs and the clinical labor PE RVUs. This also allows the 
global component RVUs to equal the sum of the PC and TC RVUs.)
    For presentation purposes in the examples in the Table 2, 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 
RVUs/direct percentage). The second part is either the work RVUs, 
clinical PE RVUs, or both depending on whether the service is a global 
service and whether the clinical PE RVUs exceed the work RVUs (as 
described earlier in this step).
    Apply a scaling 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 survey data.
    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.
    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.
    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 across all services performed 
by the specialty.
    Step 14: Using the results of Step 12 and Step 13, calculate the 
specialty-specific indirect PE scaling factors.
    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 RVUs.
(iv) Calculate the Final PE RVUs
    Step 18: Add the direct PE RVUs from Step 6 to the indirect PE RVUs 
from Step 17 and apply the final PE budget neutrality (BN) adjustment, 
MEI rebasing adjustment, and multiple procedure payment reduction 
(MPPR) adjustment.
    The final PE BN adjustment is calculated by comparing the results 
of Step 18 (prior to the MEI rebasing and MPPR adjustments) 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 ratesetting purposes, but all specialties are included for purposes 
of calculating the final BN adjustment. (See ``Specialties excluded 
from ratesetting calculation'' below in this section.)
    As discussed in section II.E.1. of this proposed rule, we are 
proposing to rebase and revise the Medicare Economic Index (MEI) for CY 
2011. As discussed in section II.C.4. of this proposed rule, section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) 
specifies that the Secretary shall identify potentially misvalued codes 
by examining multiple codes that are frequently billed in conjunction 
with furnishing a single service. There is inherent duplication in the 
PE associated with those services which are frequently furnished 
together, so reducing PFS payment for the second and subsequent 
services to account for the efficiencies in multiple service sessions 
may be appropriate. Consistent with this provision of the ACA, we are 
proposing a limited expansion of the current MPPR policy for imaging 
services for CY 2011 and a new MPPR policy for therapy services.
(v) Setup File Information
     Specialties excluded from ratesetting calculation: For the 
purposes of calculating the PE RVUs, we exclude certain specialties, 
such as certain nonphysician practitioners paid at a percentage of the 
PFS and low volume specialties, from the calculation. These specialties 
are included for the purposes of calculating the BN adjustment. They 
are displayed in Table 1.

[[Page 40052]]



                                               Table 1--Specialties Excluded From Ratesetting Calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Specialty code                                                           Specialty description
--------------------------------------------------------------------------------------------------------------------------------------------------------
42.................................  Certified nurse midwife.
49.................................  Ambulatory surgical center.
50.................................  Nurse practitioner.
51.................................  Medical supply company with certified orthotist.
52.................................  Medical supply company with certified prosthetist.
53.................................  Medical supply company with certified prosthetist-orthotist.
54.................................  Medical supply company not included in 51, 52, or 53.
55.................................  Individual certified orthotist.
56.................................  Individual certified prosthetist.
57.................................  Individual certified prosthetist-orthotist.
58.................................  Individuals not included in 55, 56, or 57.
59.................................  Ambulance service supplier, e.g., private ambulance companies, funeral homes, etc.
60.................................  Public health or welfare agencies.
61.................................  Voluntary health or charitable agencies.
73.................................  Mass immunization roster biller.
74.................................  Radiation therapy centers.
87.................................  All other suppliers (e.g., drug and department stores).
88.................................  Unknown supplier/provider specialty.
89.................................  Certified clinical nurse specialist.
95.................................  Competitive Acquisition Program (CAP) Vendor.
96.................................  Optician.
A0.................................  Hospital.
A1.................................  SNF.
A2.................................  Intermediate care nursing facility.
A3.................................  Nursing facility, other.
A4.................................  HHA.
A5.................................  Pharmacy.
A6.................................  Medical supply company with respiratory therapist.
A7.................................  Department store.
1..................................  Supplier of oxygen and/or oxygen related equipment.
2..................................  Pedorthic personnel.
3..................................  Medical supply company with pedorthic personnel.
--------------------------------------------------------------------------------------------------------------------------------------------------------

     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 RVUs. 
For example, the professional service, CPT code 93010 
(Electrocardiogram, routine ECG with at least 12 leads; interpretation 
and report only), is associated with the global service, CPT code 93000 
(Electrocardiogram, routine ECG with at least 12 leads; with 
interpretation and report).
     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 
proposed 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); generally 150,000 minutes.
usage = equipment utilization assumption; 0.75 for certain expensive 
diagnostic imaging equipment (see 74 FR 61753 through 61755 and 
section II.A.3. of this proposed rule) and 0.5 for others.
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:  The use of any particular conversion factor (CF) in Table 
2 to illustrate the PE calculation has no effect on the resulting 
RVUs.


[[Page 40053]]



                                                                                  Table 2--Calculation of PE RVUs Under Methodology for Selected Codes
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            99213 Office       33533 CABG,                                                             93000 ECG,        93005 ECG,        93010 ECG,
                                       Step              Source             Formula          visit, est     arterial, single   71020 Chest x-   71020-TC Chest x- 71020-26 Chest x-     complete           tracing           report
                                                                                             nonfacility        facility       ray nonfacility   ray nonfacility   ray nonfacility     nonfacility       nonfacility       nonfacility
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (Lab)...........  Step 1..........  AMA...............  .................             13.32             77.52              5.74              5.74              0.00              6.12              6.12              0.00
(2) Suppy cost (Sup)...........  Step 1..........  AMA...............  .................              2.98              7.34              3.39              3.39              0.00              1.19              1.19              0.00
(3) Equipment cost (Eqp).......  Step 1..........  AMA...............  .................              0.19              0.65              8.17              8.17              0.00              0.12              0.12              0.00
(4) Direct cost (Dir)..........  Step 1..........  ..................  =(1)+(2)+(3).....             16.50             85.51             17.31             17.31              0.00              7.43              7.43              0.00
(5) Direct adjustment (Dir Adj)  Steps 2-4.......  See footnote*.....  .................             0.484             0.484             0.484             0.484             0.484             0.484             0.484             0.484
(6) Adjusted labor.............  Steps 2-4.......  =Lab * Dir Adj....  =(1) * (5).......              6.45             37.52              2.78              2.78              0.00              2.96              2.96              0.00
(7) Adjusted supplies..........  Steps 2-4.......  =Sup * Dir Adj....  =(2) * (5).......              1.44              3.55              1.64              1.64              0.00              0.58              0.58              0.00
(8) Adjusted equipment.........  Steps 2-4.......  =Eqp * Dir Adj....  =(3) * (5).......              0.09              0.32              3.96              3.96              0.00              0.06              0.06              0.00
(9) Adjusted direct............  Steps 2-4.......  ..................  =(6)+(7)+(8).....              7.99             41.39              8.38              8.38              0.00              3.60              3.60              0.00
(10) Conversion Factor (CF)....  Step 5..........  PFS...............  .................           36.0791           36.0791           36.0791           36.0791           36.0791           36.0791           36.0791           36.0791
(11) Adj. labor cost converted.  Step 5..........  =(Lab * Dir Adj)/   =(6)/(10)........              0.18              1.04              0.08              0.08              0.00              0.08              0.08              0.00
                                                    CF.
(12) Adj. supply cost converted  Step 5..........  =(Sup * Dir Adj)/   =(7)/(10)........              0.04              0.10              0.05              0.05              0.00              0.02              0.02              0.00
                                                    CF.
(13) Adj. equip cost converted.  Step 5..........  =(Eqp * Dir Adj)/   =(8)/(10)........              0.00              0.01              0.11              0.11              0.00              0.00              0.00              0.00
                                                    CF.
(14) Adj. direct cost converted  Step 5..........  ..................  =(11)+(12)+(13)..              0.22              1.15              0.23              0.23              0.00              0.10              0.10              0.00
(15) Wrk RVU...................  Setup File......  PFS...............  .................              0.97             33.75              0.22              0.00              0.22              0.17              0.00              0.17
(16) Dir--pct..................  Steps 6, 7......  Surveys...........  .................             25.5%             18.0%             28.9%             28.9%             28.9%             29.0%             29.0%             29.0%
(17) Ind--pct..................  Steps 6, 7......  Surveys...........  .................             74.5%             82.0%             71.2%             71.2%             71.2%             71.1%             71.1%             71.1%
(18) Ind. Alloc. formula (1st    Step 8..........  See Step 8........  .................     ((14)/(16)) *     ((14)/(16)) *     ((14)/(16)) *     ((14)/(16)) *     ((14)/(16)) *     ((14)/(16)) *     ((14)/(16)) *     ((14)/(16)) *
 part).                                                                                               (17)              (17)              (17)              (17)              (17)              (17)              (17)              (17)
(19) Ind. Alloc. (1st part)....  Step 8..........  ..................  See (18).........              0.65              5.23              0.57              0.57              0.00              0.24              0.24              0.00
(20) Ind. Alloc. formulas (2nd   Step 8..........  See Step 8........  .................              (15)              (15)         (15)+(11)              (11)              (15)         (15)+(11)              (11)              (15)
 part).
(21) Ind. Alloc. (2nd part)....  Step 8..........  ..................  See (20).........              0.97             33.75              0.30              0.08              0.22              0.25              0.08              0.17
(22) Indirect Allocator          Step 8..........  ..................  =(19)+(21).......              1.62             38.98              0.87              0.65              0.22              0.50              0.33              0.17
 (1st+2nd).
(23) Indirect Adjustment (Ind    Steps 9-11......  See footnote**....  .................             0.369             0.369             0.369             0.369             0.369             0.369             0.369             0.369
 Adj).
(24) Adjusted Indirect           Steps 9-11......  =Ind Alloc * Ind    .................              0.60             14.37              0.32              0.24              0.08              0.18              0.12              0.06
 Allocator.                                         Adj.
(25) Ind.Practice Cost Index     Steps 12-16.....  See Steps 12-16...  .................             1.104             0.831             0.852             0.852             0.852             0.926             0.926             0.926
 (PCI).
(26) Adjusted Indirect.........  Step 17.........  = Adj. Ind Alloc *  =(24) * (25).....              0.66             11.95              0.27              0.20              0.07              0.17              0.11              0.06
                                                    PCI.
(27) MEI Rebasing Adjustment...  Step 18.........  PFS...............  .................             1.168             1.168             1.168             1.168             1.168             1.168             1.168             1.168
(28) MPPR Adjustment...........  Step 18.........  PFS...............  .................             1.011             1.011             1.011             1.011             1.011             1.011             1.011             1.011
(29) PE RVU....................  Step 18.........  =(Adj Dir+Adj Ind)  =((14)+(26)) *                 1.03             15.36              0.59              0.51              0.08              0.32              0.25              0.07
                                                    * budn * MEI Adj    budn * (27) *
                                                    * MPPR Adj.         (28).
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: PE RVUs in Table 2, row 27, may not match Addendum B due to rounding.
* The direct adj = [current pe rvus * CF * avg dir pct]/[sum direct inputs] = [Step 2]/[Step 3].
** The indirect adj = [current pe rvus * avg ind pct]/[sum of ind allocators] = [Step 9]/[Step 10].


[[Page 40054]]

3. Proposed PE Revisions for CY 2011
a. Equipment Utilization Rate
    As part of the PE methodology associated with the allocation of 
equipment costs for calculating PE RVUs, we currently use an equipment 
utilization rate assumption of 50 percent for most equipment, with the 
exception of expensive diagnostic imaging equipment (which is equipment 
priced at over $1 million, for example, computed tomography (CT) and 
magnetic resonance imaging (MRI) scanners), for which we adopted a 90 
percent utilization rate assumption and provided for a 4-year 
transition beginning in CY 2010 (74 FR 61755). Therefore, CY 2010 is 
the first transitional payment year. Payment is made in CY 2010 for the 
diagnostic services listed in Table 3 (those that include expensive 
diagnostic imaging equipment in their PE inputs) based on 25 percent of 
the new PE RVUs and 75 percent of the prior PE RVUs for those services.
    Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of 
the ACA) requires that with respect to fee schedules established for CY 
2011 and subsequent years, in the methodology for determining PE RVUs 
for expensive diagnostic imaging equipment under the CY 2010 PFS final 
rule with comment period, the Secretary shall use a 75 percent 
assumption instead of the utilization rates otherwise established in 
that rule. The provision also requires that the reduced expenditures 
attributable to this change in the utilization rate for CY 2011 and 
subsequent years shall not be taken into account when applying the 
budget neutrality limitation on annual adjustments described in section 
1848(c)(2)(B)(ii)(II) of the Act.
    As a result, the 75 percent equipment utilization rate assumption 
will be applied to expensive diagnostic imaging equipment in a 
nonbudget neutral manner for CY 2011, and the changes to PE RVUs will 
not be transitioned over a period of years. We will apply the 75 
percent utilization rate assumption in CY 2011 to all of the services 
to which we currently apply the transitional 90 percent utilization 
rate assumption in CY 2010. These services are listed in a file on the 
CMS Web site that is posted under downloads for the CY 2010 PFS final 
rule with comment period at: (http://www.cms.gov/physicianfeesched/downloads/CODES_SUBJECT_TO_90PCT_USAGE_RATE.zip). These codes are 
also displayed in Table 3.

  Table 3--Current CPT Codes Subject to First Year (CY 2010) of 4-Year
 Transition to 90 Percent Equipment Utilization Rate Assumption and That
 Will Be Subject to the 75 Percent Equipment Utilization Rate Assumption
                               in CY 2011
------------------------------------------------------------------------
             CPT code                         Short descriptor
------------------------------------------------------------------------
70336.............................  Mri, temporomandibular joint(s).
70450.............................  Ct head/brain w/o dye.
70460.............................  Ct head/brain w/dye.
70470.............................  Ct head/brain w/o & w/dye.
70480.............................  Ct orbit/ear/fossa w/o dye.
70481.............................  Ct orbit/ear/fossa w/dye.
70482.............................  Ct orbit/ear/fossa w/o & w/dye.
70486.............................  Ct maxillofacial w/o dye.
70487.............................  Ct maxillofacial w/dye.
70488.............................  Ct maxillofacial w/o & w/dye.
70490.............................  Ct soft tissue neck w/o dye.
70491.............................  Ct soft tissue neck w/dye.
70492.............................  Ct soft tissue neck w/o & w/dye.
70540.............................  Mri orbit/face/neck w/o dye.
70542.............................  Mri orbit/face/neck w/dye.
70543.............................  Mri orbit/face/neck w/o & w/dye.
70551.............................  Mri brain w/o dye.
70552.............................  Mri brain w/dye.
70553.............................  Mri brain w/o & w/dye.
70554.............................  Fmri brain by tech.
71250.............................  Ct thorax w/o dye.
71260.............................  Ct thorax w/dye.
71270.............................  Ct thorax w/o & w/dye.
71550.............................  Mri chest w/o dye.
71551.............................  Mri chest w/dye.
71552.............................  Mri chest w/o & w/dye.
72125.............................  CT neck spine w/o dye.
72126.............................  Ct neck spine w/dye.
72127.............................  Ct neck spine w/o & w/dye.
72128.............................  Ct chest spine w/o dye.
72129.............................  Ct chest spine w/dye.
72130.............................  Ct chest spine w/o & w/dye.
72131.............................  Ct lumbar spine w/o dye.
72132.............................  Ct lumbar spine w/dye.
72133.............................  Ct lumbar spine w/o & w/dye.
72141.............................  Mri neck spine w/o dye.
72142.............................  Mri neck spine w/dye.
72146.............................  Mri chest spine w/o dye.
72147.............................  Mri chest spine w/dye.
72148.............................  Mri lumbar spine w/o dye.
72149.............................  Mri lumbar spine w/dye.
72156.............................  Mri neck spine w/o & w/dye.
72157.............................  Mri chest spine w/o & w/dye.
72158.............................  Mri lumbar spine w/o & w/dye.
72192.............................  Ct pelvis w/o dye.
72193.............................  Ct pelvis w/dye.
72194.............................  Ct pelvis w/o & w/dye.
72195.............................  Mri pelvis w/o dye.
72196.............................  Mri pelvis w/dye.
72197.............................  Mri pelvis w/o & w/dye.
73200.............................  Ct upper extremity w/o dye.
73201.............................  Ct upper extremity w/dye.
73202.............................  Ct upper extremity w/o & w/dye.
73218.............................  Mri upper extr w/o dye.
73219.............................  Mri upper extr w/dye.
73220.............................  Mri upper extremity w/o & w/dye.
73221.............................  Mri joint upper extr w/o dye.
73222.............................  Mri joint upper extr w/dye.
73223.............................  Mri joint upper extr w/o & w/dye.
73700.............................  Ct lower extremity w/o dye.
73701.............................  Ct lower extremity w/dye.
73702.............................  Ct lower extremity w/o & w/dye.
73718.............................  Mri lower extremity w/o dye.
73719.............................  Mri lower extremity w/dye.
73720.............................  Mri lower ext w/dye & w/o dye.
73721.............................  Mri joint of lwr extr w/o dye.
73722.............................  Mri joint of lwr extr w/dye.
73723.............................  Mri joint of lwr extr w/o & w/dye.
74150.............................  Ct abdomen w/o dye.
74160.............................  Ct abdomen w/dye.
74170.............................  Ct abdomen w/o & w/dye.
74181.............................  Mri abdomen w/o dye.
74182.............................  Mri abdomen w/dye.
74183.............................  Mri abdomen w/o and w/dye.
74261.............................  Ct colonography, w/o dye.
74262.............................  Ct colonography, w/dye.
75557.............................  Cardiac mri for morph.
75559.............................  Cardiac mri w/stress img.
75561.............................  Cardiac mri for morph w/dye.
75563.............................  Cardiac mri w/stress img & dye.
75571.............................  Ct hrt w/o dye w/ca test.
75572.............................  Ct hrt w/3d image.
75573.............................  Ct hrt w/3d image, congen.
77058.............................  Mri, one breast.
77059.............................  Mri, both breasts.
77078.............................  Ct bone density, axial.
77084.............................  Magnetic image, bone marrow.
------------------------------------------------------------------------

    Additionally, for CY 2011, we are proposing to expand the list of 
services to which the higher equipment utilization rate assumption 
applies to all other diagnostic imaging services that utilize similar 
expensive CT and MRI scanners. The additional 24 CPT codes (listed in 
Table 4) to which we are proposing to apply the 75 percent equipment 
utilization rate assumption also have expensive diagnostic imaging 
equipment (priced at over $1 million) included in their PE inputs. 
These services are predominantly diagnostic computed tomographic 
angiography (CTA) and magnetic resonance angiography (MRA) procedures 
that include similar expensive CT and MRI scanners in their direct PE 
inputs. We indicated in the CY 2010 PFS final rule with comment period 
(74 FR 61754) that we were persuaded by PPIS data on angiography that 
the extrapolation of MRI and CT data (and their higher equipment 
utilization rate) may be inappropriate. However, this reference was 
limited to those procedures that include an angiography room in the 
direct PE inputs, such as CPT code 93510 (Left heart catheterization, 
retrograde, from the brachial artery, axillary artery or femoral 
artery; percutaneous). In contrast, CTA and MRA procedures include a CT 
room or

[[Page 40055]]

MRI room, respectively, in the direct PE inputs, and the PPIS data 
confirm that a higher assumed utilization rate than 50 percent would be 
appropriate. The PPIS angiography room data that reflected a 56 percent 
equipment utilization rate would not specifically apply to CTA and MRA 
procedures. Thus, on further review, we believe it is appropriate to 
include CTA and MRA procedures in the list of procedures for which we 
assume a 75 percent equipment utilization rate, and we are proposing to 
do so beginning in CY 2011.
    Consistent with section 1848(c)(2)(B)(v)(III) of the Act (as 
amended by section 3135 of the ACA), the reduced expenditures 
attributable to this change in the utilization rate assumption 
applicable to CY 2011 shall not be taken into account when applying the 
budget neutrality limitation on annual adjustments described in section 
1848(c)(2)(B)(ii)(III) of the Act.
    As provided in the CY 2010 PFS final rule with comment period (74 
FR 61751), CY 2011 is the second year of the 4-year transition to the 
PE RVUs calculated using the PPIS data. The reductions in the PE RVUs 
for expensive diagnostic imaging equipment attributable to the change 
to an equipment utilization rate assumption of 75 percent for CY 2011 
are not subject to the transition.

    Table 4--Proposed CPT Code Additions to the 75 Percent Equipment
                   Utilization Rate Assumption CY 2011
------------------------------------------------------------------------
             CPT code                         Short descriptor
------------------------------------------------------------------------
70496.............................  Ct angiography, head.
70498.............................  Ct angiography, neck.
70544.............................  Mr angiography head w/o dye.
70545.............................  Mr angiography head w/dye.
70546.............................  Mr angiography head w/o & w/dye.
70547.............................  Mr angiography neck w/o dye.
70548.............................  Mr angiography neck w/dye.
70549.............................  Mr angiography neck w/o & w/dye.
71275.............................  Ct angiography, chest.
71555.............................  Mri angio chest w/ or w/o dye.
72159.............................  Mr angio spone w/o & w/dye.
72191.............................  Ct angiography, pelv w/o & w/dye.
72198.............................  Mri angio pelvis w/ or w/o dye.
73206.............................  Ct angio upper extr w/o & w/dye.
73225.............................  Mr angio upr extr w/o & w/dye.
73706.............................  Ct angio lower ext w/o & w/dye.
73725.............................  Mr angio lower ext w/ or w/o dye.
74175.............................  Ct angiography, abdom w/o & w/dye.
74185.............................  Mri angio, abdom w/ or w/o dye.
75565.............................  Card mri vel flw map add-on.
75574.............................  Ct angio hrt w/3d image.
75635.............................  Ct angio abdominal arteries.
76380.............................  CAT scan follow up study.
77079.............................  Ct bone density, peripheral.
------------------------------------------------------------------------

b. HCPCS Code-Specific PE Proposals
    In this section, we discuss other specific CY 2011 proposals and 
changes related to direct PE inputs. The proposed changes that follow 
are included in the proposed CY 2011 direct PE database, which is 
available on the CMS Web site under the downloads for the CY 2011 PFS 
proposed rule at http://www.cms.gov/PhysicianFeeSched/.
(1) Biohazard Bags
    We have identified 22 codes for which the supply item ``biohazard 
bag'' (SM004) is currently considered a direct PE input. The item is 
already properly accounted for in the indirect PE because it is not 
attributable to an individual patient service. Therefore, we are 
proposing to remove the biohazard bag from the CY 2011 direct PE 
database and the changes in direct PE inputs for the associated 
services are reflected in the proposed CY 2011 direct PE database.
(2) PE Inputs for Professional Component (PC) Only and Technical 
Component (TC) Only Codes Summing to Global Only Codes
    In the case of selected diagnostic tests, different but related CPT 
codes are used to describe global, professional, and technical 
components of a service. These codes are unlike the majority of other 
diagnostic test CPT codes where modifiers may be used in billing a 
single CPT code in order to differentiate professional and technical 
components. When different but related CPT codes are used to report the 
components of these services, the different CPT codes are referred to 
as ``global only,'' ``professional (PC) only,'' and ``technical (TC) 
only'' codes. Medicare payment systems are programmed to ensure that 
the PE RVUs for global only codes equal the sum of the PE RVUs for the 
PC and TC only codes. However, it has come to our attention that the 
direct PE inputs for certain global only codes do not reflect the 
appropriate summation of their related TC only and PC only component 
code PE inputs as they appear in the direct PE database. While the PFS 
payment calculations have been programmed to apply the correct PE RVUs 
for the global only code based on a summation of component code PE 
RVUs, the direct PE database has reflected incorrect inputs that are 
overridden by the payment system. Therefore, we are proposing to 
correct the direct PE inputs for the global only codes so that the 
inputs reflect the appropriate summing of the PE inputs for the 
associated PC only and TC only codes. The proposed CY 2011 direct PE 
database includes PE corrections to the 14 CPT codes listed in Table 5.

 Table 5--Groups of Related CPT Codes With Proposed Changes to PE Inputs
    So That Inputs for Professional Component (PC) Only and Technical
           Component (TC) Only Codes Sum to Global Only Codes
------------------------------------------------------------------------
         CPT code                         Long descriptor
------------------------------------------------------------------------
93224....................  Wearable electrocardiographic rhythm derived
                            monitoring for 24 hours by continuous
                            original waveform recording and storage,
                            with visual superimposition scanning;
                            includes recording, scanning analysis with
                            report, physician review and interpretation.
93225....................  Wearable electrocardiographic rhythm derived
                            monitoring for 24 hours by continuous
                            original waveform recording and storage,
                            with visual superimposition scanning;
                            recording (includes connection, recording,
                            disconnection).
93226....................  Wearable electrocardiographic rhythm derived
                            monitoring for 24 hours by continuous
                            original waveform recording and storage,
                            with visual superimposition scanning;
                            scanning analysis with report.
93230....................  Wearable electrocardiographic rhythm derived
                            monitoring for 24 hours by continuous
                            original waveform recording and storage
                            without superimposition scanning utilizing a
                            device capable of producing a full
                            miniaturized printout; including recording,
                            microprocessor-based analysis with report,
                            physician review and interpretation.
93231....................  Wearable electrocardiographic rhythm derived
                            monitoring for 24 hours by continuous
                            original waveform recording and storage
                            without superimposition scanning utilizing a
                            device capable of producing a full
                            miniaturized printout; recording (includes
                            connection, recording, and disconnection.

[[Page 40056]]

 
93232....................  Wearable electrocardiographic rhythm derived
                            monitoring for 24 hours by continuous
                            original waveform recording and storage
                            without superimposition scanning utilizing a
                            device capable of producing a full
                            miniaturized printout; microprocessor-based
                            analysis with report.
93268....................  Wearable patient activated
                            electrocardiographic rhythm derived event
                            recording with presymptom memory loop, 24-
                            hour attended monitoring, per 30 day period
                            of time; includes transmission, physician
                            review and interpretation.
93270....................  Wearable patient activated
                            electrocardiographic rhythm derived event
                            recording with presymptom memory loop, 24-
                            hour attended monitoring, per 30 day period
                            of time; recording (includes connection,
                            recording, and disconnection).
93271....................  Wearable patient activated
                            electrocardiographic rhythm derived event
                            recording with presymptom memory loop, 24-
                            hour attended monitoring, per 30 day period
                            of time; monitoring, receipt of
                            transmissions, and analysis.
93720....................  Plethysmography, total body; with
                            interpretation and report.
93721....................  Plethysmography, total body; tracing only,
                            without interpretation and report.
93784....................  Ambulatory blood pressure monitoring,
                            utilizing a system such as magnetic tape and/
                            or computer disk, for 24 hours or longer;
                            including recording, scanning analysis,
                            interpretation and report.
93786....................  Ambulatory blood pressure monitoring,
                            utilizing a system such as magnetic tape and/
                            or computer disk, for 24 hours or longer;
                            recording only.
93788....................  Ambulatory blood pressure monitoring,
                            utilizing a system such as magnetic tape and/
                            or computer disk, for 24 hours or longer;
                            scanning analysis with report.
------------------------------------------------------------------------

(3) Equipment Time Inputs for Certain Diagnostic Tests
    We have recently identified incorrect equipment time inputs for 
four CPT codes associated with certain diagnostic tests (each is 
displayed in Table 5):
     CPT code 93225 is the TC only code that includes the 
connection, recording, and disconnection of the holter monitor (CMS 
Equipment Code EQ127) used in 24 hour continuous electrocardiographic 
rhythm derived monitoring. The current equipment time input for the 
holter monitor is 42 minutes, which parallels the intra-service 
clinical labor input time for the CPT code. However, the equipment time 
should reflect the 24 hours of continuous monitoring in which the 
device is used exclusively by the patient. Therefore, we are proposing 
to change the monitor equipment time for CPT code 93225 to 1440 
minutes, the number of minutes in 24 hours.
     CPT code 93226 is the TC only code that includes the 
scanning analysis with report. The number of minutes the monitor (CMS 
Equipment Code EQ127) is used in this service should parallel the 
intra-service clinical labor input time of 52 minutes during which the 
monitor is in use, instead of the current equipment time of 1440 
minutes, because this code does not represent 24 hours of device use. 
Therefore, we are proposing to change the monitor equipment time for 
CPT code 93226 to 52 minutes.
     CPT 93224 is the global only code that includes the 
connection, recording, and disconnection of the monitor (CMS Equipment 
Code EQ127) and the scanning analysis with report, as well as the 
physician review and interpretation. Under our proposal, its direct PE 
inputs have been appropriately summed to include the 1492 total minutes 
of time for the holter monitor that are included in CPT codes 93225 and 
93226.
     CPT code 93788 is the TC only code that describes the 
scanning analysis with report for ambulatory blood pressure monitoring. 
The equipment time input for the blood pressure monitor should parallel 
the 10 minutes of clinical labor input for the CPT code since that is 
the time during which the monitor is in use. Currently, the equipment 
time input for the monitor is 1440 minutes, which is appropriate only 
for CPT code 93786, the code that describes the 24 hours of ambulatory 
blood pressure monitoring recording. In this case, CPT code 93786's 
direct PE inputs are correct. Therefore, we are proposing to correct 
the equipment time input for the ambulatory blood pressure monitor in 
CPT code 93788 to 10 minutes.
     CPT code 93784 is the global only code that includes the 
recording, the scanning analysis with report, and the physician 
interpretation and report for ambulatory blood pressure monitoring. 
Under our proposal, its direct PE inputs have been appropriately summed 
to include the 1450 total minutes of time for the ambulatory blood 
pressure monitor that are included in CPT codes 93786 and 93788.
    We have modified the proposed CY 2011 direct PE database to reflect 
these changes.
(4) Cobalt-57 Flood Source
    Stakeholders have requested that CMS reevaluate the useful life of 
the Cobalt-57 flood source (CMS Equipment Code ER001), given their 
estimate of approximately 271 days for the source's half-life. The 
current useful life input for the Colbalt-57 flood source is 5 years. 
Using publicly available catalogs, we found that the Cobalt-57 flood 
source is marketed with a useful life of 2 years. Therefore, we are 
proposing to change the useful life input from the current 5 years to 2 
years. The Cobalt-57 flood source is included with the revised useful 
life input for 96 HCPCS codes in the proposed CY 2011 direct PE 
database.
(5) Venom Immunotherapy
    One stakeholder provided updated price information for the venoms 
used for the five venom immunology CPT codes, specifically 95145 
(Professional services for the supervision of preparation and provision 
of antigens for allergen immunotherapy (specify number of doses); 
single stinging insect venom); 95146 (Professional services for the 
supervision of preparation and provision of antigens for allergen 
immunotherapy (specify number of doses); 2 single stinging insect 
venoms); 95147 (Professional services for the supervision of 
preparation and provision of antigens for allergen immunotherapy 
(specify number of doses); 3 single stinging insect venoms); 95148 
(Professional services for the supervision of preparation and provision 
of antigens for allergen immunotherapy (specify number of doses); 4 
single stinging insect venoms); 95149 (Professional services for the 
supervision of preparation and provision of antigens for allergen 
immunotherapy (specify number of doses); 5 single stinging insect 
venoms).
    In the CY 2004 PFS final rule with comment period (68 FR 63206), we

[[Page 40057]]

adopted a pricing methodology that utilizes the average price of a 1 
milliliter dose of venom and adds that price per dose as direct PE 
inputs for CPT codes 95145 and 95146. When a patient requires three 
stinging insect venoms, as for CPT code 95147, the price input for a 3-
vespid mix is used. This 3-vespid mix price is also used to value CPT 
codes 95148 (four venoms) and 96149 (five venoms), with the single 
venom price added once to CPT code 97148 and twice to CPT code 97149.
    As requested by the stakeholder, we are updating the price inputs 
for the 1-milliliter dose of venom to $16.67 and for the 3-vespid mix 
to $30.22 in the proposed CY 2011 direct PE database.
(6) Equipment Redundancy
    Stakeholders have recently brought to our attention that the ECG, 
3-channel (with SpO2, NIBP, temp, resp) (CMS Equipment Code EQ011) 
incorporates all of the functionality of the pulse oximeter with 
printer (CMS Equipment Code EQ211). Therefore, in HCPCS codes where CMS 
Equipment Code EQ011 is present, CMS Equipment Code EQ211 is redundant. 
On this basis, we are proposing to remove the pulse oximeter with 
printer (CMS Equipment Code EQ211) as an input for the 118 codes that 
also contain the ECG, 3-channel (with SpO2, NIBP, temp, resp) (CMS 
Equipment Code EQ011). We have made these adjustments in the proposed 
CY 2011 direct PE database.
(7) Equipment Duplication
    We recently identified a number of CPT codes with duplicate 
equipment inputs in the PE database. We are proposing to remove the 
duplicate equipment items and have modified the proposed CY 2011 direct 
PE database accordingly as detailed in Table 6.

Table 6--CPT Codes With Proposed Removal of Duplicate Equipment Items in
                         the Direct PE Database
------------------------------------------------------------------------
                               CMS equipment code
          CPT code                for duplicate        Description of
                                    equipment             equipment
------------------------------------------------------------------------
19302 P-mastectomy w/ln       EF014...............  light, surgical.
 removal.
19361 Breast reconstr w/lat   ED005...............  camera, digital
 flap.                                               system, 12
                                                     megapixel (medical
                                                     grade).
                              EF031...............  table, power.
                              EQ168...............  light, exam.
44157 Colectomy w/ileoanal    EF031...............  table, power.
 anast.
                              EQ168...............  light, exam.
44158 Colectomy w/neo-rectum  EF031...............  table, power.
 pouch.
                              EQ168...............  light, exam.
56440 Surgery for vulva       EF031...............  table, power.
 lesion.
                              EQ170...............  light, fiberoptic
                                                     headlight w-source.
57296 Revise vag graft, open  EF031...............  table, power.
 abd.
                              EQ170...............  light, fiberoptic
                                                     headlight w-source.
58263 Vag hyst w/t/o & vag    EF031...............  table, power.
 repair.
59610 Vbac delivery.........  EF031...............  table, power.
67228 Treatment of retinal    EL005...............  lane, exam (oph).
 lesion.
                              EQ230...............  slit lamp (Haag-
                                                     Streit), dedicated
                                                     to laser use.
76813 Ob us nuchal meas, 1    ED024...............  film processor, dry,
 gest.                                               laser.
77371 Srs, multisource......  EQ211...............  pulse oximeter w-
                                                     printer.
93540 Injection, cardiac      ED018...............  computer
 cath.                                               workstation,
                                                     cardiac cath
                                                     monitoring.
                              EL011...............  room, angiography.
                              EQ011...............  ECG, 3-channel (with
                                                     SpO2, NIBP, temp,
                                                     resp).
                              EQ032...............  IV infusion pump.
                              EQ088...............  contrast media
                                                     warmer.
                              EQ211...............  pulse oximeter w-
                                                     printer.
93542 Injection for heart x-  ED018...............  computer
 rays.                                               workstation,
                                                     cardiac cath
                                                     monitoring.
                              EL011...............  room, angiography.
                              EQ011...............  ECG, 3-channel (with
                                                     SpO2, NIBP, temp,
                                                     resp).
                              EQ032...............  IV infusion pump.
                              EQ088...............  contrast media
                                                     warmer.
                              EQ211...............  pulse oximeter w-
                                                     printer.
------------------------------------------------------------------------

(8) Establishing Overall Direct PE Supply Price Inputs Based on Unit 
Prices and Quantities
    We have identified minor errors in total price inputs for a number 
of supply items due to mathematical mistakes in multiplying the item 
unit price and the quantity used in particular CPT codes for the 
associated services. We are proposing to modify the direct PE database 
to appropriately include the overall supply price input for a supply 
item as the product of the unit price and the quantity of the supply 
item used in the CPT code. Most of the overall supply price input 
changes are small, and we have adjusted the proposed CY 2011 direct PE 
database accordingly. The CPT and Level II HCPCS codes and associated 
supplies for nonfacility and facility settings that are subject to 
these corrections are displayed in Tables 7 and 8, respectively.

                 Table 7--Overall Supply Price Calculation Corrections for Nonfacility Settings
----------------------------------------------------------------------------------------------------------------
                                                       CMS Supply code with overall
       CPT/HCPCS code             Short descriptor           price corrections          Description of supply
----------------------------------------------------------------------------------------------------------------
11952.......................  Therapy for contour      SC029.......................  needle, 18-27g.
                               defects.
11954.......................  Therapy for contour      SC029.......................  needle, 18-27g.
                               defects.
15820.......................  Revision of lower        SA082.......................  pack, ophthalmology visit
                               eyelid.                                                (w-dilation).

[[Page 40058]]

 
15821.......................  Revision of lower        SA082.......................  pack, ophthalmology visit
                               eyelid.                                                (w-dilation).
15822.......................  Revision of upper        SA082.......................  pack, ophthalmology visit
                               eyelid.                                                (w-dilation).
17311.......................  Mohs, 1 stage, h/n/hf/g  SG078.......................  tape, surgical occlusive
                                                                                      1in (Blenderm).
17312.......................  Mohs addl stage........  SG078.......................  tape, surgical occlusive
                                                                                      1in (Blenderm).
17313.......................  Mohs, 1 stage, t/a/l...  SG078.......................  tape, surgical occlusive
                                                                                      1in (Blenderm).
17314.......................  Mohs, addl stage, t/a/l  SG078.......................  tape, surgical occlusive
                                                                                      1in (Blenderm).
21011.......................  Exc face les sc < 2 cm.  SH046.......................  lidocaine 1% w-epi inj
                                                                                      (Xylocaine w-epi).
21013.......................  Exc face tum deep < 2    SH046.......................  lidocaine 1% w-epi inj
                               cm.                                                    (Xylocaine w-epi).
21073.......................  Mnpj of tmj w/anesth...  SG079.......................  tape, surgical paper 1in
                                                                                      (Micropore).
21076.......................  Prepare face/oral        SL047.......................  dental stone powder.
                               prosthesis.
21081.......................  Prepare face/oral        SK024.......................  film, dental.
                               prosthesis.
21310.......................  Treatment of nose        SB034.......................  mask, surgical, with face
                               fracture.                                              shield.
23075.......................  Exc shoulder les sc < 3  SG056.......................  gauze, sterile 4in x 4in
                               cm.                                                    (10 pack uou).
                              .......................  SH021.......................  bupivacaine 0.25% inj
                                                                                      (Marcaine).
24075.......................  Exc arm/elbow les sc <   SG056.......................  gauze, sterile 4in x 4in
                               3 cm.                                                  (10 pack uou).
                              .......................  SH021.......................  bupivacaine 0.25% inj
                                                                                      (Marcaine).
25075.......................  Exc forearm les sc < 3   SG056.......................  gauze, sterile 4in x 4in
                               cm.                                                    (10 pack uou).
                              .......................  SH021.......................  bupivacaine 0.25% inj
                                                                                      (Marcaine).
26115.......................  Exc hand les sc < 1.5    SG056.......................  gauze, sterile 4in x 4in
                               cm.                                                    (10 pack uou).
                              .......................  SH021.......................  bupivacaine 0.25% inj
                                                                                      (Marcaine).
27327.......................  Exc thigh/knee les sc <  SG056.......................  gauze, sterile 4in x 4in
                               3 cm.                                                  (10 pack uou).
27618.......................  Exc leg/ankle tum < 3    SG056.......................  gauze, sterile 4in x 4in
                               cm.                                                    (10 pack uou).
28039.......................  Exc foot/toe tum sc >    SG056.......................  gauze, sterile 4in x 4in
                               1.5 cm.                                                (10 pack uou).
28043.......................  Exc foot/toe tum sc <    SG056.......................  gauze, sterile 4in x 4in
                               1.5 cm.                                                (10 pack uou).
28045.......................  Exc foot/toe tum deep <  SG056.......................  gauze, sterile 4in x 4in
                               1.5cm.                                                 (10 pack uou).
28306.......................  Incision of metatarsal.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28307.......................  Incision of metatarsal.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28310.......................  Revision of big toe....  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28312.......................  Revision of toe........  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28313.......................  Repair deformity of toe  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28315.......................  Removal of sesamoid      SA048.......................  pack, minimum multi-
                               bone.                                                  specialty visit.
28340.......................  Resect enlarged toe      SA048.......................  pack, minimum multi-
                               tissue.                                                specialty visit.
28344.......................  Repair extra toe(s)....  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28345.......................  Repair webbed toe(s)...  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28496.......................  Treat big toe fracture.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28755.......................  Fusion of big toe joint  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28820.......................  Amputation of toe......  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28890.......................  High energy eswt,        SC051.......................  syringe 10-12ml.
                               plantar f.
29870.......................  Knee arthroscopy, dx...  SG079.......................  tape, surgical paper 1in
                                                                                      (Micropore).
32553.......................  Ins mark thor for rt     SB034.......................  mask, surgical, with face
                               perq.                                                  shield.
36475.......................  Endovenous rf, 1st vein  SC074.......................  iv pressure infusor bag.
36592.......................  Collect blood from picc  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
41530.......................  Tongue base vol          SD009.......................  canister, suction.
                               reduction.
41805.......................  Removal foreign body,    SD134.......................  tubing, suction, non-latex
                               gum.                                                   (6ft) with Yankauer tip
                                                                                      (1).
41806.......................  Removal foreign body,    SD134.......................  tubing, suction, non-latex
                               jawbone.                                               (6ft) with Yankauer tip
                                                                                      (1).
42107.......................  Excision lesion, mouth   SD009.......................  canister, suction.
                               roof.
46505.......................  Chemodenervation anal    SD009.......................  canister, suction.
                               musc.
49411.......................  Ins mark abd/pel for rt  SB034.......................  mask, surgical, with face
                               perq.                                                  shield.
49440.......................  Place gastrostomy tube   SK089.......................  x-ray developer solution.
                               perc.
49441.......................  Place duod/jej tube      SK089.......................  x-ray developer solution.
                               perc.
49442.......................  Place cecostomy tube     SK089.......................  x-ray developer solution.
                               perc.
49446.......................  Change g-tube to g-j     SK089.......................  x-ray developer solution.
                               perc.
49450.......................  Replace g/c tube perc..  SK089.......................  x-ray developer solution.
49451.......................  Replace duod/jej tube    SK089.......................  x-ray developer solution.
                               perc.
49452.......................  Replace g-j tube perc..  SK089.......................  x-ray developer solution.
49460.......................  Fix g/colon tube w/      SK089.......................  x-ray developer solution.
                               device.
49465.......................  Fluoro exam of g/colon   SK089.......................  x-ray developer solution.
                               tube.
50382.......................  Change ureter stent,     SB034.......................  mask, surgical, with face
                               percut.                                                shield.
50384.......................  Remove ureter stent,     SB034.......................  mask, surgical, with face
                               percut.                                                shield.
50385.......................  Change stent via         SB034.......................  mask, surgical, with face
                               transureth.                                            shield.
50386.......................  Remove stent via         SB034.......................  mask, surgical, with face
                               transureth.                                            shield.
50387.......................  Change ext/int ureter    SB034.......................  mask, surgical, with face
                               stent.                                                 shield.
50389.......................  Remove renal tube w/     SB034.......................  mask, surgical, with face
                               fluoro.                                                shield.
51100.......................  Drain bladder by needle  SH047.......................  lidocaine 1%-2% inj
                                                                                      (Xylocaine).
51101.......................  Drain bladder by trocar/ SH047.......................  lidocaine 1%-2% inj
                               cath.                                                  (Xylocaine).
51727.......................  Cystometrogram w/up....  SC051.......................  syringe 10-12ml.
51728.......................  Cystometrogram w/vp....  SC051.......................  syringe 10-12ml.
51729.......................  Cystometrogram w/vp&up.  SC051.......................  syringe 10-12ml.
52649.......................  Prostate laser           SA048.......................  pack, minimum multi-
                               enucleation.                                           specialty visit.
53855.......................  Insert prost urethral    SB024.......................  gloves, sterile.
                               stent.

[[Page 40059]]

 
59300.......................  Episiotomy or vaginal    SG062.......................  packing, gauze plain 0.25-
                               repair.                                                0.50in (5 yd uou).
59812.......................  Treatment of             SA052.......................  pack, post-op incision care
                               miscarriage.                                           (staple).
64490.......................  Inj paravert f jnt c/t   SK025.......................  film, dry, radiographic,
                               1 lev.                                                 8in x 10in.
64493.......................  Inj paravert f jnt l/s   SH021.......................  bupivacaine 0.25% inj
                               1 lev.                                                 (Marcaine).
                              .......................  SK025.......................  film, dry, radiographic,
                                                                                      8in x 10in.
65272.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65286.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66250.......................  Follow-up surgery of     SA082.......................  pack, ophthalmology visit
                               eye.                                                   (w-dilation).
67031.......................  Laser surgery, eye       SA082.......................  pack, ophthalmology visit
                               strands.                                               (w-dilation).
67105.......................  Repair detached retina.  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
67110.......................  Repair detached retina.  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
67120.......................  Remove eye implant       SA082.......................  pack, ophthalmology visit
                               material.                                              (w-dilation).
67228.......................  Treatment of retinal     SA082.......................  pack, ophthalmology visit
                               lesion.                                                (w-dilation).
67901.......................  Repair eyelid defect...  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
75571.......................  Ct hrt w/o dye w/ca      SJ019.......................  electrode adhesive disk.
                               test.
75572.......................  Ct hrt w/3d image......  SJ019.......................  electrode adhesive disk.
75573.......................  Ct hrt w/3d image,       SJ019.......................  electrode adhesive disk.
                               congen.
75574.......................  Ct angio hrt w/3d image  SJ019.......................  electrode adhesive disk.
75960.......................  Transcath iv stent rs&i  SK034.......................  film, x-ray 14in x 17in.
76821.......................  Middle cerebral artery   SM013.......................  disinfectant, surface
                               echo.                                                  (Envirocide, Sanizide).
77371.......................  Srs, multisource.......  SG079.......................  tape, surgical paper 1in
                                                                                      (Micropore).
77372.......................  Srs, linear based......  SG079.......................  tape, surgical paper 1in
                                                                                      (Micropore).
77373.......................  Sbrt delivery..........  SG079.......................  tape, surgical paper 1in
                                                                                      (Micropore).
78452.......................  Ht muscle image spect,   SC051.......................  syringe 10-12ml.
                               mult.
                              .......................  SK092.......................  x-ray fixer solution
78454.......................  Ht musc image, planar,   SK092.......................  x-ray fixer solution.
                               mult.
88125.......................  Forensic cytopathology.  SL026.......................  clearing agent (Histo-
                                                                                      clear).
88355.......................  Analysis, skeletal       SK073.......................  skin marking ink (tattoo).
                               muscle.
                              .......................  SL061.......................  embedding paraffin.
                              .......................  SL078.......................  histology freezing spray
                                                                                      (Freeze-It).
                              .......................  SL201.......................  stain, eosin.
88356.......................  Analysis, nerve........  SB023.......................  gloves, non-sterile,
                                                                                      nitrile.
                              .......................  SK073.......................  skin marking ink (tattoo).
                              .......................  SL061.......................  embedding paraffin.
                              .......................  SL078.......................  histology freezing spray
                                                                                      (Freeze-It).
                              .......................  SL108.......................  pipette.
                              .......................  SL201.......................  stain, eosin.
88365.......................  Insitu hybridization     SF004.......................  blade, microtome.
                               (fish).
                              .......................  SL179.......................  1.0N NaOH.
                              .......................  SL183.......................  slide, organosilane coated.
                              .......................  SL189.......................  ethanol, 100%.
                              .......................  SL190.......................  ethanol, 70%.
                              .......................  SL194.......................  Hemo-De.
                              .......................  SM016.......................  eye shield, splash
                                                                                      protection.
88367.......................  Insitu hybridization,    SC057.......................  syringe 5-6ml.
                               auto.
                              .......................  SF004.......................  blade, microtome.
                              .......................  SL030.......................  cover slip, glass.
                              .......................  SL085.......................  label for microscope
                                                                                      slides.
                              .......................  SL178.......................  0.2N HCL.
                              .......................  SL179.......................  1.0N NaOH.
                              .......................  SL181.......................  pipette tips, sterile.
                              .......................  SL183.......................  slide, organosilane coated.
                              .......................  SL189.......................  ethanol, 100%.
                              .......................  SL190.......................  ethanol, 70%.
                              .......................  SL191.......................  ethanol, 85%.
                              .......................  SL194.......................  Hemo-De.
                              .......................  SM016.......................  eye shield, splash
                                                                                      protection.
88368.......................  Insitu hybridization,    SF004.......................  blade, microtome.
                               manual.
                              .......................  SL179.......................  1.0N NaOH.
                              .......................  SL183.......................  slide, organosilane coated.
                              .......................  SL189.......................  ethanol, 100%.
                              .......................  SL190.......................  ethanol, 70%.
                              .......................  SL194.......................  Hemo-De.
                              .......................  SM016.......................  eye shield, splash
                                                                                      protection.
88385.......................  Eval molecul probes, 51- SL207.......................  air, filtered, compressed.
                               250.
                              .......................  SL218.......................  DNA, Versagene, blood kit.
                              .......................  SL220.......................  ethanol, 200%.
                              .......................  SL225.......................  gas, nitogen, ultra-high
                                                                                      purity (compressed), grade
                                                                                      5.0.
88386.......................  Eval molecul probes,     SL207.......................  air, filtered, compressed.
                               251-500.
                              .......................  SL218.......................  DNA, Versagene, blood kit.

[[Page 40060]]

 
                              .......................  SL220.......................  ethanol, 200%.
                              .......................  SL225.......................  gas, nitogen, ultra-high
                                                                                      purity (compressed), grade
                                                                                      5.0.
90470.......................  Immune admin H1N1 im/    SB036.......................  paper, exam table.
                               nasal.
91065.......................  Breath hydrogen test...  (blank).....................  Sivrite-4.
91132.......................  Electrogastrography....  SD062.......................  electrode, surface.
91133.......................  Electrogastrography w/   SD062.......................  electrode, surface.
                               test.
92550.......................  Tympanometry & reflex    SK059.......................  paper, recording (per
                               thresh.                                                sheet).
92597.......................  Oral speech device eval  SB022.......................  gloves, non-sterile.
92610.......................  Evaluate swallowing      SB022.......................  gloves, non-sterile.
                               function.
92626.......................  Eval aud rehab status..  SK008.......................  audiology scoring forms.
92627.......................  Eval aud status rehab    SK008.......................  audiology scoring forms.
                               add-on.
92640.......................  Aud brainstem implt      SK068.......................  razor.
                               programg.
95004.......................  Percut allergy skin      SC023.......................  multi-tine device.
                               tests.
95024.......................  Id allergy test, drug/   SA048.......................  pack, minimum multi-
                               bug.                                                   specialty visit.
                              .......................  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
95027.......................  Id allergy titrate-      SA048.......................  pack, minimum multi-
                               airborne.                                              specialty visit.
                              .......................  SC052.......................  syringe 1ml.
95044.......................  Allergy patch tests....  SK087.......................  water, distilled.
95052.......................  Photo patch test.......  SK087.......................  water, distilled.
95148.......................  Antigen therapy          SH009.......................  antigen, venom.
                               services.
95805.......................  Multiple sleep latency   SK094.......................  x-ray marking pencil.
                               test.
96040.......................  Genetic counseling, 30   SK062.......................  patient education booklet.
                               min.
96102.......................  Psycho testing by        SK057.......................  paper, laser printing (each
                               technician.                                            sheet).
96360.......................  Hydration iv infusion,   SC018.......................  iv infusion set.
                               init.
                              .......................  SC051.......................  syringe 10-12ml.
                              .......................  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
96365.......................  Ther/proph/diag iv inf,  SC018.......................  iv infusion set.
                               init.
                              .......................  SC051.......................  syringe 10-12ml.
                              .......................  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
96366.......................  Ther/proph/diag iv inf   SB022.......................  gloves, non-sterile.
                               addon.
96367.......................  Tx/proph/dg addl seq iv  SB022.......................  gloves, non-sterile.
                               inf.
96369.......................  Sc ther infusion, up to  SC013.......................  infusion pump cassette-
                               1 hr.                                                  reservoir.
96371.......................  Sc ther infusion, reset  SC013.......................  infusion pump cassette-
                               pump.                                                  reservoir.
96372.......................  Ther/proph/diag inj, sc/ SB022.......................  gloves, non-sterile.
                               im.
96374.......................  Ther/proph/diag inj, iv  SB022.......................  gloves, non-sterile.
                               push.
                              .......................  SC051.......................  syringe 10-12ml.
                              .......................  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
96375.......................  Tx/pro/dx inj new drug   SB022.......................  gloves, non-sterile.
                               addon.
                              .......................  SC051.......................  syringe 10-12ml.
96401.......................  Chemo, anti-neopl, sq/   SC051.......................  syringe 10-12ml.
                               im.
                              .......................  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
96402.......................  Chemo hormon antineopl   SC051.......................  syringe 10-12ml.
                               sq/im.
                              .......................  SG050.......................  gauze, non-sterile 2in x
                                                                                      2in.
96409.......................  Chemo, iv push, sngl     SC018.......................  iv infusion set 22.
                               drug.
                              .......................  SC051.......................  syringe 10-12ml.
96411.......................  Chemo, iv push, addl     SC018.......................  iv infusion set.
                               drug.
                              .......................  SC051.......................  syringe 10-12ml.
96413.......................  Chemo, iv infusion, 1    SC018.......................  iv infusion set.
                               hr.
                              .......................  SC051.......................  syringe 10-12ml.
96417.......................  Chemo iv infus each      SC018.......................  iv infusion set.
                               addl seq.
96445.......................  Chemotherapy,            SC018.......................  iv infusion set.
                               intracavitary.
                              .......................  SH069.......................  sodium chloride 0.9%
                                                                                      irrigation (500-1000ml
                                                                                      uou).
96542.......................  Chemotherapy injection.  SC018.......................  iv infusion set.
99366.......................  Team conf w/pat by hc    SK062.......................  patient education booklet.
                               pro.
G0270.......................  MNT subs tx for change   SK057.......................  paper, laser printing (each
                               dx.                                                    sheet).
                              .......................  SK062.......................  patient education booklet.
G0271.......................  Group MNT 2 or more 30   SK057.......................  paper, laser printing (each
                               mins.                                                  sheet).
----------------------------------------------------------------------------------------------------------------


                   Table 8--Overall Supply Price Calculation Corrections for Facility Settings
----------------------------------------------------------------------------------------------------------------
                                                       CMS supply code with overall
       CPT/HCPCS Code             Short descriptor           price corrections          Description of supply
----------------------------------------------------------------------------------------------------------------
15738.......................  Muscle-skin graft, leg.  SG017.......................  bandage, Kling, non-sterile
                                                                                      2in.
15820.......................  Revision of lower        SA082.......................  pack, ophthalmology visit
                               eyelid.                                                (w-dilation).
15821.......................  Revision of lower        SA082.......................  pack, ophthalmology visit
                               eyelid.                                                (w-dilation).
15822.......................  Revision of upper        SA082.......................  pack, ophthalmology visit
                               eyelid.                                                (w-dilation).
19303.......................  Mast, simple, complete.  SB006.......................  drape, non-sterile, sheet
                                                                                      40in x 60in.
20900.......................  Removal of bone for      SA054.......................  pack, post-op incision care
                               graft.                                                 (suture).

[[Page 40061]]

 
21011.......................  Exc face les sc < 2 cm.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
21013.......................  Exc face tum deep < 2    SA048.......................  pack, minimum multi-
                               cm.                                                    specialty visit.
21193.......................  Reconst lwr jaw w/o      SJ061.......................  tongue depressor.
                               graft.
21194.......................  Reconst lwr jaw w/graft  SJ061.......................  tongue depressor.
21240.......................  Reconstruction of jaw    SJ061.......................  tongue depressor.
                               joint.
21366.......................  Treat cheek bone         SJ061.......................  tongue depressor.
                               fracture.
21435.......................  Treat craniofacial       SJ061.......................  tongue depressor.
                               fracture.
21555.......................  Exc neck les sc < 3 cm.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
21930.......................  Exc back les sc < 3 cm.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
22902.......................  Exc abd les sc < 3 cm..  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
23075.......................  Exc shoulder les sc < 3  SA048.......................  pack, minimum multi-
                               cm.                                                    specialty visit.
24075.......................  Exc arm/elbow les sc <   SA048.......................  pack, minimum multi-
                               3 cm.                                                  specialty visit.
25075.......................  Exc forearm les sc < 3   SA048.......................  pack, minimum multi-
                               cm.                                                    specialty visit.
26115.......................  Exc hand les sc < 1.5    SA048.......................  pack, minimum multi-
                               cm.                                                    specialty visit.
27047.......................  Exc hip/pelvis les sc <  SA048.......................  pack, minimum multi-
                               3 cm.                                                  specialty visit.
27327.......................  Exc thigh/knee les sc <  SA048.......................  pack, minimum multi-
                               3 cm.                                                  specialty visit.
27618.......................  Exc leg/ankle tum < 3    SA048.......................  pack, minimum multi-
                               cm.                                                    specialty visit.
28307.......................  Incision of metatarsal.  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28340.......................  Resect enlarged toe      SA048.......................  pack, minimum multi-
                               tissue.                                                specialty visit.
28345.......................  Repair webbed toe(s)...  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
28820.......................  Amputation of toe......  SA048.......................  pack, minimum multi-
                                                                                      specialty visit.
33516.......................  Cabg, vein, six or more  SA052.......................  pack, post-op incision care
                                                                                      (staple).
34510.......................  Transposition of vein    SA054.......................  pack, post-op incision care
                               valve.                                                 (suture).
35013.......................  Repair artery rupture,   SA048.......................  pack, minimum multi-
                               arm.                                                   specialty visit.
41150.......................  Tongue, mouth, jaw       SA048.......................  pack, minimum multi-
                               surgery.                                               specialty visit.
41153.......................  Tongue, mouth, neck      SA048.......................  pack, minimum multi-
                               surgery.                                               specialty visit.
41155.......................  Tongue, jaw, & neck      SA048.......................  pack, minimum multi-
                               surgery.                                               specialty visit.
41805.......................  Removal foreign body,    SD134.......................  tubing, suction, non-latex
                               gum.                                                   (6ft) with Yankauer tip
                                                                                      (1).
41806.......................  Removal foreign body,    SD134.......................  tubing, suction, non-latex
                               jawbone.                                               (6ft) with Yankauer tip
                                                                                      (1).
42160.......................  Treatment mouth roof     SD122.......................  suction tip, Yankauer.
                               lesion.
51925.......................  Hysterectomy/bladder     SB006.......................  drape, non-sterile, sheet
                               repair.                                                40in x 60in.
56620.......................  Partial removal of       SA048.......................  pack, minimum multi-
                               vulva.                                                 specialty visit.
57284.......................  Repair paravag defect,   SA051.......................  pack, pelvic exam.
                               open.
                                                       SB006.......................  drape, non-sterile, sheet
                                                                                      40in x 60in.
57285.......................  Repair paravag defect,   SA051.......................  pack, pelvic exam.
                               vag.
                                                       SB006.......................  drape, non-sterile, sheet
                                                                                      40in x 60in.
57423.......................  Repair paravag defect,   SA051.......................  pack, pelvic exam.
                               lap.
                                                       SB006.......................  drape, non-sterile, sheet
                                                                                      40in x 60in.
58660.......................  Laparoscopy, lysis.....  SB006.......................  drape, non-sterile, sheet
                                                                                      40in x 60in.
58662.......................  Laparoscopy, excise      SJ046.......................  silver nitrate applicator.
                               lesions.
58670.......................  Laparoscopy, tubal       SJ046.......................  silver nitrate applicator.
                               cautery.
58940.......................  Removal of ovary(s)....  SA052.......................  pack, post-op incision care
                                                                                      (staple).
58952.......................  Resect ovarian           SB006.......................  drape, non-sterile, sheet
                               malignancy.                                            40in x 60in.
64632.......................  N block inj, common      SA048.......................  pack, minimum multi-
                               digit.                                                 specialty visit.
65112.......................  Remove eye/revise        SA050.......................  pack, ophthalmology visit
                               socket.                                                (no dilation).
65114.......................  Remove eye/revise        SA050.......................  pack, ophthalmology visit
                               socket.                                                (no dilation).
65235.......................  Remove foreign body      SA082.......................  pack, ophthalmology visit
                               from eye.                                              (w-dilation).
65265.......................  Remove foreign body      SA082.......................  pack, ophthalmology visit
                               from eye.                                              (w-dilation).
65272.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65273.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65280.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65285.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65286.......................  Repair of eye wound....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65290.......................  Repair of eye socket     SA082.......................  pack, ophthalmology visit
                               wound.                                                 (w-dilation).
65770.......................  Revise cornea with       SA050.......................  pack, ophthalmology visit
                               implant.                                               (no dilation).
65850.......................  Incision of eye........  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
65865.......................  Incise inner eye         SA082.......................  pack, ophthalmology visit
                               adhesions.                                             (w-dilation).
65870.......................  Incise inner eye         SA082.......................  pack, ophthalmology visit
                               adhesions.                                             (w-dilation).
66180.......................  Implant eye shunt......  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66185.......................  Revise eye shunt.......  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66220.......................  Repair eye lesion......  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66250.......................  Follow-up surgery of     SA082.......................  pack, ophthalmology visit
                               eye.                                                   (w-dilation).
66500.......................  Incision of iris.......  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66600.......................  Remove iris and lesion.  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66605.......................  Removal of iris........  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66625.......................  Removal of iris........  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66630.......................  Removal of iris........  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66635.......................  Removal of iris........  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66682.......................  Repair iris & ciliary    SA082.......................  pack, ophthalmology visit
                               body.                                                  (w-dilation).
66820.......................  Incision, secondary      SA082.......................  pack, ophthalmology visit
                               cataract.                                              (w-dilation).

[[Page 40062]]

 
66850.......................  Removal of lens          SA082.......................  pack, ophthalmology visit
                               material.                                              (w-dilation).
66852.......................  Removal of lens          SA082.......................  pack, ophthalmology visit
                               material.                                              (w-dilation).
66930.......................  Extraction of lens.....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66940.......................  Extraction of lens.....  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
66983.......................  Cataract surg w/iol, 1   SA082.......................  pack, ophthalmology visit
                               stage.                                                 (w-dilation).
67015.......................  Release of eye fluid...  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
67031.......................  Laser surgery, eye       SA082.......................  pack, ophthalmology visit
                               strands.                                               (w-dilation).
67036.......................  Removal of inner eye     SA082.......................  pack, ophthalmology visit
                               fluid.                                                 (w-dilation).
67040.......................  Laser treatment of       SA082.......................  pack, ophthalmology visit
                               retina.                                                (w-dilation).
67105.......................  Repair detached retina.  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
67107.......................  Repair detached retina.  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
67110.......................  Repair detached retina.  SA082.......................  pack, ophthalmology visit
                                                                                      (w-dilation).
67115.......................  Release encircling       SA082.......................  pack, ophthalmology visit
                               material.                                              (w-dilation).
67120.......................  Remove eye implant       SA082.......................  pack, ophthalmology visit
                               material.                                              (w-dilation).
67228.......................  Treatment of retinal     SA082.......................  pack, ophthalmology visit
                               lesion.                                                (w-dilation).
67400.......................  Explore/biopsy eye       SA082.......................  pack, ophthalmology visit
                               socket.                                                (w-dilation).
67412.......................  Explore/treat eye        SA082.......................  pack, ophthalmology visit
                               socket.                                                (w-dilation).
67440.......................  Explore/drain eye        SA082.......................  pack, ophthalmology visit
                               socket.                                                (w-dilation).
67908.......................  Repair eyelid defect...  SG008.......................  applicator, cotton-tipped,
                                                                                      non-sterile 6in.
88356.......................  Analysis, nerve........  SL108.......................  pipette.
----------------------------------------------------------------------------------------------------------------

c. AMA RUC Recommendations in CY 2010 for Changes to Direct PE Inputs
    In a March 2010 letter, the AMA RUC made specific PE 
recommendations that we consider below. As stated earlier, the proposed 
changes that follow are included in the proposed CY 2011 direct PE 
database, which is available on the CMS Web site under the downloads 
for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/.
(1) Electrogastrography and Esophageal Function Test
    We are accepting the AMA RUC recommendations for the CY 2011 PE 
inputs for the following CPT codes: 91132 (Electrogastrography, 
diagnostic, transcutaneous); 91133 (Electrogastrography, diagnostic, 
transcutaneous; with provocative testing); 91038 (Esophageal function 
test, gastroesophageal reflux test with nasal catheter intraluminal 
impedance electrode(s) placement, recording, analysis and 
interpretation; prolonged (greater than 1 hour, up to 24 hours)). For 
CPT code 91038, we have assumed a useful life of 5 years for the 
equipment item ``ZEPHR impedance/pH reflux monitoring system with data 
recorder, software, monitor, workstation and cart,'' based on its entry 
in the AHA's publication, ``Estimated Useful Lives of Depreciable 
Hospital Assets,'' which we use as a standard reference. The proposed 
CY 2011 direct PE database has been changed accordingly.
(2) 64-Slice CT Scanner and Software
    The AMA RUC submitted an updated recommendation regarding the 
correct pricing of the 64-slice CT scanner and its accompanying 
software. Based on the documentation accompanying the recommendation, 
we are accepting this recommendation and updating the price input for 
the 64-slice scanner and software. This affects the following four CPT 
codes that use either the scanner, the software, or both: 75571 
(computed tomography, heart, without contrast material, with 
quantitative evaluation of coronary calcium); 75572 (Computed 
tomography, heart, with contrast material, for evaluation of cardiac 
structure and morphology (including 3D image postprocessing, assessment 
of cardiac function, and evaluation of venous structures, if 
performed)); 75573 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3D image postprocessing, assessment 
of LV cardiac function, RV structure and function and evaluation of 
venous structures, if performed)); and 75574 (Computed tomographic 
angiography, heart, coronary arteries and bypass grafts (when present), 
with contrast material, including 3D image postprocessing (including 
evaluation of cardiac structure and morphology, assessment of cardiac 
function, and evaluation of venous structure, if performed)). The 
proposed CY 2011 direct PE database has been modified accordingly.
(3) Cystometrogram
    The AMA RUC recently identified a rank order anomaly regarding CPT 
code 51726 (Complex cystometrogram (i.e., calibrated electronic 
equipment)). Currently, this procedure has higher PE RVUs, despite 
being less resource- intensive than the three CPT codes for which it 
serves as the base: 51727 (Complex cystometrogram (i.e., calibrated 
electronic equipment); with urethral pressure profile studies (i.e., 
urethral closure pressure profile), any technique); 51728 (Complex 
cystometrogram (i.e., calibrated electronic equipment); with voiding 
pressure studies (i.e., bladder voiding pressure), any technique); and 
51729 (Complex cystometrogram (i.e., calibrated electronic equipment); 
with voiding pressure studies (i.e., bladder voiding pressure) and 
urethral pressure profile studies (i.e., urethral closure pressure 
profile), any technique).
    Since usual AMA RUC policy is that CPT codes with a 0-day global 
period do not have pre-service time associated with the code, the AMA 
RUC recommended removing the nonfacility pre-service clinical staff 
time from the PE inputs for 51726. Additionally, the AMA RUC 
recommended that the nonfacility clinical intra-service staff time for 
CPT code 51276 be reduced from the 118 minutes of intra-service 
clinical staff time currently assigned to the code to 85 minutes of 
intra-service clinical staff time. These changes would resolve the rank 
order anomaly and bring the PE inputs for CPT code 51726 into alignment 
with the other three codes. Finally, and for the reasons

[[Page 40063]]

stated above, the AMA RUC recommended that CMS remove the 23 minutes of 
pre-service nonfacility clinical staff time from CPT code 51725 (Simple 
cystometrogram (CMG) (e.g., spinal manometer)). We are accepting these 
recommendations and, therefore, have changed the direct PE inputs for 
CPT codes 51725 and 51726 in the nonfacility setting in the proposed CY 
2011 direct PE database.
(4) Breath Hydrogen Test
    The AMA RUC provide recommendations regarding the PE inputs for CPT 
code 91065 (breath hydrogen test (e.g., for detection of lactase 
deficiency, fructose intolerance, bacterial overgrowth, or oro-cecal 
gastrointestinal transit). We are accepting the recommendations with 
two modifications. We have folded the two pieces of equipment listed as 
``quinGas Table-Top Support Stand, 3 Tank'' and ``Drying Tube, Patient 
Sample'' into the ``BreathTrackerDigital SC Instrument'' and summed 
their inputs into one equipment line-item, since these equipment items 
are used together specifically for the service in question. We have 
increased the useful life input of the ``BreathTrackerDigital SC 
Instrument'' from 7 to 8 years based on our use of the American 
Hospital Association (AHA)'s publication entitled, ``Estimated Useful 
Lives of Depreciable Hospital Assets'' as a standard reference. 
Additionally, because the AMA RUC did not include equipment times in 
their recommendations for this CPT code, we have used 53 minutes as the 
total time for all equipment items based on the total intra-service 
period for the clinical labor, consistent with our general policy for 
establishing equipment times. These modifications are reflected in the 
proposed CY 2011 direct PE database.
(5) Radiographic Fluoroscopic Room
    A recent AMA RUC review of services that include the radiographic 
fluoroscopic room (CMS Equipment Code EL014) as a direct PE revealed 
that the use of the item is no longer typical for certain services in 
which it is specified within the current direct cost inputs. The AMA 
RUC recommended to CMS that the radiographic fluoroscopic room be 
deleted from CPT codes 64420 (Injection, anesthetic agent; intercostal 
nerve, single); 64421 (Injection, anesthetic agent; intercostal nerves, 
multiple, regional block); and 64620 (Destruction by neurolytic agent, 
intercostal nerve).
    We are accepting these recommendations and, therefore, these 
changes are included in the proposed CY 2011 direct PE database.
    The AMA RUC also informed us that it has convened a workgroup to 
examine the inclusion of the fluoroscopic room across a broader range 
of codes. We will consider any future recommendations from the AMA RUC 
on this topic when they are submitted.
d. Referral of Existing CPT Codes for AMA RUC Review
    As part of our review of high cost supplies, we conducted a 
clinical review of the procedures associated with high cost supplies to 
confirm that those supplies currently are used in the typical case 
described by the CPT codes. While we confirmed that most high cost 
supplies could be used in the procedures for which they are currently 
direct PE inputs, we noted that one of the high cost supplies, fiducial 
screws (CMS Supply Code SD073) with a current price of $558, is 
included as a direct PE input for two CPT codes, specifically 77301 
(Intensity modulated radiotherapy plan, including dose-volume 
histograms for target and critical structure partial tolerance 
specifications) and 77011 (Computed tomography guidance for 
stereotactic localization). The documentation used in the current 
pricing of the supply item describes a kit that includes instructions, 
skull screws, a drill bit, and a collar for the TALON[reg] System 
manufactured by Best nomos. Best nomos' literature describes the 
insertion of the screws into the patient's skull to ensure accurate 
set-up. When CPT codes 77301 and 77011 were established in CY 2002 and 
CY 2003, respectively, we accepted the AMA RUC recommendations to 
include fiducial screws in the PE for these services. Upon further 
review, while we understand why this supply may be considered a typical 
PE input for CPT code 77011, we do not now believe that fiducial 
screws, as described in the Best nomos literature, would typically be 
used in CPT code 77301, where the most common clinical scenario would 
be treatment of prostate cancer.
    Therefore, in order to ensure that CPT codes 77301 and 77011 are 
appropriately valued for CY 2011 through the inclusion or exclusion of 
fiducial screws in their PE, we are asking the AMA RUC to review these 
CPT codes with respect to the inclusion of fiducial screws in their PE. 
We are requesting that the AMA RUC make recommendations to us regarding 
whether this supply should be included in the PE or removed from the PE 
for CPT codes 77301 and 77011 in a timeframe that would allow us to 
adopt interim values for these codes for CY 2011, should the AMA RUC 
recommend a change. If the AMA RUC continues to recommend the inclusion 
of fiducial screws in the PE for CPT code 77301 and/or 77011 for CY 
2011, we are requesting that the AMA RUC provide us with a detailed 
rationale for the inclusion of this specialized supply in the PE for 
the typical case reported under the relevant CPT code. We would also 
request that the AMA RUC furnish updated pricing information for the 
screws if they continue to recommend the screws as a PE input for one 
or both of these CPT codes in CY 2011.
e. Updating Equipment and Supply Price Inputs for Existing Codes
    Historically, we have periodically received requests to change the 
PE price inputs for supplies and equipment in the PE database. In the 
past, we have considered these requests on an ad hoc basis and updated 
the price inputs as part of quarterly or annual updates if we believed 
them to be appropriate. In this proposed rule, we are proposing to 
establish a regular and more transparent process for considering public 
requests for changes to PE database price inputs for supplies and 
equipment used in existing codes.
    We are proposing to act on public requests to update equipment and 
supply price inputs annually through rulemaking by following a regular 
and consistent process as discussed in the following paragraphs. We are 
proposing to use the annual PFS proposed rule released in the summer 
and the final rule released on or about November 1 each year as the 
vehicle for making these changes.
    We will accept requests for updating the price inputs for supplies 
and equipment on an ongoing basis; requests must be received no later 
than December 31 of each CY to be considered for inclusion in the next 
proposed rule. In that next proposed rule, we would present our review 
of submitted requests to update price inputs for specific equipment or 
supplies and our proposals for the subsequent calendar year. We would 
then finalize changes in the final rule for the upcoming calendar year. 
Our review of the issues and consideration of public comments may 
result in the following outcomes that would be presented in the final 
rule with comment period:
     Updating the equipment or supply price inputs, as 
requested.
     Updating the equipment or supply price inputs, with 
modifications.
     Rejecting the new price inputs.

[[Page 40064]]

     Declining to act on the request pending a recommendation 
from the AMA RUC.
    To facilitate our review and preparation of issues for the proposed 
rule, at a minimum, we would expect that requesters would provide the 
following information:
     Name and contact information for the requestor.
     The name of the item exactly as it appears in the direct 
PE file under downloads for the most recent PFS final rule with comment 
period, available on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp#TopOfPage.
    In order to best evaluate the requests in the context of our goal 
of utilizing accurate market prices for these items as direct PE 
inputs, we also would expect requestors to provide multiple invoices 
from different suppliers/manufacturers. In some cases, multiple sources 
may not be available, whereupon a detailed explanation should be 
provided to support the request. When furnishing invoices, requestors 
should take into consideration the following parameters:
    ++ May be either print or electronic but should be on supplier and/
or manufacturer stationery (for example, letterhead, billing statement, 
etc.)
    ++ Should be for the typical, common, and customary version of the 
supply or equipment that is used to furnish the services.
    ++ Price should be net of typical rebates and/or any discounts 
available, including information regarding the magnitude and rationale 
for such rebates or discounts.
    ++ If multiple items are presented on the same invoice, relevant 
item(s) should be clearly identified.
    We are soliciting public comments on this proposed process, 
including the information that requestors should furnish to facilitate 
our full analysis in preparation for the next calendar year's 
rulemaking cycle.

B. Malpractice Relative Value Units (RVUs)

1. Background
    Section 1848(c) of the Act requires that each service paid under 
the PFS be comprised of three components: work, PE, and malpractice. 
From 1992 to 1999, malpractice RVUs were charge-based, using weighted 
specialty-specific malpractice expense percentages and 1991 average 
allowed charges. Malpractice RVUs for new codes after 1991 were 
extrapolated from similar existing codes or as a percentage of the 
corresponding work RVU. Section 4505(f) of the BBA required us to 
implement resource-based malpractice RVUs for services furnished 
beginning in 2000. Therefore, initial implementation of resource-based 
malpractice RVUs occurred in 2000.
    The statute also requires that we review, and if necessary adjust, 
RVUs no less often than every 5 years. The first review and update of 
resource-based malpractice RVUs was addressed in the CY 2005 PFS final 
rule with comment period (69 FR 66263). Minor modifications to the 
methodology were addressed in the CY 2006 PFS final rule with comment 
period (70 FR 70153). In the CY 2010 PFS final rule with comment 
period, we implemented the second review and update of malpractice 
RVUs. For a discussion of the second review and update of malpractice 
RVUs see the CY 2010 PFS proposed rule (74 FR 33537) and final rule 
with comment period (74 FR 61758).
2. Malpractice RVUs for New and Revised Services Effective Before the 
Next 5-Year Review
    Currently, malpractice RVUs for new and revised codes effective 
before the next 5-Year Review (for example, effective CY 2011 through 
CY 2014) are determined by a direct crosswalk to a similar ``source'' 
code or a modified crosswalk to account for differences in work RVUs 
between the new/revised code and the source code. For the modified 
crosswalk approach, we adjust the malpractice RVUs for the new/revised 
code to reflect the difference in work RVUs between the source code and 
the AMA RUC's recommended work value (or the work value we are applying 
as an interim final value under the PFS) for the new code. For example, 
if the interim final work RVUs for the new/revised code are 10 percent 
higher than the work RVUs for the source code, the malpractice RVUs for 
the new/revised code would be increased by 10 percent over the source 
code RVUs. This approach presumes the same risk factor for the new/
revised code and source code but uses the work RVUs for the new/revised 
code to adjust for risk-of-service. The assigned malpractice RVUs for 
new/revised codes effective between updates remain in place until the 
next 5-Year Review.
    We will continue our current approach for determining malpractice 
RVUs for new/revised codes that become effective before the next 5-Year 
Review and update. Under this approach we will crosswalk the new/
revised code to the RVUs of a similar source code and adjust for 
differences in work (or, if greater, the clinical labor portion of the 
fully implemented PE RVUs), between the source code and the new/revised 
code. Additionally, we will publish a list of new/revised codes and the 
analytic crosswalk(s) used for determining their malpractice RVUs in 
the final rule with comment period, which we have not previously done. 
The CY 2011 malpractice RVUs for new/revised codes will be implemented 
as interim final values in the CY 2011 PFS final rule with comment 
period, where they will be subject to public comment. They will then be 
finalized in the CY 2012 PFS final rule with comment period.
3. Revised Malpractice RVUs for Selected Disc Arthroplasty Services
    As discussed in the CY 2010 PFS proposed rule (74 FR 33539), we 
assign malpractice RVUs to each service based upon a weighted average 
of the risk factors of all specialties that furnish the service. For 
the CY 2010 review of malpractice RVUs, we used CY 2008 Medicare 
payment data on allowed services to establish the frequency of a 
service by specialty. CPT code 22856 (Total disc arthroplasty 
(artificial disc), anterior approach, including discectomy with end 
plate preparation (includes osteophytectomy for nerve root or spinal 
cord decompression and microdissection), single interspace, cervical) 
had zero allowed services for CY 2008. Therefore, our contractor 
initially set the level of services to 1, and assigned a risk factor 
according to the average risk factor for all services that do not 
explicitly have a separate technical or professional component. We 
proposed to adopt our contractor's initial malpractice RVUs for CPT 
code 22856 in the CY 2010 proposed rule. Application of the average 
physician risk factor would have resulted in a significant decrease in 
malpractice RVUs for CPT code 22856 in CY 2010.
    Several commenters on the CY 2010 PFS proposed rule expressed 
concern regarding the proposed malpractice RVUs for CPT code 22856, 
which represented a proposed reduction of more than 77 percent. The 
commenters stated that this service is predominantly furnished by 
neurosurgeons and orthopedic surgeons. Given the high risk factors 
associated with these specialty types and the changes in malpractice 
RVUs for comparable services, the commenters stated that a reduction in 
the malpractice RVUs of this magnitude for CPT code 22856 could not be 
correct.
    After consideration of the public comments, for CY 2010, we set the 
risk factor for CPT code 22856 as the weighted average risk factor of 
six comparable procedures mentioned by

[[Page 40065]]

the commenters: CPT code 22554 (Arthrodesis, anterior interbody 
technique, including minimal discectomy to prepare interspace (other 
than for decompression); cervical below C2); CPT code 22558 
(Arthrodesis, anterior interbody technique, including minimal 
discectomy to prepare interspace (other than for decompression); 
lumbar); CPT code 22857 (Total disc arthroplasty (artificial disc), 
anterior approach, including discectomy to prepare interspace (other 
than for decompression), single interspace, lumbar); CPT code 22845 
(Anterior instrumentation; 2 to 3 vertebral segments (list separately 
in addition to code for primary procedure)); CPT code 63075 
(Discectomy, anterior, with decompression of spinal cord and/or nerve 
root(s), including osteophytectomy; cervical, single interspace); and 
CPT code 20931 (Allograft for spine surgery only; structural (list 
separately in addition to code for primary procedure)). The weighted 
average risk factor for these services is 8.4.
    Since publication of the CY 2010 PFS final rule with comment 
period, stakeholders have mentioned that we made significant changes to 
the malpractice RVUs for CPT code 22856 in CY 2010. The commenters also 
brought to our attention that other services are clinically similar to 
CPT code 22856 and have similar work RVUs, and therefore, some 
stakeholders believe these services should all have similar malpractice 
RVUs. Services mentioned by the stakeholders that are clinically 
similar to CPT code 22856 include CPT code 22857; CPT code 22861 
(Revision including replacement of total disc arthroplasty (artificial 
disc), anterior approach, single interspace; cervical); CPT code 22862 
(Revision including replacement of total disc arthroplasty (artificial 
disc) anterior approach, lumbar); CPT code 22864 (Removal of total disc 
arthroplasty (artificial disc), anterior approach, single interspace; 
cervical); and CPT code 22865 (Removal of total disc arthroplasty 
(artificial disc), anterior approach, single interspace; lumbar).
    After further review of this issue, we are proposing to apply the 
same risk factor used for CPT code 22856 to certain other services 
within this family of services (CPT codes 22857 through 22865) for 
which there were no allowed services in CY 2008. CPT codes 22861 and 
22864 had zero allowed services in CY 2008 and our contractor initially 
set their malpractice RVUs in the same way as it did for CPT code 
22856. Therefore, we will assign the weighted average risk factor we 
use for CPT code 22856 (that is, the weighted average of the risk 
factors for CPT codes 20931, 22554, 22558, 22845, 22857, and 63075) to 
CPT codes 22861 and 22864. However, CPT codes 22857, 22862, and 22865 
are low volume services (allowed services under 100). Our policy for 
low volume services is to apply the risk factor of the dominant 
specialty as indicated by our claims data. We will continue to apply 
our policy for low volume services to CPT codes 22857, 22862, and 
22865.

C. Potentially Misvalued Services Under the Physician Fee Schedule

1. Valuing Services Under the PFS
    As discussed in section I. of this proposed rule, in order to value 
services under the PFS, section 1848(c) of the Act requires the 
Secretary to determine relative values for physicians' services based 
on three components: the work, practice expense (PE), and malpractice 
components. Section 1848(c)(1)(A) of the Act defines the work component 
to include ``the portion of the resources used in furnishing the 
service that reflects physician time and intensity in furnishing the 
service.'' Additionally, the statute provides that the work component 
shall include activities that occur before and after direct patient 
contact. Furthermore, the statute specifies that with respect to 
surgical procedures, the valuation of the work component for the code 
would reflect a ``global'' concept in which pre-operative and post-
operative physicians' services related to the procedure would also be 
included.
    In addition, section 1848(c)(2)(C)(i) of the Act specifies that 
``the Secretary shall determine a number of work relative value units 
(RVUs) for the service based on the relative resources incorporating 
physician time and intensity required in furnishing the service.'' As 
discussed in detail in sections I.A.2. and I.A.3 of this proposed rule, 
the statute also defines the PE and malpractice components and provides 
specific guidance in the calculation of the RVUs for each of these 
components. Section 1848(c)(1)(B) of the Act defines the PE component 
as ``the portion of the resources used in furnishing the service that 
reflects the general categories of expenses (such as office rent and 
wages of personnel, but excluding malpractice expenses) comprising 
practice expenses.''
    Section 1848(c)(2)(C)(ii) of the Act specifies that the ``Secretary 
shall determine a number of practice expense relative value units for 
the services for years beginning with 1999 based on the relative 
practice expense resources involved in furnishing the service.'' 
Furthermore, section 1848(c)(2)(B) of the Act directs the Secretary to 
conduct a periodic review, not less often than every 5 years, of the 
RVUs established under the PFS. Finally, on March 23, 2010, the 
Affordable Care Act was enacted, further requiring the Secretary to 
periodically review and identify potentially misvalued codes and make 
appropriate adjustments to the relative values of those services 
identified as being potentially misvalued. Section 3134(a) of the ACA 
added a new section 1848(c)(2)(K) of the Act which requires the 
Secretary to periodically identify potentially misvalued services using 
certain criteria, and to review and make appropriate adjustments to the 
relative values for those services. Section 3134(a) of the ACA also 
added a new section 1848(c)(2)(L) which requires the Secretary to 
develop a validation process to validate the RVUs of potentially 
misvalued codes under the PFS and make appropriate adjustments.
    As discussed in section I.A.1. of this proposed rule, we establish 
physician work RVUs for new and revised codes based on our review of 
recommendations received from the AMA RUC. The AMA RUC also provides 
recommendations to CMS on the values for codes that have been 
identified as potentially misvalued. To respond to concerns expressed 
by MedPAC, the Congress, and other stakeholders regarding accurate 
valuation of services under the PFS, the AMA RUC created the Five-Year 
Review Identification Workgroup. In addition to providing 
recommendations to CMS for work RVUs, the AMA RUC's Practice Expense 
Subcommittee reviews direct PE (clinical labor, medical supplies, and 
medical equipment) for individual services and examines the many broad 
and methodological issues relating to the development of PE RVUs.
    In accordance with section 1848(c) of the Act, we determine 
appropriate adjustments to the RVUs, taking into account the 
recommendations provided by the AMA RUC and MedPAC, and publish the 
explanation for the basis of these adjustments in the PFS proposed and 
final rules. We note that section 1848(c)(2)(A)(ii) of the Act 
authorizes the use of extrapolation and other techniques to determine 
the RVUs for physicians' services for which specific data are not 
available, in addition to taking into account the results of 
consultations with organizations representing physicians.

[[Page 40066]]

2. Identifying, Reviewing, and Validating the RVUs of Potentially 
Misvalued Services Under the PFS
a. Background
    In its March 2006 Report to Congress, MedPAC noted that ``misvalued 
services can distort the price signals for physicians' services as well 
as for other health care services that physicians order, such as 
hospital services.'' In that same report MedPAC postulated that 
physicians' services under the PFS can become misvalued over time for a 
number of reasons: ``For example, when a new service is added to the 
physician fee schedule, it may be assigned a relatively high value 
because of the time, technical skill, and psychological stress that are 
required to perform it. Over time, skill, and stress involved may 
decline as physicians become more familiar with the service and more 
efficient at providing it. The amount of physician work needed to 
furnish an existing service may decrease when new technologies are 
incorporated. Services can also become overvalued when practice 
expenses decline. This can happen when the costs of equipment and 
supplies fall, or when equipment is used more frequently, reducing its 
cost per use. Likewise, services can become undervalued when physician 
work increases or practice expenses rise.'' In the ensuing years since 
MedPAC's 2006 report, additional groups of potentially misvalued 
services have been identified by Congress, CMS, MedPAC, the AMA RUC, 
and other stakeholders.
    In recent years CMS and the AMA RUC have taken increasingly 
significant steps to address potentially misvalued codes. As MedPAC 
noted in its March 2009 Report to Congress, in the intervening years 
since MedPAC made the initial recommendations, ``CMS and the AMA RUC 
have taken several steps to improve the review process.'' Most 
recently, section 1848(c)(2)(K)(ii) of the Act (as added by section 
3134 of the ACA) directed the Secretary to specifically examine 
potentially misvalued services in seven categories.
    (1) Codes and families of codes for which there has been the 
fastest growth.
    (2) Codes or families of codes that have experienced substantial 
changes in practice expenses.
    (3) Codes that are recently established for new technologies or 
services.
    (4) Multiple codes that are frequently billed in conjunction with 
furnishing a single service.
    (5) Codes with low relative values, particularly those that are 
often billed multiple times for a single treatment.
    (6) Codes which have not been subject to review since the 
implementation of the RBRVS (the so-called `Harvard-valued codes').
    (7) Other codes determined to be appropriate by the Secretary.
    Section 1848(c)(2)(K)(iii) of the Act (as added by section 3134 of 
the ACA) also specifies that the Secretary may use existing processes 
to receive recommendations on the review and appropriate adjustment of 
potentially misvalued services. In addition, the Secretary may conduct 
surveys, other data collection activities, studies, or other analyses 
as the Secretary determines to be appropriate to facilitate the review 
and appropriate adjustment of potentially misvalued services. This 
section authorizes the use of analytic contractors to identify and 
analyze potentially misvalued codes, conduct surveys or collect data, 
and make recommendations on the review and appropriate adjustment of 
potentially misvalued services. Finally, section 1848(c)(2)(K)(iii)(V) 
of the Act (as added by section 3134 of the ACA) specifies that the 
Secretary may make appropriate coding revisions (including using 
existing processes for consideration of coding changes) which may 
include consolidation of individual services into bundled codes for 
payment under the physician fee schedule.
b. Progress in Identifying and Reviewing Potentially Misvalued Codes
    Over the last several years, CMS, in conjunction with the AMA RUC, 
has identified and reviewed numerous potentially misvalued codes in all 
seven of the categories specified in section 1848(c)(2)(K)(ii) (as 
added by section 3134 of the ACA), and we plan to continue our work 
examining potentially misvalued codes in these areas over the upcoming 
years, consistent with the new legislative mandate on this issue. In 
the current process, the AMA RUC reviews potentially misvalued codes 
that are identified either by CMS or through its own processes and 
recommends revised work RVUs and/or direct PE inputs for those codes to 
CMS. CMS then assesses the recommended revised work RVUs and/or direct 
PE inputs and, in accordance with section 1848(c) of the Act, we 
determine if the recommendations constitute appropriate adjustments to 
the RVUs under the PFS. Since CY 2009, CMS and the AMA RUC have 
identified over 700 potentially misvalued codes.
    For example, in regards to the first category (codes and families 
of codes for which there has been the fastest growth), for CY 2009 CMS 
identified over 100 potentially misvalued codes for which an analysis 
of the utilization data showed an annual growth in allowed services of 
10 percent (or more) for 3 consecutive years (73 FR 38586). Each of 
these codes had allowed charges of $1 million or more in CY 2007. We 
published this list in the CY 2009 proposed rule (73 FR 38586 through 
38589) and requested that the AMA RUC immediately begin a review of the 
codes on this list. Meanwhile, in parallel with CMS' efforts, the AMA 
RUC also initiated processes to identify and review potentially 
misvalued codes on an ongoing basis using certain screens, including 
screens for ``CMS fastest growing procedures'' and ``high volume 
growth.'' Both of these AMA RUC screens are applicable to the first 
category of potentially misvalued codes specified in ACA. We plan to 
continue to analyze Medicare claims data over future years to identify 
additional services that exhibit rapid growth and high Medicare 
expenditures for referral to the AMA RUC for review as potentially 
misvalued codes.
    Pertaining to the second category specified in section 
1848(c)(2)(K)(ii) of the Act (as added by section 3134 of ACA) (codes 
or families of codes that have experienced substantial changes in 
practice expenses), in CY 2009 we requested that the AMA RUC continue 
its review of direct PE inputs, focusing particularly on high-volume 
codes where the PE payments are increasing significantly under the 
transition to the new PE methodology (73 FR 38589). The AMA RUC has 
responded by sending CMS recommendations for revised direct PE inputs 
for codes identified for PE review on an ongoing basis.
    Additionally in CY 2009, we began an initiative to review and 
update the prices for high-cost supplies in order to ensure the 
accuracy and completeness of the direct PE inputs. We discuss our most 
recent efforts in refining the process to update the prices of high-
cost supplies in section II.C.5. of this proposed rule.
    For the third category of potentially misvalued codes identified in 
section 1848(c)(2)(K)(ii) (as added by section 3134 of the ACA) (codes 
that are recently established for new technologies or services), the 
AMA RUC routinely identifies such codes through a screen based on 3 
years of Medicare claims data, and sends CMS recommendations for 
revised work RVUs and/or direct PE inputs for these codes on an ongoing 
basis. The AMA RUC may determine that a code for a new service requires 
reevaluation or does not require reevaluation, or it may conclude, on a 
case-by-case basis, that more than 3 years of claims data are

[[Page 40067]]

necessary before the code can be reviewed. In that case, it would 
determine the appropriate future timeframe for review.
    We also note that in its June 2008 Report to Congress entitled 
``Reforming the Health Care System'' and in the context of a discussion 
about primary care, MedPAC acknowledges, ``* * * Efficiency can improve 
more easily for other types of services, such as procedures, with 
advances in technology, technique, and other factors. Ideally, when 
such efficiency gains are achieved, the fee schedule's relative value 
units (RVUs) for the affected services should decline accordingly, 
while budget neutrality would raise the RVUs for the fee schedule's 
primary care services.'' (page 27). Section III.C.5. of this proposed 
rule includes a discussion regarding periodic updates to the costs of 
high cost supplies. This discussion is highly relevant to new 
technology services, where growth in volume of a service as it diffuses 
into clinical practice may lead to a decrease in the cost of expensive 
supplies. We also expect that other efficiencies in physician work and 
PE may be achieved after an initial period of relative inefficiency 
that reflects the ``learning curve.'' We plan to pay particular 
attention to the work values and direct PE inputs for these new 
services and the AMA RUC's periodic review process to ensure that any 
efficiencies are captured under the PFS over time, recognizing that the 
appropriate timing for revaluing these services needs to be considered 
on a case-by-case basis depending on the growth rate in service volume.
    We have also addressed the fourth category (multiple codes that are 
frequently billed in conjunction with furnishing a single service) in 
rulemaking prior to the enactment of the ACA. As discussed in the CY 
2009 PFS proposed rule (73 FR 38586), we have a longstanding policy of 
reducing payment for multiple surgical procedures performed on the same 
patient, by the same physician, on the same day. Over the ensuing 
years, the multiple procedure payment reduction (MPPR) policy has been 
extended to a number of nuclear diagnostic and diagnostic imaging 
procedures. We continue our work to recognize efficiencies in this area 
with a proposal to expand the MPPR policy to additional combinations of 
imaging services and to therapy services for CY 2011 as described in 
section II.C.4. of this proposed rule.
    We note the AMA RUC has also established a screen to identify 
services performed by the same physician on the same date of service 95 
percent of the time or more. Over the past 2 years, the CPT Editorial 
Panel has established new bundled codes to describe a comprehensive 
service for certain combinations of these existing services that are 
commonly furnished together, and the AMA RUC has recommended work 
values and direct PE inputs to CMS for these comprehensive service 
codes that recognize the associated efficiencies. CMS looks forward to 
working with the AMA RUC in this joint effort to examine codes commonly 
reported together and more appropriately value common combinations 
services.
    We address the fifth category of potentially misvalued codes (codes 
with low relative values, particularly those that are often billed 
multiple times for a single treatment) in section II.C.3.b. of this 
proposed rule. That is, we are providing a list of services with low 
work RVUs that are commonly reported with multiple units in a single 
encounter and requesting that the AMA RUC review these codes that we 
have identified as potentially misvalued.
    The sixth category (codes which have not been subject to review 
since the implementation of the RBRVS (the so-called `Harvard-valued 
codes')) also continues to be addressed by CMS and the AMA RUC on an 
ongoing basis. As we noted in the CY 2009 PFS proposed rule (73 FR 
38589), there were at that time approximately 2900 codes, representing 
$5 billion in annual spending, that were originally valued using 
Harvard data and have not subsequently been evaluated by the AMA RUC. 
Consequently, in CY 2009, we requested that the AMA RUC engage in an 
ongoing effort to review the remaining Harvard-valued codes, focusing 
first on the high-volume, low intensity codes (73 FR 38589). In 
response to our request, the AMA RUC initially conducted an analysis of 
Harvard-valued services with utilization above 10,000 services per 
year, which resulted in a list of 296 distinct services (73 FR 69883). 
The AMA RUC, in its public comment on the CY 2009 proposed rule, stated 
that it believes it would be effective to limit any review to these 296 
services and also noted that of the 296 services identified, 23 had 
already been identified by another screen and were in the process of 
being reviewed (73 FR 69883). To date, the AMA RUC has reviewed and 
submitted to CMS recommendations for revised work RVUs and/or direct PE 
inputs for a number of Harvard-valued codes, prioritizing those codes 
with utilization of over 1 million services. The AMA RUC and CMS intend 
to continue our ongoing assessment of Harvard-valued codes, next 
targeting codes with utilization of over 100,000 services.
    Finally, the seventh category of potentially misvalued codes 
mentioned in section 1848(c)(2)(K)(ii) (as added by section 3134 of the 
ACA) is all other codes determined to be appropriate by the Secretary. 
In this category, CMS has previously proposed policies and requested 
that the AMA RUC review codes for which there have been shifts in the 
site-of-service (site-of-service anomalies), as well as codes that 
qualify as ``23-hour stay'' outpatient services. The policies for 
valuation of both the site-of-service anomaly codes and the ``23-hour 
stay'' codes are developed further in sections II.C.3.d. and e., 
respectively, of this proposed rule. For CY 2011, we are also 
identifying codes with low work RVUs but are high volume based on 
claims data as another category of potentially misvalued codes and are 
referring these codes to the AMA RUC for review, as discussed in 
section II.C.3.b. of this proposed rule. In addition, for CY 2011 we 
are newly targeting key codes that the AMA RUC uses as reference 
services for valuing other services, termed ``multispecialty points of 
comparison'' services, and referring these to the AMA RUC for review as 
potentially misvalued codes as described in section II.C.3.a. of this 
proposed rule. Finally, we note the AMA RUC has also established 
screens to identify potentially misvalued codes in additional 
categories, including codes with a high intra-service work per unit of 
time (IWPUT) and codes representing services that had been surveyed by 
one specialty, but are now performed by a different specialty. We will 
continue to review AMA RUC recommendations for revised work RVUs and/or 
direct PE inputs for codes that fall into these categories.
    As a result of the combined efforts of CMS and the AMA RUC to 
address potentially misvalued codes, for CY 2009 the AMA RUC 
recommended revised work values and/or PE inputs for 204 misvalued 
services (73 FR 69883). For CY 2010, an additional 113 codes were 
identified as misvalued and the AMA RUC provided new recommendations 
for revised work RVUs and/or PE inputs to CMS as discussed in the CY 
2010 PFS final rule with comment period (74 FR 61778). Upon review of 
the AMA RUC-recommended work RVUs, CMS accepted the majority of the 
values as appropriate adjustments to the RVUs under the PFS, in 
accordance with section 1848(c) of the Act. However, for a number of 
codes, mainly the site-of-service anomaly codes, we indicated

[[Page 40068]]

that although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had 
ongoing concerns about the methodology used by the AMA RUC to review 
these services (73 FR 69883 and 74 FR 61776 through 61778, 
respectively). In the CY 2010 PFS final rule with comment period, we 
requested that the AMA RUC reexamine the site-of-service anomaly codes 
and use the building block methodology to revalue the services (74 FR 
61777). In that same rule, we also stated that we would continue to 
examine these codes and consider whether it would be appropriate to 
propose additional changes in future rulemaking. We discuss our CY 2011 
proposal with respect to these codes in section II.C.3.d. of this 
proposed rule.
c. Validating RVUs of Potentially Misvalued Codes
    In addition to identifying and reviewing potentially misvalued 
codes, section 1848(c)(2)(L) (as added by section 3134 of the ACA) 
specifies that the Secretary shall establish a formal process to 
validate relative value units under the PFS. The validation process may 
include validation of work elements (such as time, mental effort and 
professional judgment, technical skill and physical effort, and stress 
due to risk) involved with furnishing a service and may include 
validation of the pre, post, and intra-service components of work. The 
Secretary is directed to validate a sampling of the work RVUs of codes 
identified through any of the seven categories of potentially misvalued 
codes specified by section 1848(c)(2)(K)(ii) (as added by section 3134 
of the ACA). Furthermore, the Secretary may conduct the validation 
using methods similar to those used to review potentially misvalued 
codes, including conducting surveys, other data collection activities, 
studies, or other analyses as the Secretary determines to be 
appropriate to facilitate the validation of RVUs of services. 
Currently, while CMS does assess the AMA RUC- recommended work RVUs to 
determine if the recommendations constitute appropriate adjustments to 
the RVUs under the PFS, we intend to establish a more extensive 
validation process of RVUs in the future in accordance with the 
requirements of section 1848(c)(2)(L) (as added by section 3134 of the 
ACA). Therefore, we are soliciting public comments on this proposed 
rule on possible approaches and methodologies that we should consider 
for a validation process. We are especially interested in public 
comments regarding approaches, including the use of time and motion 
studies, to validate estimates of physician time and intensity that are 
factored into the work RVUs for services with rapid growth in Medicare 
expenditures, one of the categories that the statute specifically 
directs CMS to examine. We plan to discuss the validation process in a 
future PFS rule once we have considered the matter further in 
conjunction with any public comments and other input from stakeholders 
that we receive.
3. CY 2011 Identification and Review of Potentially Misvalued Services
    In this section, we discuss codes that may be misvalued according 
to five different criteria:
     Codes on the multi-specialty points of comparison list;
     Codes with low work RVUs commonly billed in multiple units 
per single encounter;
     Codes with high volume and low work RVUs;
     Codes with site-of-service anomalies; and
     Codes that qualify as ``23-hour stay'' outpatient 
services.
a. Codes on the Multispecialty Points of Comparison List
    The AMA RUC uses a scale referred to as the multispecialty points 
of comparison (MPC) to evaluate the reasonableness of a specialty 
society's recommended RVU value for a service. The MPC list contains 
reference codes of established comparison services that are used in the 
valuation of new codes. The current MPC list consists of 316 codes 
which the AMA RUC may use to compare and contrast the relativity of 
codes under review to existing relative values. Since the AMA RUC may 
use the values on the MPC list as a basis for relativity when 
determining the values for new, revised, and newly reviewed codes 
(including potentially misvalued codes), it is essential that the 
services on the MPC list be appropriately valued since any codes 
misvalued on the MPC list could contribute to the misvaluing of other 
codes under review. While we believe that the entire MPC list should be 
assessed to ensure that services are paid appropriately under the PFS, 
we have prioritized the review of the MPC list, ranking the codes by 
allowed service units and charges based on CY 2009 claims data. We are 
proposing to refer the codes in Table 9 to the AMA RUC for review.

       Table 9--Codes on the MPC List Referred for AMA RUC Review
------------------------------------------------------------------------
             CPT Code                         Short descriptor
------------------------------------------------------------------------
66984.............................  Cataract surg w/iol, 1 stage.
97110.............................  Therapeutic exercises.
43239.............................  Upper GI endoscopy, biopsy.
20610.............................  Drain/inject, joint/bursa.
78815.............................  Pet image w/ct, skull-thigh.
45385.............................  Lesion removal colonoscopy.
45380.............................  Colonoscopy and biopsy.
11721.............................  Debride nail, 6 or more.
17000.............................  Destruct premalg lesion.
92980.............................  Insert intracoronary stent.
74160.............................  Ct abdomen w/dye.
71020.............................  Chest x-ray.
11100.............................  Biopsy, skin lesion.
66821.............................  After cataract laser surgery.
52000.............................  Cystoscopy.
92083.............................  Visual field examination(s).
73721.............................  Mri jnt of lwr extre w/o dye.
93010.............................  Electrocardiogram report.
77334.............................  Radiation treatment aid(s).
92250.............................  Eye exam with photos.
95810.............................  Polysomnography, 4 or more.
77003.............................  Fluoroguide for spine inject.
11056.............................  Trim skin lesions, 2 to 4.
76700.............................  Us exam, abdom, complete.
77290.............................  Set radiation therapy field.
77300.............................  Radiation therapy dose plan.
43235.............................  Uppr gi endoscopy, diagnosis.
71275.............................  Ct angiography, chest.
95900.............................  Motor nerve conduction test.
31231.............................  Nasal endoscopy, dx.
95165.............................  Antigen therapy services.
94060.............................  Evaluation of wheezing.
31575.............................  Diagnostic laryngoscopy.
------------------------------------------------------------------------

b. Codes With Low Work RVUs Commonly Billed in Multiple Units per 
Single Encounter
    Consistent with section 1848(c)(2)(K)(ii) (as added by section 3134 
of the ACA) which identifies categories of potentially misvalued codes 
for our review, we believe services with low work RVUs that are 
commonly billed with multiple units in a single encounter are an 
additional appropriate category for identifying potentially misvalued 
codes. An example of a high multiple/low work RVU service is CPT code 
95004 (Percutaneous tests (scratch, puncture, prick) with allergenic 
extracts, immediate type reaction, including test interpretation and 
report by a physician, specify number of tests). For purposes of 
compiling a list of the high multiple/low work RVU services, we defined 
a high multiple service as one that is commonly performed in multiples 
of 5 or more per day. Then, we selected from high multiple services 
with work RVUs of less than or equal to 0.5 RVUs. We note that in 
selecting 5 per day as the minimum threshold for the number of common 
services performed in a multiple service encounter, we intended to 
establish a meaningful threshold which, in conjunction with the

[[Page 40069]]

threshold for work RVUs of 0.5 RVUs or less, would produce a reasonable 
number of services for the RUC to review that have substantial total 
work RVUs for the comprehensive service furnished during a single 
treatment. That is, as a general example, with a work RVU threshold of 
0.5 RVUs and a multiple threshold of 5 per day, the total work RVUs for 
a typical treatment would equate to 2.5 RVUs, which is approximately 
comparable to a high level office visit, an interpretation of a complex 
imaging procedure, or a minor surgical procedure.
    We are asking the AMA RUC to review the codes in Table 10.

 Table 10--Codes With Low Work RVUs That Are Commonly Billed in Multiple
                    Units Referred for AMA RUC Review
------------------------------------------------------------------------
             CPT Code                         Short descriptor
------------------------------------------------------------------------
95904.............................  Sense nerve conduction test.
17003.............................  Destruct premalg les, 2-14.
95004.............................  Percut allergy skin tests.
11101.............................  Biopsy, skin add-on.
95024.............................  Id allergy test, drug/bug.
76000.............................  Fluoroscope examination.
95144.............................  Antigen therapy services.
95010.............................  Percut allergy titrate test.
88300.............................  Surgical path, gross.
95027.............................  Id allergy titrate-airborne.
95015.............................  Id allergy titrate-drug/bug.
95148.............................  Antigen therapy services.
------------------------------------------------------------------------

c. Codes With High Volume and Low Work RVUs
    We believe that codes that have low work RVUs but are high volume 
based on claims data are another category of potentially misvalued 
codes. Although these codes have low work RVUs (less than or equal to 
0.25 RVUs), the high utilization of these codes represents significant 
expenditures under the PFS such that their appropriate valuation is 
especially important. Table 11 contains a list of such codes and we are 
requesting that the AMA RUC review these codes.

   Table 11--Codes With Low Work RVUs That Are High Volume Referred for
                             AMA RUC Review
------------------------------------------------------------------------
             CPT Code                         Short descriptor
------------------------------------------------------------------------
71010.............................  Chest x-ray.
73510.............................  X-ray exam of hip.
97035.............................  Ultrasound therapy.
88313.............................  Special stains group 2.
73630.............................  X-ray exam of foot.
72100.............................  X-ray exam of lower spine.
73030.............................  X-ray exam of shoulder.
73562.............................  X-ray exam of knee, 3.
73560.............................  X-ray exam of knee, 1 or 2.
94010.............................  Breathing capacity test.
77052.............................  Comp screen mammogram add-on.
88304.............................  Tissue exam by pathologist.
73564.............................  X-ray exam, knee, 4 or more.
72170.............................  X-ray exam of pelvis.
74000.............................  X-ray exam of abdomen.
73610.............................  X-ray exam of ankle.
11719.............................  Trim nail(s).
73620.............................  X-ray exam of foot.
92567.............................  Tympanometry.
73110.............................  X-ray exam of wrist.
73130.............................  X-ray exam of hand.
93701.............................  Bioimpedance, cv analysis.
72040.............................  X-ray exam of neck, spine.
92543.............................  Caloric vestibular test
------------------------------------------------------------------------

d. Codes With Site-of-Service Anomalies
    In previous years, we requested that the AMA RUC review codes that, 
according to the Medicare claims database, have experienced a change in 
the typical site of service since the original valuation of the code. 
For example, we have found services that originally were provided in 
the inpatient setting but for which current claims data show the 
typical case has shifted to being furnished outside the inpatient 
setting. Since the procedures were typically performed in the inpatient 
setting when the codes were originally valued, the work RVUs for these 
codes would have been valued to include the inpatient physician work 
provided, as well as to reflect the intensive care and follow-up 
normally associated with an inpatient procedure. If the typical case 
for the procedure has shifted from the inpatient setting to an 
outpatient or physician's office setting, it is reasonable to expect 
that there have been changes in medical practice, and that such changes 
would represent a decrease in physician time or intensity or both. The 
AMA RUC reviewed and recommended to CMS revised work RVUs for 29 codes 
for CY 2009 and 11 codes for CY 2010 that were identified as having 
site-of-service anomalies.
    In the CY 2010 PFS proposed and final rules with comment period (74 
FR 33556 and 74 FR 61777, respectively), we encouraged the AMA RUC to 
utilize the building block methodology when revaluing services with 
site-of-service anomalies. Specifically, where the AMA RUC has 
determined in its review that changes in the inclusion of inpatient 
hospital days, office visits, and hospital discharge day management 
services (that is, the ``building blocks'' of the code) are warranted 
in the revaluation of the code, we asked the AMA RUC to adjust the 
site-of-service anomaly code for the work RVUs associated with those 
changes.
    Additionally, we suggested that in cases where the AMA RUC has 
adjusted the pre-service, intra-service and post-service times of the 
code under review, the AMA RUC should also make associated work RVU 
adjustments to account for those changes. However, we remain concerned 
that in the AMA RUC's recommendations of the work RVUs for the CYs 2009 
and 2010 site-of-service anomaly codes, the AMA RUC may have determined 
that eliminating or reallocating pre-service and post-service times, 
hospital days, office visits, and hospital discharge day management 
services was appropriate to reflect the typical case that is now 
occurring in a different setting, but the work RVUs associated with 
those changes may not have been systematically extracted or reallocated 
from the total work RVU value for the service.
    In the CYs 2009 and 2010 PFS final rules with comment period (73 FR 
69883 and 74 FR 61776 through 61778, respectively), we indicated that 
although we would accept the AMA RUC valuations for these site-of-
service anomaly codes on an interim basis through CY 2010, we had 
ongoing concerns about the methodology used by the AMA RUC to review 
these services. We requested that the RUC reexamine the site-of-service 
anomaly codes and use the building block methodology to revalue the 
services (74 FR 61777). We also stated that we would continue to 
examine these codes and consider whether it would be appropriate to 
propose additional changes in future rulemaking.
    Accordingly, in preparation for CY 2011 rulemaking, we conducted a 
comprehensive analysis of the codes that the AMA RUC reviewed for CYs 
2009 and 2010 due to site-of-service anomaly concerns. We 
systematically applied the reverse building block methodology to the 29 
codes from CY 2009 and 11 codes from CY 2010 as follows:
     First, we obtained the original work RVU value assigned to 
the code (this is the ``starting value'') and made a list of the 
building block services with RVUs that were originally associated with 
the code (that is, before the AMA RUC reviewed the code for site-of-
service anomalies).
     Next, we examined the AMA RUC-recommended changes to the 
building blocks of the code.

[[Page 40070]]

     We then deducted the RVUs associated with the AMA RUC's 
recommended eliminations from the code's starting RVU value.
    Generally, the AMA RUC eliminated inpatient hospital visit building 
blocks from the value of the code since the site-of-service for the 
code has shifted from the inpatient setting to another setting. We note 
in some cases, the AMA RUC left an inpatient hospital visit in the 
valuation of the code. We believe this is inconsistent with the change 
in the site of service to non-inpatient settings. Accordingly, we 
adhered to the methodology and deducted the RVUs associated with all 
inpatient hospital visits from the starting value. In cases where the 
AMA RUC recommended adding or substituting outpatient visits, we also 
added or substituted the RVUs associated with those changes to the 
starting value. If the AMA RUC recommended changes to the pre-, intra-, 
or post-service times, we calculated the incremental change in RVUs 
associated with that time and either added or deducted that RVU amount 
from the starting value. We note that the RVU values associated with 
the incremental time change are calculated using the intensity 
associated with the particular pre-, intra-, or post period. For the 
intensity of the intra-service period, we utilized the original IWPUT 
associated with the code. The AMA RUC generally recommended allowing 
only half of a hospital discharge day management service for the site-
of-service anomaly codes. That is, CPT code 99238 (Hospital discharge 
day management; 30 minutes or less) has a work RVU value of 1.28; 
therefore, half the value associated with CPT code 99238 is 0.64. 
Accordingly, if a code had one CPT code 99238 listed as part of the 
original valuation, we deducted 0.64 RVUs from the starting value.
    We standardized the methodology so that each of the site-of-service 
anomaly codes has half of a hospital discharge day management service 
value accounted in the valuation. Finally, we note that while we 
eliminated the RVUs associated with all inpatient hospital visits built 
into the code's starting value, because the typical case no longer 
occurs in the inpatient setting, we allowed for the possibility that in 
some cases, some part of the work which had been performed in the 
inpatient setting may continue to be provided even in the outpatient 
setting. Therefore, to be conservative in our deductions of work RVUs 
associated with the inpatient hospital codes from the starting values, 
we allowed the intra-time of any inpatient hospital visits included in 
the original valuation to migrate to the post-service period of the 
code. Accordingly, while we deducted the full RVUs of an inpatient 
hospital visit from the starting value, we added the intra-service time 
of the inpatient hospital visit to the post-service time of the code 
and accounted for the incremental change in RVUs. The following 
description provides an example of our methodology.
    CPT code 21025 (Excision of bone (e.g., for osteomyelitis or bone 
abscess); mandible) has a starting value of 11.07 RVUs. Table 12 shows 
the building blocks that are included in the original valuation of the 
code.

                                                                                            Table 12
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Median intra-     Immediate post-                                                                                                                    Original
       Pre-service time            service time       service time          99231              99232              99238              99211             99212             99213          IWPUT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
75 min........................  120 min..........  43 min...........  1 visit (0.76      1 visit (1.39      1 visit (1.28      2 visits (0.36    2 visits (0.96    2 visits (1.94         0.0145
                                                                       RVUs).             RVUs).             RVUs).             RVUs).            RVUs).            RVUs).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The AMA RUC removed two inpatient hospital visits and reduced the 
outpatient visits from 6 to 4 visits. Table 13 shows the building 
blocks that were recommended for CY 2009 by the AMA RUC after its 
review of the code for site-of-service anomalies.

                                                                                            Table 13
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Median intra-     Immediate post-                                                                                                                    Revised
       Pre-service time            service time       service time          99231              99232              99238              99211             99212             99213          IWPUT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
85 min........................  90 min...........  30 min...........  .................  .................  .................  ................  2 visits........  2 visits........       0.0530
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Next we calculated the RVUs associated with the changes to the 
building blocks recommended by the AMA RUC. We note that the immediate 
post-service value of 0.38 RVUs (Table 14) includes 30 minutes of 
intra-service time from inpatient hospital CPT code 99231 (Level 1 
subsequent hospital care, per day). Also, the median intra-service 
value of 0.44 RVUs (Table 14) was determined using the starting IWPUT 
value of 0.0145. Additionally, our methodology accounted for a half of 
a hospital discharge day management service (CPT code 99238) for the 
site-of-service anomaly code. Table 14 shows the RVU changes to the 
building blocks that were calculated based on the methodology discussed 
above.

                                                                                            Table 14
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Median intra-      Immediate post-
        Pre-service time             service time        service time            99231               99232               99238               99211               99212               99213
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0.22 RVUs.......................  -0.44 RVUs........  0.38 RVUs.........  -0.76 RVUs........  -1.39 RVUs........  -0.64 RVUs........  -0.36 RVUs........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    In the final step, the RVUs associated with the changes to the 
building blocks recommended by the AMA RUC (Table 14) were deducted 
from or added to the starting value of 11.07 RVUs, which resulted in 
the CY 2011 reverse building

[[Page 40071]]

block value of 8.08 RVUs (11.07+0.22-0.44+0.38-0.76-1.39 -0.64-
0.36=8.08).
    The methodology discussed above was applied to each of the site-of-
service anomaly codes from CYs 2009 and 2010 and the results are 
summarized in Tables 15 and 16.

                               Table 15--CY 2009 Site-of-Service Anomaly Codes \1\
----------------------------------------------------------------------------------------------------------------
                                                              CY 2008 RVUs     RUC Recommended   CY 2011 Reverse
            CPT code                  Short descriptor         (``starting      value for CY     building block
                                                                value'')            2009              value
----------------------------------------------------------------------------------------------------------------
21025..........................  Excision of bone, lower               11.07              9.87              8.09
                                  jaw.
23415..........................  Release of shoulder                   10.09              9.07             10.63
                                  ligament.
25116..........................  Remove wrist/forearm                   7.38              7.38              7.21
                                  lesion.
42440..........................  Excise submaxillary gland              7.05              7.05              6.52
52341..........................  Cysto w/ureter stricture               6.11              5.35              5.62
                                  tx.
52342..........................  Cysto w/up stricture tx..              6.61              5.85              6.20
52343..........................  Cysto w/renal stricture                7.31              6.55              5.90
                                  tx.
52344..........................  Cysto/uretero, stricture               7.81              7.05              5.58
                                  tx.
52345..........................  Cysto/uretero w/up                     8.31              7.55              5.76
                                  stricture.
52346..........................  Cystouretero w/renal                   9.34              8.58              6.05
                                  strict.
52400..........................  Cystouretero w/congen                 10.06              8.66              7.00
                                  repr.
52500..........................  Revision of bladder neck.              9.39              7.99              8.72
52640..........................  Relieve bladder                        6.89              4.73              5.01
                                  contracture.
53445..........................  Insert uro/ves nck                    15.21             15.21             11.72
                                  sphincter.
54410..........................  Remove/replace penis                  16.48             15.00             14.00
                                  prosth.
54530..........................  Removal of testis........              9.31              8.35              8.88
57287..........................  Revise/remove sling                   11.49             10.97             10.20
                                  repair.
62263..........................  Epidural lysis mult                    6.41              6.41              6.99
                                  sessions.
62350..........................  Implant spinal canal cath              8.04              6.00              0.41
62355..........................  Remove spinal canal                    6.60              4.35             -0.43
                                  catheter.
62360..........................  Insert spine infusion                  3.68              4.28             -3.14
                                  device.
62361..........................  Implant spine infusion                 6.59              5.60             -0.92
                                  pump.
62362..........................  Implant spine infusion                 8.58              6.05             -0.51
                                  pump.
62365..........................  Remove spine infusion                  6.57              4.60             -0.35
                                  device.
63650..........................  Implant neuroelectrodes..              7.57              7.15              4.25
63685..........................  Insrt/redo spine n                     7.87              6.00              4.80
                                  generator.
64708..........................  Revise arm/leg nerve.....              6.22              6.22              6.17
64831..........................  Repair of digit nerve....             10.23              9.00              8.87
65285..........................  Repair of eye wound......             14.43             14.43             13.52
----------------------------------------------------------------------------------------------------------------
\1\ We note that in this table, we have not adjusted the RVUs for these codes for the RVU changes to the
  evaluation and management codes that resulted from the CY 2010 elimination of the consultation codes (74 FR
  61775). However, we note that we may, if appropriate, adjust the RVUs for services with global periods to
  account for relevant changes in the RVUs for evaluation and management services as necessary.


                               Table 16--CY 2010 Site-of-Service Anomaly Codes \2\
----------------------------------------------------------------------------------------------------------------
                                                              CY 2009 RVUs     RUC Recommended   CY 2011 Reverse
            CPT code                  Short descriptor         (``starting      value for CY     building block
                                                                value'')            2010              value
----------------------------------------------------------------------------------------------------------------
28120..........................  Part removal of ankle/                 5.64              8.08              6.03
                                  heel.
28122..........................  Partial removal of foot                7.56              7.56              6.79
                                  bone.
28725..........................  Fusion of foot bones.....             11.97             11.97             12.41
28730..........................  Fusion of foot bones.....             12.21             12.21             10.06
36825..........................  Artery-vein autograft....             10.00                15             13.12
42415..........................  Excise parotid gland/                 17.99             17.99             15.17
                                  lesion.
42420..........................  Excise parotid gland/                 20.87             20.87             17.80
                                  lesion.
49507..........................  Prp i/hern init block >5               9.97              9.97              9.37
                                  yr.
49521..........................  Rerepairing hernia,                   12.36             12.36             11.59
                                  blocked.
49587..........................  Rpr umbil hern, block > 5              7.96              7.96              7.19
                                  yr.
61885..........................  Insrt/redo neurostim 1                 7.37              7.57              3.22
                                  array.
----------------------------------------------------------------------------------------------------------------
\2\ We note that in this table, we have not adjusted the RVUs for these codes for the RVU changes to the
  evaluation and management codes that resulted from the CY 2010 elimination of the consultation codes (74 FR
  61775). However, we note that we may, if appropriate, adjust the RVUs for services with global periods to
  account for relevant changes in the RVUs for evaluation and management services as necessary.

    For most codes in Tables 15 and 16, the CY 2011 reverse building 
block methodology produced a value that is somewhat lower than the AMA 
RUC-recommended value. While our results suggest that the majority of 
the codes with site-of-service anomalies continue to be overvalued 
under the AMA RUC's most recent recommendations, we also found that the 
methodology may produce a result that is considerably reduced or, in 
several cases, a negative value. We understand that in previous years, 
stakeholders have expressed confusion as to why the application of a 
building block methodology would produce negative values. We believe in 
some cases, the starting value, that is,

[[Page 40072]]

the original work RVU, may have been misvalued using building block 
inputs that were not consistent with the service, although the overall 
work value of the code may have been consistent with the values for 
other similar services. Moreover, a number of these services are the 
Harvard-valued codes, for which the RVUs were established many years 
ago based on historical inputs that may no longer be appropriate for 
the code. An attempt to extract the RVUs associated with these 
inappropriate inputs through the reverse building block methodology 
could produce aberrant results. Furthermore, in some cases, we noticed 
that the original IWPUT of the code was negative even before the code 
was reviewed by the AMA RUC for a site-of-service anomaly. A negative 
value for the IWPUT is counterintuitive to the IWPUT concept, 
indicating that the code was originally misvalued at the building block 
level. At a minimum, we believe that in cases where the reverse 
building block methodology produces aberrant results, and where 
clinical review indicates a need for further analysis, the codes should 
be referred back to the AMA RUC for review and new valuation should be 
performed based on the building block methodology.
    We note the application of the reverse building block methodology 
is an objective way to account for changes in the resources resulting 
from the change in the site-of-service in which the typical service is 
provided. However, because relative values under the PFS are 
``relative,'' that is, where work relative value units for a code are 
established relative to work relative value units for other codes, the 
recommended methodology of valuing services based on input building 
blocks is best applied within the context of the AMA RUC discussion. 
For example, we recognize that the AMA RUC looks at families of codes 
and may assign RVUs based on a particular code ranking within the 
family. This method of valuing services preserves relativity within the 
relative value scale for that code family. However, we have stated that 
we believe the relative value scale requires each service to be valued 
based on the resources used in furnishing the service as specified in 
section 1848(c)(1)(A) of the Act, which defines the physician work 
component to include ``the portion of the resources used in furnishing 
the service that reflects physician time and intensity in furnishing 
the service.'' Furthermore, section 1848(c)(2)(C)(i) of the Act 
specifies that ``the Secretary shall determine a number of work 
relative value units (RVUs) for the service based on the relative 
resources incorporating physician time and intensity required in 
furnishing the service.'' Read together, these two sections of the 
statute support our intention to rely on the building block methodology 
to determine appropriate work RVUs for codes.
    We note that we continue to rely on the extensive expertise 
provided by the AMA RUC to recommend appropriate input building blocks 
for codes. Additionally, the AMA RUC's unique infrastructure and broad 
perspective permits the valuation of a code within the context of 
relativity to the entire relative value system. Therefore, we believe 
that the recommended methodology of valuing services based on input 
building blocks is best applied within the context of the AMA RUC 
discussion.
    Accordingly, we are requesting that the AMA RUC review the CPT 
codes displayed in Tables 15 and 16. In addition, where the application 
of the CY 2011 reverse building block methodology produces an aberrant 
result that is clearly not a reflection of physician work for the 
service, we are requesting that the AMA RUC review the input building 
blocks and recommend an appropriate RVU value that is both consistent 
with the building blocks of the code and appropriate relative to the 
values for other codes in the family. For other codes where the 
application of the CY 2011 reverse building block methodology produces 
a result that is consistent with the physician work for the service, we 
encourage the AMA RUC to confirm the values and recommend these work 
values for CY 2011. In this way, we would hope to receive new AMA RUC 
recommendations for all of the codes in Tables 15 and 16 for CY 2011. 
Furthermore, if the recommendations that we receive from the AMA RUC 
are not consistent with the building block methodology and not 
appropriate relative to the values of other services, and the 
application of the CY 2011 reverse building block methodology produces 
a result that CMS medical advisors believe is consistent with the work 
for the service, we are proposing to adopt the CY 2011 reverse building 
block methodology values that are listed in Tables 15 and 16 for CY 
2011. In cases where the reverse building block methodology produces a 
negative work value, we are suggesting that the AMA RUC review and 
revise the building blocks of the code so that a new valuation can be 
determined based on the building block methodology. For such codes, if 
the revised recommendations that we would hope to receive from the AMA 
RUC are still not consistent with the building block methodology upon 
revision, because we cannot pay for these services based on negative 
work RVUs, we are proposing to modify the AMA RUC-recommended values 
for these codes as CMS determines clinically appropriate and adopt the 
CMS-modified RVUs on a interim final basis for CY 2011.
    In their future work, we urge the AMA RUC to use the building block 
methodology when valuing services or provide CMS with extensive 
rationale for cases where the AMA RUC believes the building block 
methodology is inappropriate for a specific code. Since section 
1848(c)(2)(L) (as added by section 3134 of the ACA) specifies that the 
Secretary shall establish a process to validate work RVUs of 
potentially misvalued codes under the PFS, as we have discussed earlier 
in this section, we believe codes that are valued using the building 
block methodology would be more likely to meet the standards of a 
systematic RVU validation process that could be developed in accordance 
with the requirements of the statute.
e. Codes With ``23-hour'' Stays
    In the CY 2010 PFS proposed rule (74 FR 33557), we requested that 
the AMA RUC review services that are typically performed in the 
outpatient setting and require a hospital stay of less than 24 hours. 
We stated in the proposed rule that we believed these to be primarily 
outpatient services and expressed concern that the value of evaluation 
and management (E/M) visits for inpatients was inappropriately included 
in the valuation of codes that qualify as ``23-hour stay'' outpatient 
services.
    We received a number of comments in response to the discussion in 
the CY 2010 proposed rule. The AMA RUC stated that it already values 
stays of less than 23 hours appropriately by reducing the hospital 
discharge day management service (that is, CPT code 99238), from 1 day 
to a half day. The AMA RUC also explained that when the AMA RUC refers 
to 23-hour stay services in discussions at AMA RUC meetings, it is 
referring primarily to services that are reported in the Medicare 
claims database as typically outpatient services, but where the patient 
is kept overnight and, on occasion, even longer in the hospital. 
Because the AMA RUC believes the patient stays overnight in the 
hospital, it believes the inclusion of inpatient E/M visits to be 
appropriate in the valuation of this category of codes.
    We believe that the 23-hour stay issue encompasses several 
scenarios. The typical patient is commonly in the

[[Page 40073]]

hospital for less than 24 hours, which often means the patient may 
indeed stay overnight in the hospital. On occasion, the patient may 
stay longer than a single night in the hospital; however, in both 
cases, the patient is considered for Medicare purposes to be a hospital 
outpatient, not an inpatient, and our claims data support that the 
typical 23-hour stay service is billed as an outpatient service. 
Accordingly, we believe that the valuation of the codes that fall into 
the 23-hour stay category should not reflect work that is typically 
associated with an inpatient service. For example, inpatient E/M visit 
codes such as CPT codes 99231 (Level 1 subsequent hospital care, per 
day); 99232 (Level 2 subsequent hospital care, per day); and 99233 
(Level 3 subsequent hospital care, per day), should not be included at 
the full value in the valuation of 23-hour stay services.
    Currently, the valuation of 23-hour stay services is conducted in a 
nonuniform manner by the AMA RUC. The AMA RUC has indicated that it 
currently includes a half hospital discharge day management service and 
no hospital inpatient visits for outpatient services with expected 
hospital stays of 23 hours or less. In contrast, for those outpatient 
services where the AMA RUC believes that the recovery period could be 
longer than 23 hours, the AMA RUC stated in its comment on the CY 2010 
PFS proposed rule that it currently includes a full hospital discharge 
day management service and one or more inpatient E/M visits in the 
code's value. However, we note the typical 23-hour stay service is 
billed as an outpatient service and so long as the typical case 
continues to be billed as an outpatient service, we believe the code 
should not incorporate physician work values for services that are 
typically associated with an inpatient service. In the 2010 PFS 
proposed and final rule with comment period (74 FR 33556 and 74 FR 
61777, respectively), we stated that we believed the use of inpatient 
E/M visit codes for services rendered in the post-service period for 
outpatient 23-hour stay procedures would result in overpayment for pre- 
and post-service work that would not be provided. Accordingly, we 
proposed in the CY 2010 proposed rule (74 FR 33556 through 33557) not 
to allow any additional inpatient E/M service to be billed for care 
furnished during the post-procedure period when care is furnished for 
an outpatient service requiring less than a 24-hour hospital stay.
    However, we find it is plausible that while the patient receiving 
the 23-hour stay service remains a hospital outpatient, the patient 
would typically be cared for by the physician furnishing the procedure 
during that post-procedure period. While we do not believe that post-
procedure hospital ``visits'' would be at the inpatient level since the 
typical case is an outpatient who would be ready to be discharged from 
the hospital in 23 hours or less, we agree that the intra-service time 
of the inpatient hospital visit may be included in the valuation for 
the 23-hour stay code.
    Accordingly, we are modifying our proposed CY 2010 approach and 
suggesting that in the future, when the AMA RUC reviews new and 
potentially misvalued codes that are identified as 23-hour stay 
services, the AMA RUC would apply the following methodology:
    (1) Begin with the starting RVU value of the 23-hour stay code 
under review and decrease the hospital discharge day management service 
from one day to a half day.
    (2) Deduct the RVUs of inpatient hospital visits from the starting 
RVU value.
    (3) Reallocate the time associated with the intra-service portion 
of the inpatient hospital visits to the immediate post-service time of 
the 23-hour stay code under review.
    Example: A 23-hour stay code is currently valued at 15 RVUs and has 
1 hospital discharge day management service and 1 level 3 subsequent 
hospital care visit incorporated in this value.
     Applying step (1): 15-0.64\*\ = 14.36
     Applying step (2): 14.36-2\**\ = 12.36
     Applying step (3): 12.36 + (30 minutes x 0.0224)\***\ = 
13.032 RVUs
    \*\Value associated with \1/2\ hospital discharge day management 
service.
    \**\Value associated with an inpatient hospital visit, CPT code 
99233.
    \***\Value associated with the reallocated intra-service time 
multiplied by the post-service intensity of the 23-hour stay code.
    Finally, we note that since work relative value units are 
established by the Secretary in the context of relativity to other 
codes in the system, the recommended methodology for the evaluation of 
23-hour stay codes is best applied within the context of relativity. We 
appreciate that the AMA RUC has the ability to assess the 23-hour stay 
code after application of the recommended methodology to ensure 
appropriate relativity of this code and other codes within the system. 
We strongly encourage the AMA RUC to apply the recommended methodology 
to ensure the consistent and appropriate valuation of the physician 
work for these services.
4. Expanding the Multiple Procedure Payment Reduction (MPPR) Policy to 
Additional Nonsurgical Services
a. Background
    Medicare has a longstanding policy to reduce payment by 50 percent 
for the second and subsequent surgical procedures furnished to the same 
patient by the same physician on the same day, largely based on the 
presence of efficiencies in the PE and pre- and post-surgical physician 
work. Effective January 1, 1995, the multiple procedure payment 
reduction (MPPR) policy, with the same percentage reduction, was 
extended to nuclear medicine diagnostic procedures (CPT codes 78306, 
78320, 78802, 78803, 78806, and 78807). In the CY 1995 PFS final rule 
with comment period (59 FR 63410), we indicated that we would consider 
applying the policy to other diagnostic tests in the future.
    Consistent with recommendations of MedPAC in its March 2005 Report 
to Congress on Medicare Payment Policy, under the CY 2006 PFS, the MPPR 
policy was extended to the technical component (TC) of certain 
diagnostic imaging procedures performed on contiguous areas of the body 
in a single session (70 FR 70261). The reduction recognizes that, for 
the second and subsequent imaging procedures, there are some 
efficiencies in clinical labor, supplies, and equipment time. In 
particular, certain clinical labor activities and supplies are not 
duplicated for subsequent procedures and, because equipment time and 
indirect costs are allocated based on clinical labor time, those would 
also be reduced accordingly.
    The imaging MPPR policy currently applies to computed tomography 
(CT) and computed tomographic angiography (CTA), magnetic resonance 
imaging (MRI) and magnetic resonance angiography (MRA), and ultrasound 
services within 11 families of codes based on imaging modality and body 
region. When we adopted the policy in CY 2007, we stated that we 
believed efficiencies were most likely to occur when contiguous body 
areas are the focus of the imaging because the patient and equipment 
have already been prepared for the second and subsequent procedures, 
potentially yielding resource savings in areas such as clerical time, 
technical preparation, and supplies (70 FR 45850). Therefore, the MPPR 
policy currently applies only to procedures involving contiguous body

[[Page 40074]]

areas within a family of codes, not across families, and to those 
procedures that are provided in a single session. Additionally, while 
the MPPR policy applies to TC-only services and to the TC of global 
services, it does not apply to professional component (PC) services.
    Under the current imaging MPPR policy, full payment is made for the 
TC of the highest-paid procedure, and payment is reduced by 25 percent 
of the TC for each additional procedure when an MPPR scenario applies. 
We had originally planned to phase in the MPPR policy over a 2-year 
period, with a 25 percent reduction in CY 2006 and a 50 percent 
reduction in CY 2007 (70 FR 70263). However, the Deficit Reduction Act 
of 2005 (Pub. L. 109-171) (DRA) capped the PFS payment amount for most 
imaging procedures at the amount paid under the hospital Outpatient 
Prospective Payment System (OPPS). In view of the DRA, we determined 
that it would be prudent to retain the MPPR at 25 percent while we 
continued to examine the appropriate payment levels (71 FR 69659). The 
DRA also exempted reduced expenditures attributable to the MPPR policy 
from the PFS budget neutrality provision. Most recently, effective July 
1, 2010, section 3135(b) of the ACA increased the MPPR on the TC of 
imaging services under the policy established in the CY 2006 PFS final 
rule with comment period from 25 to 50 percent and exempted the reduced 
expenditures attributable to this further change from the PFS budget 
neutrality provision.
    In the July 2009 GAO report entitled, ``Medicare Physician 
Payments: Fees Could Better Reflect Efficiencies Achieved when Services 
are Provided Together,'' the GAO recommended that we take further steps 
to ensure that fees for services paid under the PFS reflect 
efficiencies that occur when services are performed by the same 
physician on the same beneficiary on the same day. The GAO recommended 
the following: (1) Expanding the existing MPPR policy to the PC to 
reflect efficiencies in physician work for certain imaging services; 
and (2) expanding the MPPR to reflect PE efficiencies that occur when 
certain nonsurgical, nonimaging services are provided together. The GAO 
also encouraged us to focus on service pairs that have the most impact 
on Medicare spending.
    In the March 2010 report, MedPAC noted its concerns about 
mispricing of services under the PFS. MedPAC indicated that it would 
explore whether expanding the unit of payment through packaging or 
bundling would improve payment accuracy and encourage more efficient 
use of services.
    In the CYs 2009 and 2010 PFS proposed rules (73 FR 38586 and 74 FR 
33554, respectively), we stated that we planned to analyze nonsurgical 
services commonly furnished together (for example, 60 to 75 percent of 
the time) to assess whether an expansion of the MPPR policy could be 
warranted. MedPAC encouraged us to consider duplicative physician work, 
as well as PE, in any expansion of the MPPR policy.
b. Proposed CY 2011 Expansion of the Imaging Technical Component MPPR 
Policy to Additional Combinations of Imaging Services
    Over the past 2 years, the AMA RUC has examined several services 
billed 90 percent or more of the time together as part of the 
potentially misvalued service initiative and, in several cases, created 
one code to describe the complete service, with a value that reflects 
the expected efficiencies. Notwithstanding the bundling work of the 
RUC, there may be additional imaging and other diagnostic services that 
are furnished together less than 90 percent of the time where we could 
still expect efficiencies in the TC, and in some cases in the PC, 
resulting in potential overpayment for these services under current 
policy when furnished together.
    Section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA) specifies that the Secretary shall identify potentially misvalued 
codes by examining multiple codes that are frequently billed in 
conjunction with furnishing a single service, and review and make 
appropriate adjustments to their relative values. As a first step in 
applying this provision, we are proposing a limited expansion of the 
current imaging MPPR policy for CY 2011. We will continue to review 
other possible expansions of the MPPR policy to the TC and/or PC of 
imaging procedures or other diagnostic tests for the future. Any 
further changes would be addressed in future rulemaking.
    In a related policy for hospital outpatient payment of imaging 
services, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68559 through 68569), the OPPS adopted a policy to pay for two or more 
CT and CTA, MRI and MRA, or ultrasound procedures furnished in the same 
session through a single composite ambulatory payment classification 
(APC) group. These composite APC payments were based on the 11 families 
of codes subject to the MPPR under the PFS that were collapsed into 3 
imaging families for the OPPS according to their modality--1 for 
ultrasound, 1 for CT and CTA, and 1 for MRI and MRA services.
    At that time, we stated our belief that the contiguous body area 
concept that was incorporated in the PFS imaging families was not 
necessary for potential efficiencies to be achieved in an imaging 
session. We provided examples to illustrate that we would not expect 
second and subsequent imaging services of the same modality involving 
noncontiguous body areas to require duplicate facility resources 
(comparable to the TC under the PFS) for clinical labor activities such 
as greeting the patient, providing education and obtaining consent, 
retrieving prior exams, setting up an intravenous infusion, and 
preparing and cleaning the room, any more than second and subsequent 
imaging procedures of the same modality involving contiguous body 
areas. While we noted that multiple imaging claims under the OPPS are 
generally within the same imaging modality and involve contiguous body 
areas the vast majority of the time, we estimated that the collapsed 3 
families, as opposed to the 11 PFS families, would add 12 percent 
additional claims to those eligible for a single composite APC payment 
under the OPPS based on the provision of 2 or more imaging services in 
a single session, allowing us to capture additional claims with 
efficiencies.
    Taking into consideration the OPPS policy that was adopted in the 
CY 2009 OPPS/ASC final rule with comment period, in this proposed rule, 
we are proposing to apply the MPPR regardless of family, that is, the 
policy would apply to multiple imaging services furnished within the 
same family of codes or across families. This proposal would simplify 
the current imaging MPPR policy in a way that is consistent with the 
standard PFS MPPR policy for surgical procedures that does not group 
procedures by body region. Therefore, the MPPR would apply to CT and 
CTA, MRI and MRA, and ultrasound procedures services furnished to the 
same patient in the same session, regardless of the imaging modality, 
and not limited to contiguous body areas.
    Because of the different pieces of equipment used for CT/CTA, MRI/
MRA, and ultrasound procedures, it would be highly unlikely that a 
single practitioner would furnish more than one imaging procedure 
involving 2 different modalities to one patient in a single session 
where the proposed MPPR policy would apply. On the other hand, while 
most multiple procedures furnished with a single modality in one 
session would involve procedures currently assigned to one of the 11

[[Page 40075]]

imaging families, it would not be uncommon for more than one imaging 
procedure of the same modality to be furnished across families and, 
like the scenario for hospital outpatient imaging services, we would 
expect efficiencies to occur in these cases. Therefore, we believe that 
an expansion of the current imaging MPPR policy to account for 
efficiencies in such situations would allow us to pay more 
appropriately for these multiple imaging procedure sessions, consistent 
with our ongoing efforts to address misvalued services.
    The proposed expansion of the imaging MPPR policy to include all of 
the current codes in a single family to which the standard 50 percent 
reduction for second and subsequent procedures would apply would reduce 
payment for 20 percent more services than the current MPPR policy under 
the PFS. Thus, under the CY 2011 proposal, we would capture additional 
efficiencies and pay more appropriately in these cases. We note that, 
as indicated above, section 3135(b)(2) of the ACA specifies that 
reduced expenditures attributable to the increase in the imaging MPPR 
from 25 to 50 percent in CY 2011 are excluded from the PFS budget 
neutrality adjustment. However, the reduced payment for code 
combinations that would newly be subject to the imaging MPPR policy 
under this proposal would be made in a budget neutral manner under the 
PFS, as these new combinations are not included under section 
1848(b)(4)(D) (added by section 3135(b) of the ACA), which addresses 
``single-session imaging to consecutive body parts'' under the 
established imaging MPPR policy.
    Finally, we are also proposing to add the codes displayed in Table 
17 to the list of imaging services subject to the MPPR policy in CY 
2011. These codes were newly created for CY 2010 and are similar to 
codes currently in imaging family 2, titled CT and CTA (Chest/Thorax/
Abdomen/Pelvis).
    We further note that new CY 2010 CPT codes 74261 (Computed 
tomography (CT) colonography, diagnostic, including image 
postprocessing; without contrast material) and 74262 (Computed 
tomography (CT) colonography, diagnostic, including image 
postprocessing; with contrast material(s) including non-contrast 
images, if performed) were added to the CY 2010 MPPR policy through the 
July 2010 PFS quarterly update, with a retroactive effective date of 
January 1, 2010. These codes replaced CPT code 0067T (Computed 
tomographic (CT) colonography (i.e., virtual colonoscopy); diagnostic) 
in CY 2010, which was on the list of procedures subject to the imaging 
MPPR policy prior to CY 2010.
    As discussed earlier in this section, reduced expenditures 
attributable to the increase in the MPPR for multiple imaging 
procedures to consecutive body parts (that is, those previously 
designated in the same family of codes) are exempt from the budget 
neutrality provision of the PFS. However, the reduced expenditures 
attributable to the MPPR for combinations of multiple imaging 
procedures that we are proposing for CY 2011 (the MPPR for multiple 
imaging procedures not involving consecutive body parts) would be 
subject to budget neutrality adjustment under the PFS. We note that 
this formulation for whether reduced expenditures are exempt from 
budget neutrality applies both to procedures currently subject to the 
imaging MPPR and to new codes that are subject to the policy in CY 2011 
and in future years. To the extent that imaging procedures described by 
the new codes are furnished in combination with other procedures that 
are subject to the imaging MPPR on consecutive body areas, the reduced 
expenditures attributable to the MPPR for these combinations would be 
exempt from the PFS budget neutrality adjustment.
    The complete list of codes subject to the proposed CY 2011 MPPR 
policy for diagnostic imaging services is included in Addendum F to 
this proposed rule.

  Table 17--Proposed CPT Code Additions to the Diagnostic Imaging MPPR
                           Policy for CY 2011
------------------------------------------------------------------------
            CPT code                         Short descriptor
------------------------------------------------------------------------
75571...........................  Ct hrt w/o dye w/ca test.
75572...........................  Ct hrt w/3d image.
75573...........................  Ct hrt w/3d image, congen.
75574...........................  Ct angio hrt w/3d image.
------------------------------------------------------------------------

c. Proposed CY 2011 Expansion of the MPPR Policy to Therapy Services
    In the July 2009 GAO report entitled, ``Medicare Physician 
Payments: Fees Could Better Reflect Efficiencies Achieved when Services 
are Provided Together,'' the GAO found efficiencies when multiple 
physical therapy services were furnished in one session and concluded 
that an MPPR policy could be appropriate for these services. In the 
report, the GAO noted that officials from the AMA RUC explained that 
time spent on pre-service and post-service therapy activities is spread 
across the number of services in a typical session in order to avoid 
duplication of the PE for the services. Nevertheless, the GAO found 
that there was duplication of certain activities in the intra-service 
period, and provided the example of time spent testing range of motion 
or muscle flexibility that was duplicated in commonly observed code 
pairs.
    In the typical clinical scenario for therapy services, we believe 
that therapy services are misvalued for PFS payment when multiple 
services are furnished to a patient in a single session because 
duplicate clinical labor and supplies are included in the PE of the 
services furnished. We believe this duplication should be accounted for 
under the PFS, as we currently account for efficiencies in multiple 
surgical and multiple diagnostic imaging procedures furnished in a 
single session. Over the past 2 years, the AMA RUC has examined several 
services billed 90 percent or more of the time together as part of its 
potentially misvalued service initiative and, in several cases, created 
one code to describe the complete service, with a value that reflects 
the expected efficiencies. Notwithstanding the AMA RUC's analyses, in 
most cases it has not created one code to describe a complete therapy 
service, in part because many of the core therapy CPT codes are timed 
codes based on increments of treatment time.
    Therefore, we are proposing a further step to implement section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) that 
specifies that the Secretary shall identify potentially misvalued codes 
by examining multiple codes that are frequently billed in conjunction 
with furnishing a single service. For CY 2011 we are proposing an MPPR 
policy for the HCPCS codes listed in Table 18, specifically the 
separately payable ``always therapy'' services that are only paid by 
Medicare when furnished under a therapy plan of care. These services 
are designated ``always therapy'' services regardless of who furnishes 
them and always require therapy modifiers to be reported, specifically 
-GP (Services rendered under outpatient physical therapy plan of care); 
-GO (Services rendered under outpatient occupational therapy plan of 
care); or -GN (Services rendered under outpatient speech pathology plan 
of care). The therapy codes are available in a file on the CMS Web site 
at: http://www.cms.gov/TherapyServices/. We have excluded both 
contractor-priced and bundled codes from Table 18 because, under our 
proposal, an MPPR would not be applicable for ``always therapy'' 
services furnished in combination with these codes. In the case of 
bundled codes that are not separately paid, there are no explicit 
efficiencies in the direct PE to be reflected in payment for the second 
and subsequent therapy services furnished

[[Page 40076]]

to the patient on the same day. In the case of contractor-priced codes, 
there is no nationally established pricing that could be uniformly 
adjusted to reflect the expected efficiencies when multiple therapy 
services are furnished.

 Table 18--Separately Payable ``Always Therapy'' Services Subject to the
                      Proposed CY 2011 MPPR Policy*
------------------------------------------------------------------------
         CPT/HCPCS code                      Short descriptor
------------------------------------------------------------------------
92506...........................  Speech/hearing evaluation.
92507...........................  Speech/hearing therapy.
92508...........................  Speech/hearing therapy.
92526...........................  Oral function therapy.
92597...........................  Oral speech device eval.
92607...........................  Ex for speech device rx, 1hr.
92608...........................  Ex for speech device rx addl.
92609...........................  Use of speech device service.
96125...........................  Cognitive test by hc pro.
97001...........................  Pt evaluation.
97002...........................  Pt re-evaluation.
97003...........................  Ot evaluation.
97004...........................  Ot re-evaluation.
97010...........................  Hot or cold packs therapy.
97012...........................  Mechanical traction therapy.
97016...........................  Vasopneumatic device therapy.
97018...........................  Paraffin bath therapy.
97022...........................  Whirlpool therapy.
97024...........................  Diathermy eg, microwave.
97026...........................  Infrared therapy.
97028...........................  Ultraviolet therapy.
97032...........................  Electrical stimulation.
97033...........................  Electric current therapy.
97034...........................  Contrast bath therapy.
97035...........................  Ultrasound therapy.
97036...........................  Hydrotherapy.
97110...........................  Therapeutic exercises.
97112...........................  Neuromuscular reeducation.
97113...........................  Aquatic therapy/exercises.
97116...........................  Gait training therapy.
97124...........................  Massage therapy.
97140...........................  Manual therapy.
97150...........................  Group therapeutic procedures.
97530...........................  Therapeutic activities.
97533...........................  Sensory integration.
97535...........................  Self care mngment training.
97537...........................  Community/work reintegration.
97542...........................  Wheelchair mngment training.
97750...........................  Physical performance test.
97755...........................  Assistive technology assess.
97760...........................  Orthotic mgmt and training.
97761...........................  Prosthetic training.
97762...........................  C/o for orthotic/prosth use.
G0281...........................  Elec stim unattend for press.
G0283...........................  Elec stim other than wound.
G0329...........................  Electromagntic tx for ulcers.
------------------------------------------------------------------------
* Excludes contractor-priced and bundled codes.

    At this time, we are not proposing an MPPR policy for ``sometimes 
therapy'' services, specifically those services that may be furnished 
under a therapy plan of care or otherwise by physicians or NPPs as 
medical services. We believe that the care patterns are different for 
the latter group of services that may sometimes be furnished as therapy 
services, and note that they are less commonly furnished with multiple 
services in a single session than the ``always therapy'' services. In 
the discussion that follows, our reference to therapy services means 
those HCPCS codes designated annually as ``always therapy'' services by 
CMS.
    Based on CY 2009 PFS claims data, we identified over 500 therapy 
service code pairs billed for the same patient in a single session. We 
then reviewed a sample of the most common therapy code pairs, 
specifically those high volume code pairs with more than 250,000 
combined services per year, to examine the potential for duplication in 
the PE. These codes pairs represented more than half of the occurrences 
of therapy services billed together. While we acknowledge that the PE 
inputs per service for some therapy services were included in the 
direct PE database based on one-half of the total PE inputs required 
for two services provided in a single session, which would account for 
some duplication, this was not the case for all combinations of therapy 
services. Of the high volume therapy services examined, approximately 
one-fourth of the code pairs were not valued based on two services. In 
addition, we note that the CY 2009 PFS claims data show that when 
multiple therapy services are billed on a claim for the same date of 
service, the median number is four services per day. Therefore, even 
for those clinical labor times that may reflect the allocation of total 
time across two units of therapy services, we believe that some 
elements of the current PE inputs are duplicated based on current 
patterns of therapy service delivery where most multiple service claims 
involve delivery of more than 2 services in a session.
    Duplicate labor activities currently included in the PE for the 
service period for these high volume pairs of therapy services are as 
follows: clean room/equipment; education/instruction/counseling/
coordinating home care; greet patient/provide gowning; obtain 
measurements, for example, ROM/strength/edema; and post-treatment 
patient assistance. The most common duplicate supply item included in 
the PE was the multispecialty visit pack. Examples of duplicated and 
unduplicated labor activities and supplies for two sample therapy code 
pairs and our estimates of potential clinically appropriate time and 
quantity reductions for multiple service sessions are displayed in 
Table 19. We note that CY 2009 PFS claims data for these sample code 
pairs include over 3.4 million pairs of CPT codes 97112 (Therapeutic 
procedure, 1 or more areas, each 15 minutes; neuromuscular reeducation 
of movement, balance, coordination, kinesthetic sense, posture, and/or 
proprioception for sitting and/or standing activities) and 97110 
(Therapeutic procedure, 1 or more areas, each 15 minutes; therapeutic 
exercises to develop strength and endurance, range of motion and 
flexibility) furnished by the same practitioner on the same day and 
over 500,000 pairs of CPT codes 97001 (Physical therapy evaluation) and 
97140 (Manual therapy techniques (e.g., mobilization/manipulation, 
manual lymphatic drainage, manual traction), 1 or more regions, each 15 
minutes).

Table 19: Examples of Duplicate PE Inputs for Therapy Services That 
Should Be Accounted for When Multiple Services Are Furnished in One 
Session

    Example 1: CPT code 97112 (Therapeutic procedure, 1 or more areas, 
each 15 minutes; neuromuscular reeducation of movement, balance, 
coordination, kinesthetic sense, posture, and/or proprioception for 
sitting and/or standing activities) and CPT code 97110 (Therapeutic 
procedure, 1 or more areas, each 15 minutes; therapeutic exercises to 
develop strength and endurance, range of motion and flexibility)

 
----------------------------------------------------------------------------------------------------------------
                                                                        Code A 97112  Code B 97110
      Staff description              Labor task          Time period     labor task    labor task   Total minute
                                    description                             time          time        reduction
----------------------------------------------------------------------------------------------------------------
Physical Therapy Aide........  Clean room/equipment.  Service Period,            1             1             1
                                                       Post-Service.

[[Page 40077]]

 
Physical Therapy Assistant...  Education/instruction/ Service Period,            2.5           2.5           2.5
                                counseling/coord       Post-Service.
                                home care.
Physical Therapy Aide........  Greet patient/provide  Service Period,            1.5           1.5           1.5
                                gowning.               Pre-Service.
Physical Therapy Assistant...  Obtain measurements,   Service Period,            1.5           1.5           1.5
                                e.g., ROM/strength/    Pre-Service.
                                edema.
Physical Therapy Assistant...  Obtain vital signs...  Service Period,            1             1             1
                                                       Pre-Service.
Physical Therapy Assistant...  Phone calls between    Post-Service               1             1             1
                                visits with patient,   Period.
                                family.
Physical Therapy Aide........  Post treatment         Service Period,            1             1             1
                                patient assistance.    Post-Service.
Physical Therapy Assistant...  Review/read            Pre-Service                1.5           1.5           1.5
                                documentation, plan    Period.
                                of care, treatment
                                goals.
Physical Therapy Aide........  Verify/Coordinate      Pre-Service                1.5           1.5           1.5
                                availability of        Period.
                                resources/equip.
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                                                   Code B 97110
               Supply description                      Price       Code A 97112    Code B 97110      quantity
                                                                     quantity        quantity        reduction
----------------------------------------------------------------------------------------------------------------
pack, minimum multi-specialty visit.............           $1.14             0.5             0.5               0
Thera-bands (6in width).........................            0.06             1.5             1.5             1.5
----------------------------------------------------------------------------------------------------------------

    Example 2: CPT code 97001 (Physical therapy evaluation) and CPT 
Code 97140 (Manual therapy techniques (eg, mobilization/manipulation, 
manual lymphatic drainage, manual traction), 1 or more regions, each 15 
minutes)

----------------------------------------------------------------------------------------------------------------
                                                                        Code A 97001  Code B 97140
      Staff description              Labor task          Time period     labor task    labor task   Total minute
                                    description                             time          time        reduction
----------------------------------------------------------------------------------------------------------------
Physical Therapy Aide........  Clean room/equipment.  Service Period,            3             1             1
                                                       Post-Service.
Physical Therapy Assistant...  Education/instruction/ Service Period,            2             1             1
                                counseling/coord       Post-Service.
                                home care.
Physical Therapy Aide........  Greet patient/provide  Service Period,            3             1.5           1.5
                                gowning.               Pre-Service.
Physical Therapy Assistant...  Obtain measurements,   Service Period,            8             1.5           1.5
                                e.g., ROM/strength/    Pre-Service.
                                edema.
Physical Therapy Assistant...  Obtain vital signs...  Service Period,            3             1             1
                                                       Pre-Service.
Physical Therapy Assistant...  Phone calls between    Post-Service               2             1             1
                                visits with patient,   Period.
                                family.
Physical Therapy Assistant...  Review/read            Pre-Service                1              .5            .5
                                documentation, plan    Period.
                                of care, treatment
                                goals.
Physical Therapy Aide........  Verify/Coordinate      Pre-Service                3             1.5           1.5
                                availability of        Period.
                                resources/equip.
Physical Therapy Aide........  Prep and position      Service Period,            2             0             0
                                patient.               Pre-Service.
Physical Therapy Aide........  Prepare room,          Service Period,            2             0             0
                                equipment, supplies.   Pre-Service.
Physical Therapy Aide........  Post treatment         Service Period,            0             1             0
                                assistance.            Post-Service.
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                                                   Code B 97140
               Supply description                     Price       Code A 97001    Code B 97140       quantity
                                                                    quantity        quantity        reduction
----------------------------------------------------------------------------------------------------------------
pack, minimum multi-specialty visit............          $1.14                1             0.5              0.5
lotion, message, unscented.....................           0.158               0             0.5              0
----------------------------------------------------------------------------------------------------------------


[[Page 40078]]

    We did not remove minutes for clinical labor tasks that were not 
duplicated. For example, for CPT code pair 97001 and 97140 the 
following tasks were not duplicated: Post treatment patient assistance; 
prep and position patient; and prepare room, equipment, and supplies. 
In addition, we did not remove any supply items that would be required 
for only one of the separate services because these would not be 
duplicated in the PE applicable to the combination of services. We 
estimated no reduction for equipment time, even though efficiencies 
would be expected for equipment that is used in both services when they 
are furnished together. Finally, a corresponding reduction to the 
indirect expenses is appropriate since indirect costs are allocated 
partially based on direct costs. For five high volume therapy code 
pairs that each occur over 2 million time in PFS claims for multiple 
therapy services and account for almost half of such claims, we 
estimated that the resulting reduction in the PE for the lower paying 
code would range from 28 to 56 percent.
    In summary, given the duplicative clinical labor activities and 
supplies as shown in the code combination examples, we believe it would 
be appropriate to extend the 50 percent MPPR policy that is currently 
applied to surgical services and the TC of imaging services, to the PE 
component of certain therapy services. Specifically, we are proposing 
to apply a 50 percent payment reduction to the PE component of the 
second and subsequent therapy services for multiple ``always therapy'' 
services furnished to a single patient in a single day. Because it 
would be difficult to determine the precise beginning and end of 
therapy sessions and we do not believe that beneficiaries would 
typically have more than one therapy session in a single day, we are 
proposing to apply the 50 percent MPPR policy to the PE component of 
subsequent therapy services provided to the same patient on the same 
day, rather than in the same session.
    We note that many therapy services are time-based CPT codes, so 
multiple units of a single code may be billed for a single session that 
lasts for a longer period of time than one unit of the code. The 
proposed MPPR policy would apply to multiple units of the same therapy 
service, as well as to multiple different services, when furnished to 
the same patient on the same day. Full payment would be made for the 
service or unit with the highest PE and payment would be made at 50 
percent of the PE component for the second and subsequent procedures or 
units of the service. The work and malpractice components of the 
therapy service payment would not be reduced. For therapy services 
furnished by a group practice or ``incident to'' a physician's service, 
the MPPR would apply to all ``always therapy'' services furnished to a 
patient on the same day, regardless of whether the services are 
provided in one therapy discipline or multiple disciplines, for 
example, physical therapy, occupational therapy, or speech-language 
pathology. The proposed CY 2011 MPPR policy would apply to both those 
services paid under the PFS that are furnished in the office setting 
and those services paid at the PFS rates that are furnished by 
outpatient hospitals, home health agencies, comprehensive outpatient 
rehabilitation facilities (CORFs), and other entities that are paid by 
Medicare for outpatient therapy services. Table 20 provides a sample 
calculation of the current and proposed CY 2011 payment for multiple 
therapy services furnished on the same day. For those services paid 
under the PFS, the PFS budget neutrality provision would apply so that 
the estimated reduced expenditures for therapy services would be 
redistributed to increase payment for other PFS services.

                Table 20--Sample Proposed Payment Calculation for Multiple Therapy Services Furnished to a Single Patient on the Same Day
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Current    Proposed CY
                                   Procedure 1   Procedure 1   Procedure 2     total      2011 total             Proposed payment calculation
                                     Unit 1        Unit 2                     payment      payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Work............................         $7.00         $7.00        $11.00       $25.00       $25.00  no reduction.
PE..............................         10.00         10.00          8.00        28.00        19.00  $10 + (0.5 x $10) + (0.5 x $8).
Malpractice.....................          1.00          1.00          1.00         3.00         3.00  no reduction.
    Total.......................         18.00         18.00         20.00        56.00        47.00  $18 + $7 + (0.5 x $10) + $1 + $11 + (0.5 x $8) +
                                                                                                       $1.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We believe this proposed therapy MPPR policy would provide more 
appropriate payment for therapy services that are commonly furnished 
together by taking into account the duplicative clinical labor 
activities and supplies in the PE that are not furnished more than once 
in the single therapy session. This approach is consistent with the 
statutory requirement for the Secretary to identify, review, and adjust 
the relative values of potentially misvalued services under the PFS as 
specified by section 3134 of the ACA. We also believe this proposed 
policy is responsive to Congressional concerns about significant growth 
in therapy spending and to MedPAC and GAO recommendations regarding the 
expansion of MPPR policies under the PFS to account for additional 
efficiencies. We note that paying more appropriately for therapy 
services based on PE relative values that are adjusted for the clinical 
scenario under which the services are furnished would result in reduced 
therapy expenditures, and beneficiaries would be able to receive more 
medically necessary outpatient therapy services before reaching the 
therapy cap. For a further discussion of potential alternatives to the 
therapy caps, we refer readers to section III.A.2. of this proposed 
rule.
5. High Cost Supplies
a. Background
    MedPAC and the AMA RUC have long recommended that CMS establish a 
frequent price update process for high-cost supplies that are direct PE 
inputs in the PE database for services paid under the PFS because of 
their speculation that prices for these items may decrease over time as 
competition increases and new technologies disseminate into medical 
practice. MedPAC in particular has perennially noted that it is 
important for CMS to update the prices of high-priced supplies on a 
regular basis as inaccurate prices can distort PE RVUs over time,

[[Page 40079]]

contributing to the misvaluing of established services under the PFS.
    Most of the current prices for high-cost supplies included in the 
direct PE database are from 2004 or earlier. There are currently 62 
unique supplies with prices of $150 or more in the proposed CY 2011 PE 
database, which is available on the CMS Web site under the supporting 
data files for the CY 2011 PFS proposed rule at http://www.cms.gov/PhysicianFeeSched/. Finally, we note that we do not actually pay the 
supply prices included in the PE database but, instead, use them to 
develop the PE RVUs according to our standard PE methodology as 
described in section II.A.2. of this proposed rule. Payment for a 
procedure that uses a supply is based upon the PE RVUs that result from 
the PE methodology, and supplies are among the direct PE inputs for 
procedures. Therefore, it is the relativity of high-cost supply prices 
to prices for other PE items (equipment, low-cost supplies, and 
clinical labor) that is important.
    Accordingly, in the CY 2009 PFS proposed rule (73 FR 38582), we 
proposed a process to update the prices for high-cost supplies priced 
at $150 or more that are included in the PE inputs for procedures paid 
under the PFS PE methodology. The CY 2009 proposed rule described a 
publicly transparent process in which CMS would publish a list of the 
high-cost supplies in the PFS proposed rule (65 supplies were included 
in the CY 2009 PFS proposed rule), and specialty societies or other 
relevant organizations would provide acceptable documentation 
supporting the pricing for the supplies during the 60-day public 
comment period. Furthermore, in that same proposed rule (73 FR 38582), 
we provided guidance on what constitutes valid, reliable documentation 
that reflects the typical price of the high-cost item in the 
marketplace. We outlined examples of acceptable documentation, such as 
a detailed description (including system components), sources, and 
current pricing information, confirmed by copies of catalog pages, 
invoices, and quotes from manufacturers, vendors, or distributors. We 
indicated that documentation that does not include specific pricing 
information such as phone numbers and addresses of manufacturers, 
vendors, or distributors or Web site links without pricing information 
would not be acceptable. We also noted that if acceptable documentation 
was not received within the proposed rule's 60-day public comment 
period, we would use prices from the Internet, retail vendors, and 
supply catalogs to determine the appropriate cost, and that we would 
use the lowest price identified by these sources (73 FR 38582). 
Finally, we solicited public comments on alternatives that could be 
used to update pricing information in the absence of acceptable 
documentation provided by specialty societies or other interested 
organizations.
    In the CY 2009 PFS final rule with comment period (73 FR 69882), we 
indicated that we received many comments on the proposed process and, 
while some commenters expressed support, others believed the proposed 
process was flawed and burdensome. Moreover, although we received some 
data in response to our request for information on the 65 high-cost 
supplies with prices of $150 or more, much of what we received was not 
complete or did not represent typical market prices. In particular, we 
expressed concern that the submitted data often represented 
manufacturer list prices for the premier models of many supplies, while 
we believed there were less expensive alternatives. Therefore, we were 
unable to determine the most appropriate, typical supply prices for our 
PFS payment methodology that prices the typical service described by a 
HCPCS code. Rather than finalizing the proposed process for updating 
high-cost supplies and revising the prices for the 65 supplies based on 
inadequate pricing information, we stated in the CY 2009 PFS final rule 
with comment period (73 FR 69882) that we would research the 
possibility of using an independent contractor to assist us in 
obtaining accurate pricing information. Furthermore, we informed the 
public that we planned to study the limitations of available pricing 
data and determine how to revise our proposed process to elicit better 
data.
    In the CY 2010 PFS proposed rule and final rule with comment period 
(74 FR 33554 and 61776, respectively), we stated that we were 
continuing to examine ways to obtain accurate pricing information for 
high-cost supplies. We noted again in the CY 2010 PFS proposed rule 
that we would depend upon the cooperation of the medical community to 
obtain typical prices in the marketplace, and we provided stakeholders 
with another opportunity to submit public comments on the process. In 
the CY 2010 PFS final rule with comment period, we acknowledged 
commenters' general support for an initiative to ensure accurate 
pricing of high-cost supplies. In general, the commenters strongly 
preferred a transparent and public process, and we stated that we would 
consider this perspective as we explore the best way to ensure that 
accurate supply pricing information is used in the PFS payment 
methodology.
b. Future Updates to the Prices of High-Cost Supplies
    In working towards refining a process to update the prices of high-
cost supplies and consistent with our intention expressed in the CY 
2009 PFS final rule with comment period (73 FR 69882), we contracted 
with an independent contractor during CY 2009 to help us study the 
availability of accurate pricing information. We requested that the 
independent contractor, L&M Policy Research, research pricing 
information for the 65 high-cost supplies listed in the CY 2009 
proposed rule (73 FR 38583 through 38585) and determine what, if any, 
pricing information reflecting typical market prices could be obtained 
for these high-cost supplies.
    We first requested that the contractor explore publicly available 
sources to obtain typical market prices for these supplies. The 
contractor utilized supply vendor catalogs and Web sites and directly 
contacted vendors, manufacturers, group purchasing organizations 
(GPOs), and any other suppliers that the contractor identified in their 
research in order to identify prices for each of the supplies. Where 
more than one version of a supply item appeared to match a description 
of a high-cost supply and/or more than one possible vendor or 
manufacturer was identified, the contractor attempted to obtain prices 
from the multiple sources.
    Upon review of the high-cost supply list, the contractor refined 
the list to 62 unique high-cost items with prices of $150 or more for 
the study. The original list only consisted of 64 items but included 
one item inadvertently listed twice (CMS Supply Code SD207 (suture 
device for vessel closure (Perclose A-T)) and one item (CMS Supply Code 
SH079 (collagen implant)) that was deleted from the PE database after 
CY 2007 because it was no longer used as an input for any codes. While 
the contractor was able to obtain prices for 37 of the 62 unique 
supplies, the contractor was unable to obtain pricing information for 
the remaining 25 supplies. Documentation of these prices, a requirement 
we discussed in the CY 2009 PFS proposed rule (73 FR 38582), was only 
obtained for 25 of the 36 supplies with new pricing information. For 
the remainder, while the contractor was given price quotes over the 
phone, the sales agents or customer service representatives declined to 
provide any form of written documentation, in some cases because 
company policies

[[Page 40080]]

restricted providing pricing documentation to prospective customers 
without an account. Moreover, information on typical discounts was 
obtained for only seven products, and only one discount was documented. 
In the case of these products, companies disclosed the maximum 
available discounts, ranging from 18 percent to 45 percent. Relative to 
prices currently included in the PE database, the contractor found 
higher prices for the majority of the medical supplies that were 
researched, specifically 23 supplies with higher prices, 8 with lower 
prices, and 3 with the same price. The high-cost supplies studied by 
the contractor and their current database prices are displayed in Table 
20.

 Table 20--High-Cost Supplies With Prices of $150 or Greater in the PFS
       Direct PE Database That Were Studied by the CMS Contractor
------------------------------------------------------------------------
                         Supply       Current database   Associated CPT
  CMS supply code      description       unit price           codes
------------------------------------------------------------------------
                    stent, ureteral,              $235             52332
                     wguidewire, 3cm
                     flexible tip.
                    probe,                       1,175             50593
                     cryoablation,
                     renal.
                    catheter,                    1,380      22526, 22527
                     intradiscal
                     (spineCATH).
                    probe,                       1,589             19105
                     cryoablation
                     (Visica ICE 30
                     or 40).
                    kit, capsule,                  450             91111
                     ESO, endoscopy
                     w-application
                     supplies (ESO).
                    catheter,                      306             68816
                     balloon,
                     lacrimal.
                    catheter, CVA,               1,750             36566
                     system,
                     tunneled w-
                     port, dual
                     (LifeSite).
                    stent, vascular,             1,645      37205, 37206
                     deployment
                     system, Cordis
                     SMART.
                    agent, embolic,                258             37210
                     2 ml uou.
                    tube,                          195     49441, 49446,
                     jejunostomy.                           49451, 49452
SA005.............  kit, capsule                   450             91110
                     endoscopy w-
                     application
                     supplies (M2A).
SA010.............  kit, CVA                       308     36557, 36558,
                     catheter,                                     36581
                     tunneled,
                     without
                     portpump.
SA011.............  kit, CVA                       495     36560, 36561,
                     catheter,                             36563, 36582,
                     tunneled, with                                36583
                     subcut port.
SA015.............  kit, for                       488     36870, 37184,
                     percutaneous                          37186, 37187,
                     thrombolytic                                  37188
                     device
                     (Trerotola).
SA020.............  kit, loop snare                275      36595, 37203
                     (Microvena).
SA022.............  kit,                           305      63610, 64561
                     percutaneous
                     neuro test
                     stimulation.
SA024.............  kit,                           858             36522
                     photopheresis
                     procedure.
SA025.............  kit, PICC with                 586     36570, 36571,
                     subcut port.                                  36585
SA036.............  kit,                         1,149             53850
                     transurethral
                     microwave
                     thermotherapy.
SA037.............  kit,                         1,050             53852
                     transurethral
                     needle ablation
                     (TUNA).
SA038.............  kit,                           650             53853
                     transurethral
                     waterinduced
                     thermotherapy.
SA039.............  kit,                           696      22520, 22521
                     vertebroplasty
                     (LP2, CDO).
SA074.............  kit,                           519             36478
                     endovascular
                     laser treatment.
SA075.............  kit,                         1,245             58565
                     hysteroscopic
                     tubal implant
                     for
                     sterilization.
SA077.............  kit, pleural                   329      32550, 96440
                     catheter
                     insertion.
SA087.............  tray, RTS                    2,550             19296
                     applicator
                     (Mammosite).
SA091.............  tray, scoop,                   750             31730
                     fast track
                     system.
SA092.............  kit, gene, MLL               1,395             88385
                     fusion.
SA093.............  kit, priming,              \1\ 463      88385, 88386
                     random.
SC085.............  tubing set,                    173             36514
                     plasma exchange.
SD018.............  catheter,                      727             58353
                     balloon,
                     thermal
                     ablation
                     (Thermachoice).
SD019.............  catheter,                      166     43456, 45303,
                     balloon,                              45340, 45386,
                     ureteral-GI                                   46604
                     (strictures).
SD020.............  catheter, CVA,                 355             36565
                     tunneled, dual
                     (Tesio).
SD023.............  catheter,                      183     74251, 74260,
                     enteroclysis.                         89100, 89105,
                                                           89130, 89132,
                                                           89135, 89136,
                                                            89140, 89141
SD058.............  electrode, grid.               475             95829
SD072.............  eyelid weight                  218             67912
                     implant, gold.
SD073.............  fiducial screws            \2\ 558      77011, 77301
                     (set of 4).
SD094.............  mammotome probe.               200             19103
SD109.............  probe,                       1,995     20982, 32998,
                     radiofrequency,                        41530, 50592
                     3 array
                     (StarBurstSDE).
SD151.............  catheter,                      432     35470, 35471,
                     balloon, low                                  35474
                     profile PTA.
SD152.............  catheter,                      244     35472, 35473,
                     balloon, PTA.                         35475, 35476,
                                                            G0392, G0393
SD154.............  catheter,                      338     36217, 36247,
                     microcatheter                         36481, 37183,
                     (selective 3rd                                37210
                     order).

[[Page 40081]]

 
SD155.............  catheter, RF                  $725             36475
                     endovenous
                     occlusion.
SD175.............  guidewire,                     180     36217, 36247,
                     steerable                             36481, 37183,
                     (Transcend).                          37205, 37206,
                                                           37210, 49440,
                                                           49441, 49442,
                                                           49446, 49450,
                                                           49451, 49452,
                                                                   49460
SD177.............  hysteroscope,                1,146             58563
                     ablation device.
SD185.............  plasma antibody              1,150             36515
                     adsorption
                     column
                     (Prosorba).
SD186.............  Plasma LDL                   1,380             36516
                     adsorption
                     column
                     (Liposorber).
SD189.............  plate, surgical,               226             21208
                     mini-
                     compression, 4
                     hole.
SD191.............  plate, surgical,               719     21125, 21127,
                     reconstruction,                               21215
                     left, 5 x 16
                     hole.
SD193.............  plate, surgical,               389      21461, 21462
                     rigid
                     comminuted
                     fracture.
SD204.............  sensor, pH                     225             91035
                     capsule (Bravo).
SD205.............  sheath,                        154             31620
                     endoscope
                     ultrasound
                     balloon.
SD207.............  suture device                  225     35470, 35471,
                     for vessel                            35472, 35473,
                     closure                               35474, 35475,
                     (Perclose A-T).                       37184, 37187,
                                                           37188, 37205,
                                                                   G0392
SD215.............  probe,                       1,250             58356
                     endometrial
                     cryoablation
                     (Her Option).
SD216.............  catheter,                      165      91040, 91120
                     balloon,
                     esophageal or
                     rectal (graded
                     distention
                     test).
SD218.............  stent, ureteral,               162     50382, 50384,
                     without                                       50385
                     guidewire.
SF028.............  laser tip                      290     30117, 52214,
                     (single use).                          52224, 52317
SF029.............  laser tip, bare                150      46917, 46924
                     (single use).
SF030.............  laser tip,                     850      52647, 52648
                     diffuser fiber.
SL055.............  DNA stain kit              \3\ 150             88358
                     (per test).
SL209.............  array kit,                   2,121             88386
                     Genosensor.
SL225.............  gas, nitogen,                  190      88385, 88386
                     ultra-high
                     purity
                     (compressed)
                     grade 5.0.
------------------------------------------------------------------------
\1\ Six pack.
\2\ Set of 4.
\3\ 10 pack.

    Next, we directed the contractor to access the United States 
General Services Administration (GSA) medical supply schedule to 
augment the results obtained through review of vendor materials and 
direct contact with vendors, manufacturers, and GPOs. We note that the 
GSA establishes long-term government-wide contracts with commercial 
firms for many products, negotiating contracts and determining prices 
to be fair and reasonable prior to placing them on schedule. Included 
on the schedule are thousands of medical supplies at prices that, in 
most cases, are established through competition. The GSA schedule is an 
open solicitation and a business of any size, if it is stable and 
financially sound, can request to be included on the schedule. GSA's 
vendors usually are nationwide vendors with substantial non-government 
sales, and products on the schedule must be manufactured in the U.S. or 
in a nation with a trade agreement with the United States. Submissions 
for the schedule are received 365 days per year, vendor contracts can 
be of varying lengths, and vendors can add or delete products from the 
schedule. Depending on the aggregate cost estimate associated with the 
vendor's supply items, the time to achieve inclusion on the schedule 
can vary from as short as several months to as long as 2 years. The GSA 
has delegated authority to the Department of Veterans Affairs (VA) to 
procure medical supplies under the VA Federal Supply Schedules Program.
    Using the GSA general search engine under the category 
``Laboratory, Scientific, & Medical'' available at https://www.gsaadvantage.gov/advgsa/advantage/main/start_page.do the 
contractor obtained nine prices for items similar to the high-cost 
supplies in the PE database and that are displayed in Table 20 from the 
publicly available information on the Internet, including pricing for 
one product for which its prior work did not yield an updated price. We 
believe that additional items that are similar to the high-cost 
supplies in the PE database and that may be used with the same 
procedures may be on the GSA schedule but we are still working through 
the crosswalk between our supplies and the way the supplies are 
presented on the GSA schedule. Examples of high-cost supplies in the PE 
database that the contractor located on the GSA schedule include: (1) 
Kit, capsule, ESO, endoscopy w-application supplies (ESO), priced at 
$450 in the PE database and $444 on the GSA schedule; and (2) tube, 
jejunostomy, priced at $195 in the PE database and $60 to $83 on the 
GSA schedule, depending on the characteristics of the tube.
    Since the GSA medical supply schedule is a source for pricing 
information that is public and transparent and reflects the best 
government contract price for a product, we believe it is a desirable 
resource for us to use in a refined process for updating the prices of 
high-cost

[[Page 40082]]

supplies. For historical context, CMS has previously proposed to use VA 
prices that result from the competitive marketplace as comparison 
points to limit the Medicare prices for oxygen and certain items of 
durable medical equipment and prosthetic devices (62 FR 38100 through 
38107, and 64 FR 44227 through 44231) in 1997 and 1999, respectively. 
These prior proposals were based on our determination that the Medicare 
payment amounts for these items as durable medical equipment or 
prosthetics (not as physicians' services) were not inherently 
reasonable. We note, however, that our current interest in the GSA 
schedule for pricing high-cost supplies for payment of physicians' 
services is not based on considerations of inherent reasonableness, and 
we do not actually pay the prices in the PE database for supplies under 
the PFS.
    We further note that public commenters on pricing high-cost 
supplies have consistently requested that CMS ensure that the pricing 
information used to update the prices is provided publicly. The 
commenters have observed that this transparency would enable 
stakeholders to evaluate and provide feedback to the agency on pricing 
accuracy (74 FR 61776). We also acknowledge that our past attempts over 
several years to identify typical market prices for the high-cost 
supplies have been inhibited by the limited availability of public data 
that meet the documentation requirements we have previously 
established. Individual vendors do not always publish their product 
prices or provide typical discounts. Moreover, discounts may vary 
depending on suppliers and the volume of supplies purchased. Our 
understanding of the GSA medical supply schedule is that the publicly 
listed fair and reasonable prices on the schedule generally do not 
include volume and or certain other discounts that may be subsequently 
negotiated by the buyer. Consequently, we would consider the prices 
available on the GSA schedule to represent the ``individual item 
ceiling'' price for a single item purchase, which we believe would be 
appropriate to estimate the high-cost supply prices for physicians' 
office purchases. We are soliciting public comments regarding the high-
cost supplies in the direct PE database for the CY 2011 PFS proposed 
rule, available on the CMS Web site as noted earlier in this section, 
and the corresponding supplies or alternative items that could be used 
for the same function that are currently on the GSA supply schedule. We 
encourage commenters to provide a detailed analysis of the current 
relationships between the items in the PE database and those on the GSA 
schedule.
    At this time, we would like to describe a refined process for 
regularly updating prices for high-cost supplies under the PFS and 
solicit comments on how we could improve on this process. The process 
could occur every 2 years beginning as soon as CY 2013, although we 
note that we would propose the refined process through rulemaking 
before revising the prices for any high-cost supply item based on the 
GSA schedule. We could also consider establishing a different price 
update period depending on whether a high-cost supply was a new supply 
in the PE database or had been in use for some time, in which case we 
might expect that the price would have stabilized and, therefore, could 
be updated less frequently. In general, we would expect that the 
periodicity of updating prices for high-cost supplies that we 
eventually adopted would balance the associated administrative burden 
with the rate of price changes, to ensure that the associated 
procedures remain appropriately valued, rather than increasingly 
misvalued, over time.
    We envision that we would base high-cost supply price inputs on the 
publicly available price listed on the GSA medical supply schedule. 
Since the medical community would have several years to examine the GSA 
medical supply schedule before the refined process would be adopted, 
and we have found no apparent limitations on vendors placing products 
on the GSA schedule, beyond the schedule's interest in competitive, 
best value procurements, stakeholders would have the opportunity to 
ensure that any high-cost direct PE input for a PFS service that may 
currently be missing from the GSA medical supply schedule would be 
included before CMS needs to access the publicly available price for 
the item. If a supply price were not publicly available on the GSA 
medical supply schedule by the time CMS needs to access the price, we 
would propose to reduce the current price input for the supply by a 
percentage that would be based on the relationship between GSA prices 
at that time and the existing PE database prices for similar supplies 
(currently an average 23 percent reduction). We believe that this 
refined process is desirable because it is consistent with commenters' 
repeated requests for the updating methodology to be transparent and 
predictable.
    Moreover, the VA (with responsibility delegated by the GSA) 
determines whether prices are fair and reasonable by comparing the 
prices and discounts that a company offers the government with the 
prices and discounts that the company offers to commercial customers. 
Therefore, using the GSA medical supply schedule as a source for 
publicly available prices would also better account for product-
specific market dynamics than the alternative of an across-the-board 
percentage reduction for supplies not on the GSA schedule based on 
general price trends for the high-cost supplies on the schedule. That 
is, if the market price of a particular supply were not to drop 
according to broad trends for other high-cost supplies, suppliers would 
have the opportunity to provide their price to the public on the GSA 
schedule in order to preclude any reduction in Medicare payment for 
procedures associated with that supply.
    Finally, we would like to reiterate that we are interested in 
receiving detailed public comments on the refined process discussed 
above, including all aspects of the price update methodology that we 
have presented. Moreover, we believe a similar approach could 
potentially be appropriate to update the prices for other supplies in 
the PE database that would not fall under our definition of high-cost 
supplies, and we welcome further public comments on that possible 
extension. We also invite further suggestions for alternative 
approaches to updating high-cost supply prices, specifically those that 
would result in a predictable, public, and transparent methodology that 
would ensure that the prices in the PE database reflect typical market 
prices. These principles are particularly important in order to ensure 
that the services that utilize the high-cost supplies when provided in 
the physician's office are appropriately valued under the PFS and 
continue to be appropriately valued over time.

D. Geographic Practice Cost Indices (GPCIs)

1. Background
    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 (that is, 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. In 
addition, section 1848(e)(1)(G) of the Act sets a

[[Page 40083]]

permanent 1.5 work GPCI floor in Alaska for services furnished 
beginning January 1, 2009. 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 2009 PFS final rule with comment period (73 FR 69740), the CY 
2009 adjustment to the GPCIs reflected the fully implemented fifth 
comprehensive GPCI update. CY 2010 would have typically included no 
adjustments to the GPCIs. However, section 3102(a) of the ACA amends 
section 1848(e)(1)(E) of the Act to extend the 1.0 work GPCI floor for 
services furnished through December 31, 2010. Additionally, section 
3102(b) of the ACA adds a new subparagraph 1848(e)(1)(H) to the Act, 
which specifies that for CY 2010 and CY 2011, the employee compensation 
and rent portions of the PE GPCI must reflect only one-half of the 
relative cost differences for each locality compared to the national 
average. The new subparagraph also includes a ``hold harmless'' 
provision for CY 2010 and CY 2011 for any PFS locality that would 
otherwise receive a reduction to its PE GPCI resulting from the limited 
recognition of cost differences. Additionally, section 1848(e)(1)(I) of 
the Act (as added by section 10324(c) of ACA) establishes a 1.0 PE GPCI 
floor for services furnished in frontier States effective January 1, 
2011. In May 2010, we provided our Medicare contractors with an updated 
CY 2010 payment file that included the 1.0 work GPCI floor and the PE 
GPCIs calculated according to the methodology required by section 
1848(e)(1)(H) of the Act (as added by section 3102(b) of ACA) for CY 
2010, to be used for payment of services furnished on or after January 
1, 2010.
    For the CY 2011 PFS proposed rule, we have completed the sixth 
review of the GPCIs and are proposing new GPCIs. We note that section 
1848(e)(1)(E) of the Act (as amended by section 3102(a) of ACA) extends 
the 1.0 work GPCI floor only through December 31, 2010. Under current 
statute, the 1.0 work GPCI floor will expire on January 1, 2011. 
Therefore, the CY 2011 physician work GPCIs and summarized geographic 
adjustment factors (GAFs) do not reflect the 1.0 work floor. However, 
section 1848(e)(1)(G) of the Act (as amended by section 134(b) of the 
MIPPA) set a permanent 1.5 work GPCI floor in Alaska for services 
furnished beginning January 1, 2009; and, as noted above, section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of ACA) provides 
for a permanent 1.0 PE GPCI floor for frontier States effective January 
1, 2011. Therefore, as required by the statute, the 1.5 work GPCI floor 
for Alaska and the 1.0 PE GPCI floor for frontier States will be in 
effect for CY 2011. In addition to the limited recognition of certain 
cost differences for the PE GPCIs, section 1848(e)(1)(H) of the Act (as 
added by section 3102(b) of ACA) also requires us to complete an 
analysis of the data sources used and cost share weights assigned to 
the PE GPCIs. Implementation of ACA provisions related to the CY 2011 
PE GPCIs is discussed in more detail in the GPCI update section below.
    See Addenda D and E to this proposed rule for the proposed CY 2011 
GPCIs and summarized GAFs.
2. GPCI Update
    The proposed updated GPCI values were developed by Acumen, LLC 
(Acumen) under contract to CMS. As mentioned above, there are three 
GPCI components (physician work, PE, and malpractice), and all GPCIs 
are developed through comparison to a national average for each 
component. Additionally, each of the three GPCIs relies on its own data 
source(s) and methodology for calculating its value as described below.
a. Physician Work GPCIs
    The physician work GPCIs are designed to capture the relative cost 
of physician labor by Medicare PFS locality. Previously, the physician 
work GPCIs were developed using the median hourly earnings from the 
2000 Census of workers in seven professional specialty occupation 
categories which we used as a proxy for physicians' wages and 
calculated to reflect one-quarter of the relative cost differences for 
each locality compared to the national average. Physicians' wages are 
not included in the occupation categories because Medicare payments are 
a key determinant of physicians' earnings. Including physicians' wages 
in the physician work GPCIs would, in effect, have made the indices 
dependent upon Medicare payments.
    The physician work GPCIs were updated in CYs 2001, 2003, 2005, and 
2008 using professional earnings data from the 2000 Census. However, 
wage and earnings data are no longer available from the Census long 
form and the 2000 data are outdated. Therefore, for the proposed sixth 
GPCI update, we used the 2006 through 2008 Bureau of Labor Statistics 
(BLS) Occupational Employment Statistics (OES) data as a replacement 
for the 2000 Census data. The use of BLS OES data as a replacement for 
the 2000 Census data is discussed in more detail in the update of the 
PE GPCIs section. As noted above, the 1.0 work GPCI floor is set to 
expire under current statute on December 31, 2010. Therefore, the CY 
2011 proposed physician work GPCIs reflect the removal of this floor.
b. Practice Expense GPCIs
(1) The Affordable Care Act Requirements for PE GPCIs
General Methodology for the CY 2011 GPCIs
    ACA added a new subparagraph 1848(e)(1)(H) to the Act which revises 
the methodology for calculating the PE GPCIs for CY 2010 and CY 2011 so 
that the employee compensation and rent portions of the PE GPCIs 
reflect only one-half of the relative cost differences for each 
locality compared to the national average. Additionally, under section 
1848(e)(1)(H)(iii) of the Act (as added by section 3102(b) of the ACA), 
each PFS locality is held harmless so that the PE GPCI will not be 
reduced as a result of the change in methodology for PE GPCIs. In 
accordance with section 1848(e)(1)(H)(ii) of the Act (as added by 
section 3102(b) of ACA), the employee compensation and rent components 
of the proposed CY 2011 PE GPCIs were calculated to reflect one-half of 
the cost differences for each PFS locality relative to the national 
average cost. Additionally, as required by the statute, physicians' 
services furnished in each PFS locality would be adjusted by the higher 
of the locality's PE GPCI calculated with the limited recognition of 
employee compensation and rent cost differences or the PE GPCI 
calculated without the limited recognition of cost differences.
Phase-In of PE GPCIs
    Section 1848(e)(1)(C) of the Act requires us to phase in GPCI 
adjustments over 2 years if there was more than 1 year between GPCI 
adjustments. In accordance with the statute, we are proposing to phase 
in the updated PE GPCIs using one-half of the CY 2010 values and one-
half of the fully implemented values (as described in this section). To 
apply the phase-in and hold harmless provisions of the Act, we 
calculated transitional PE GPCIs based on two scenarios. Under the 
first scenario, we calculated transitional CY 2011 PE GPCIs using the 
full recognition of employee compensation and rent cost differences for 
each locality as compared to the national average. The

[[Page 40084]]

CY 2011 transitional PE GPCI values with full recognition of cost 
differences were calculated using one-half of the CY 2010 PE GPCI 
values with full recognition of cost differences and one-half of the 
updated PE GPCIs with full recognition of cost differences. The first 
scenario represents the transitional PE GPCI values prior to the 
limited recognition of cost differences. In other words, this scenario 
does not include the effects of sections 1848(e)(1)(H)(i) and (ii) of 
the Act (as added by section 3102(b) of ACA).
    For the second scenario, we calculated transitional CY 2011 PE 
GPCIs with the limited recognition of cost differences for the employee 
compensation and rent components (as required by sections 
1848(e)(1)(H)(i) and (ii) of the Act (as added by section 3102(b) of 
ACA)). The CY 2011 transitional PE GPCI values with the limited 
recognition of cost differences were calculated using one-half of the 
CY 2010 PE GPCIs with the limited cost differences and one-half of the 
updated PE GPCIs with the limited cost differences. The hold harmless 
provision under section 1848(e)(1)(H)(iii) of the Act (as added by 
section 3102(b) of ACA) was applied by selecting the greater of the CY 
2011 transitional PE GPCI value calculated with the limited recognition 
of cost differences or the CY 2011 transitional PE GCPI value 
calculated with full recognition of cost differences. The phase-in of 
the CY 2011 PE GPCIs and application of the hold harmless provision are 
illustrated in Table 21 below.

                                   Table 21--Phase-In of the CY 2011 PE GPCIs
----------------------------------------------------------------------------------------------------------------
                                                                                CY 2011
                                        CY 2010          Updated GPCIs       (transitional       Hold harmless
                                                                                 year)
----------------------------------------------------------------------------------------------------------------
File 1
PE GPCI Without 3102(b) of ACA..  Without ACA.......  Without ACA         (\1/2\ of 2010) +   Greater of File 1
                                                       (Updated Data).     (\1/2\ Updated      Transitional
                                                                           GPCI).              Value
File 2
PE GPCI With 3102(b) of ACA.....  With ACA..........  With ACA (Updated   (\1/2\ of 2010 w/   or File 2
                                                       Data).              ACA) + (\1/2\       Transitional
                                                                           Updated GPCI w/     Value.
                                                                           ACA).
----------------------------------------------------------------------------------------------------------------
*ACA in this table means the Affordable Care Act.

Data Analysis
    Section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) 
of ACA) also requires the Secretary to ``analyze current methods of 
establishing practice expense adjustments under subparagraph (A)(i) and 
evaluate data that fairly and reliably establishes distinctions in the 
cost of operating a medical practice in different fee schedule areas.'' 
This section also requires the Secretary to make appropriate 
adjustments to the PE GPCIs no later than by January 1, 2012. To 
implement this statutory requirement, we are proposing to implement 
changes in PE data sources and cost share weights discussed herein 
effective beginning in CY 2011.
    In accordance with section 1848(e)(1)(H)(iv) of the Act (as added 
by section 3102(b) of ACA), we have analyzed the current methods and 
data sources used in the establishment of the PE GPCIs. With respect to 
the method used, we began with a review of the GAO's March 2005 Report 
entitled, ``MEDICARE PHYSICIAN FEES: Geographic Adjustment Indices Are 
Valid in Design, but Data and Methods Need Refinement'' (GAO-05-119). 
While we have raised concerns in the past about some of the GAO's GPCI 
recommendations, we note that with respect to the PE GPCIs, the GAO did 
not indicate any significant issues with the methods underlying the PE 
GPCIs. Rather, the report focused on some of the data sources used in 
the method. For example, the GAO stated that the wage data used for the 
PE GPCIs are not current. Similarly, upon our reexamination of public 
comments we have received on the PE GPCIs for previous updates, we note 
that the commenters predominately focused on either the data sources 
used in the method or raised issues such as incentivizing the provision 
of care in different geographic areas. However, the latter issue 
(incentivizing the provision of care) is outside the scope of the 
statutory requirement that the PE GPCIs reflect the relative costs of 
the mix of goods and services comprising practice expenses in the 
different fee schedule areas relative to the national average.
    One key component of the PE GPCI method that our analysis 
identified involved the office expense portion of the PE GPCIs and the 
cost share weight assigned to this component. Most significantly, we 
are proposing that the weight for the office rent component be revised 
from 12.209 percent to 8.410 percent to reflect our more detailed 
breakout of the types of office expenses that are determined in local 
markets instead of national markets. For example, for previous GPCI 
updates, we used the office expenses cost category as the cost share 
weight for office rent and, therefore, all individual components 
previously included in the office expenses category were adjusted for 
local area cost differences by the GPCIs. As discussed in section 
II.E.1. of this proposed rule, we are proposing to disaggregate the 
broader office expenses component into 9 new cost categories as part of 
the proposed CY 2011 MEI rebasing. The disaggregation of the office 
expenses category indicates that the fixed capital cost category, for 
which the consumer price index (CPI) for owner's equivalent rent is the 
price proxy, is the office expense category applicable to the office 
rent component of the PE GPCI. Therefore, the fixed cost capital cost 
category is the only component of office expenses that we are proposing 
to adjust for local area cost differences beginning in CY 2011. We are 
proposing to assign other newly defined components of the office 
expenses category (for example, utilities, chemicals, paper, rubber and 
plastics, telephone, postage, and moveable capital) to the medical 
equipment, supplies, and other miscellaneous expenses cost component of 
the PE GPCIs. As discussed later in this section, the medical 
equipment, supplies, and other miscellaneous expenses component of the 
PE GPCIs is assumed to have a national market and, therefore, this 
component is not adjusted for local area cost differences.
    The proposed expense categories for the PE GPCIs, along with their 
respective cost share weights, are primarily derived from the 2006 
American Medical Association (AMA) Physician Practice Information 
Survey (PPIS) for self-employed physicians and selected self-employed 
non-medical doctor specialties. The PPIS is the most comprehensive, 
multispecialty, contemporaneous, and consistently collected PE data 
source available. It

[[Page 40085]]

was developed by medical organizations and captures the costs of 
operating a medical practice, including office rents and nonphysician 
staff wages.
    Moreover, we also examined the feasibility of using the American 
Community Survey (ACS) and the Bureau of Labor and Statistics (BLS) 
Occupational Employment Statistics (OES) data for the employee 
compensation component of the PE GPCI. For previous updates, the 
employee compensation component was based on the 2000 Decennial Census 
long form data. Since the Census data are significantly outdated and 
the 2010 Census no longer includes occupational wage data, we believed 
the ACS or BLS OES data might be viable alternatives. While the ACS 3-
year public use microsample (PUMS) is currently available, it reflects 
only about 3 percent of households and the data exhibit significant 
variation due to the small sample. In particular, the ACS PUMS has 
fewer than 10 observations of pharmacists in the Manhattan, Beaumont 
Texas, and Southern Maine localities. Therefore, we believe it would be 
premature to use the ACS data for determining GPCI values. The 2006, 
2007, and 2008 panels from the BLS OES represent a larger sample than 
the ACS PUMS and more recent data than the 2000 Census. As such, we are 
proposing to use the BLS OES data for updating the GPCIs. We look 
forward to exploring the use of the full ACS data when they become 
available.
    Additionally, we explored other sources of rent data (including 
commercial rental data and survey data) for use in calculating the PE 
GPCIs. We could not identify a reliable alternative rental data source 
available on a national basis with coverage of non-metropolitan areas.
    We do not believe there is a national data source better than the 
Housing and Urban Development (HUD) data for determining the relative 
cost differences in office rents. Therefore, based on our review of the 
available data sources, we are proposing to use the 2010 apartment 
rental data produced by HUD at the 50th percentile as a proxy for the 
relative cost difference in physician office rents.
    We believe our analysis of the current methods of establishing PE 
GPCIs and our evaluation of data that fairly and reliably establish 
distinctions in the cost of operating a medical practice in the 
different fee schedule areas meet the statutory requirements of section 
1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of ACA). A 
more detailed discussion of our analysis of current methods of 
establishing PE GPCIs and evaluation of data sources is included in 
Acumen's draft report. Acumen's draft report and associated analysis of 
the sixth GPCI update, including the PE GPCIs, will be posted on the 
CMS Web site after display of this CY 2011 PFS proposed rule. The draft 
report may be accessed from the PFS Web site at: http://www.cms.gov/PhysicianFeeSched/ under the ``Downloads'' section of the CY 2011 PFS 
proposed rule web page.
Determining the Proposed PE GPCI Cost Share Weights
    To determine the cost share weights for the proposed CY 2011 GPCIs, 
we used the proposed 2006-based Medicare Economic Index (MEI) as 
discussed in section II.E.1. of this proposed rule. The proposed MEI 
was rebased and revised to reflect the weighted-average annual price 
change for various inputs needed to provide physicians' services. As 
discussed in detail in that section, the proposed expense categories in 
the MEI, along with their respective weights, are primarily derived 
from data collected in the 2006 AMA PPIS for self-employed physicians 
and selected self-employed non-medical doctor specialties.
    For the cost share weight for the PE GPCIs, we used the 2006-based 
MEI weight for the PE category of 51.734 percent minus the professional 
liability insurance category weight of 4.295 percent. Therefore, the 
proposed cost share weight for the PE GPCIs is 47.439 percent. For the 
employee compensation portion of the PE GPCIs, we used the nonphysician 
employee compensation category weight of 19.153 percent. The fixed 
capital category weight of 8.410, for which the CPI for owner's 
equivalent rent is the price proxy, was used for the office rent 
component. To determine the medical equipment, supplies, and other 
miscellaneous expenses component, we removed professional liability 
(4.295 percent), nonphysician employee compensation (19.153 percent), 
and fixed capital (8.410 percent) from the PE category weight (51.734 
percent). Therefore, the proposed cost share weight for the medical 
equipment, supplies, and other miscellaneous expenses component is 
19.876 percent.
    Furthermore, the physician compensation cost category and its 
weight of 48.266 percent reflect the proposed work GPCI cost share 
weight and the professional liability insurance weight of 4.295 percent 
was used for the malpractice GPCI cost share weight. We believe our 
analysis and evaluation of the weights assigned to each of the 
categories within the PE GPCIs meets the statutory requirements of 
section 1848(e)(1)(H)(iv) of the Act (as added by section 3102(b) of 
ACA).
    The proposed cost share weights for the CY 2011 GPCIs are displayed 
in Table 22 below.

      Table 22--Proposed Cost Share Weights for CY 2011 GPCI Update
------------------------------------------------------------------------
                                                         Proposed cost
        Expense category          Current cost share     share weight
                                   weight  (percent)       (percent)
------------------------------------------------------------------------
Physician Work..................             52.466              48.266
Practice Expense................             43.669              47.439
    --Employee Compensation.....             18.654              19.153
    --Office Rent...............             12.209               8.410
    --Equipment, Supplies, Other             12.806              19.876
Malpractice Insurance...........              3.865               4.295
                                 ---------------------------------------
        Total...................            100                 100
------------------------------------------------------------------------

PE GPCI Floor for Frontier States
    Section 10324(c) of ACA added a new subparagraph (I) under section 
1848(e)(1) of the Act to establish a 1.0 PE GPCI floor for physicians' 
services furnished in frontier States. In accordance with section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of ACA), 
beginning in CY 2011, we will apply a 1.0 PE GPCI floor for physicians' 
services furnished in States determined to be frontier States. The 
statute requires us to define any State as a frontier State if at least 
50 percent of the State's counties are determined to be frontier

[[Page 40086]]

counties, which the statute defines as counties that have a population 
density less than 6 persons per square mile. However, section 
1848(e)(1)(I) of the Act (as added by section 10324(c) of ACA) also 
specifies that this provision shall not apply to States receiving a 
non-labor related share adjustment under section 1886(d)(5)(H) of the 
Act (which excludes Alaska and Hawaii from qualifying as a frontier 
State).
    Consistent with the proposed FY 2011 hospital inpatient prospective 
payment system (IPPS) 1.0 wage index floor for frontier States (as 
required by section 10324(a) of the ACA) (75 FR 30920 through 30921), 
we are proposing to identify frontier counties by analyzing population 
data and county definitions based upon the most recent annual 
population estimates published by the U.S. Census Bureau. We divide 
each county's population total by each county's reported land area 
(according to the decennial census) in square miles to establish 
population density. We also are proposing to update this analysis from 
time to time, such as upon publication of a subsequent decennial 
census, and if necessary, add or remove qualifying States from the list 
of frontier States based on the updated analysis.
    For a State that qualifies as a frontier State, in accordance with 
section 1848(e)(1)(I) of the Act (as added by section 10324(c) of the 
ACA), we are proposing that physicians' services furnished within that 
State would receive the higher of the applicable PE GPCI value 
calculated according to the standard CY 2011 methodology or a minimum 
value of 1.00. Furthermore, in accordance with section 1848(e)(1)(I) of 
the Act (as added by section 10324(c) of the ACA), the frontier State 
PE GPCI floor is not subject to budget neutrality and would only be 
extended to physicians' services furnished within a frontier State.
    For determining the proposed CY 2011 PFS PE GPCI values, the 
frontier States are the following: Montana; Wyoming; North Dakota; 
Nevada; and South Dakota (as reflected in Table 23).

Table 23--Frontier States Under Section 1848(e)(1)(I) of the Act (as Added by Section 10324(c) of the Affordable
                                                    Care Act)
----------------------------------------------------------------------------------------------------------------
                                                                                  Frontier      Percent frontier
                           State                             Total counties       counties          counties
----------------------------------------------------------------------------------------------------------------
Montana...................................................                56                45                80
Wyoming...................................................                23                17                74
North Dakota..............................................                53                36                68
Nevada....................................................                17                11                65
South Dakota..............................................                66                34                52
----------------------------------------------------------------------------------------------------------------

     (2) Summary of CY 2011 Proposed PE GPCIs
    The PE GPCIs include three components: employee compensation, 
office rent, and medical equipment, supplies and miscellaneous expenses 
as discussed below:
    (i) Employee Compensation: We used the 2006 through 2008 BLS OES 
data to determine the proposed employee compensation component of the 
PE GPCIs. Employee compensation accounts for 40.4 percent of the total 
PE GPCIs.
    (ii) Office Rents: Consistent with the previous GPCI update, we 
used the most recent residential apartment rental data produced by HUD 
(2010) at the 50th percentile as a proxy for the relative cost 
differences in physician office rents. Office rent accounts for 17.7 
percent of the PE GPCIs.
    (iii) Medical Equipment, Supplies, and other Miscellaneous 
Expenses: We assumed that items such as medical equipment and supplies 
have a national market and that input prices do not vary among 
geographic areas. As discussed in previous GPCI updates in the CY 2005 
and CY 2008 PFS proposed rules, specifically the fourth GPCI update (69 
FR 47503) and fifth GPCI update (72 FR 38138), respectively, some price 
differences may exist, but we believe these differences are more likely 
to be based on volume discounts rather than on geographic market 
differences. Medical equipment, supplies, and miscellaneous expenses 
are factored into the PE GPCIs with a component index of 1.000. The 
medical equipment, supplies, and other miscellaneous expense component 
are 41.9 percent of the PE GPCIs.
c. Malpractice GPCIs
    The malpractice GPCIs are calculated based on insurer rate filings 
of premium data for $1 million to $3 million mature claims-made 
policies (policies for claims made rather than services furnished 
during the policy term). The proposed CY 2011 malpractice GPCI update 
reflects 2006 and 2007 premium data.
d. General GPCI Update Process
    The periodic review and adjustment of GPCIs is mandated by section 
1848(e)(1)(C) of the Act. At each update, the proposed GPCIs are 
published in the PFS proposed rule the year before they would take 
effect in order to provide an opportunity for public comment and 
further revisions in response to comments prior to implementation. As 
mentioned above, the proposed CY 2011 updated GPCIs for the first year 
of the 2-year transition and summarized GAFs are displayed in Addenda D 
and E to this proposed rule.
3. Payment Localities
    The current PFS locality structure was developed and implemented in 
1997. There are currently 89 localities; 34 localities are Statewide 
areas. There are 52 localities in the other 18 States, with 10 States 
having 2 localities, 2 States having 3 localities, 1 State having 4 
localities, and 3 States having 5 or more localities. The District of 
Columbia, Maryland, and Virginia suburbs, Puerto Rico, and the Virgin 
Islands are additional localities that make up the remainder of the 
total of 89 localities. 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 with comment period (61 FR 
59494).
    As we have previously noted in the CYs 2008 and 2009 proposed rules 
(72 FR 38139 and 73 FR 38513), any changes to the locality 
configuration must be made in a budget neutral manner within a State 
and 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 in order to demonstrate 
consensus for the change among the professionals whose payments would 
be affected (with some increasing and some decreasing). However, we 
have recognized that, over time, changes in demographics or local 
economic conditions may lead us to conduct a more comprehensive

[[Page 40087]]

examination of existing payment localities.
    For the past several years, we have been involved in discussions 
with physician groups and their representatives about recent shifts in 
relative demographics and economic conditions, most notably within the 
current California payment locality structure. We explained in the CY 
2008 PFS final rule with comment period that we intended to conduct a 
thorough analysis of potential approaches to reconfiguring localities 
and would address this issue again in future rulemaking. For more 
information, we refer readers to the CY 2008 PFS proposed rule (72 FR 
38139) and subsequent final rule with comment period (72 FR 66245).
    As a follow-up to the CY 2008 PFS final rule with comment period, 
we contracted with Acumen to conduct a preliminary study of several 
options for revising the payment localities on a nationwide basis. The 
contractor's interim report was posted on the CMS Web site on August 
21, 2008, and we requested comments from the public. The report 
entitled, ``Review of Alternative GPCI Payment Locality Structures,'' 
remains accessible from the CMS PFS Web page under the heading 
``Interim Study of Alternative Payment Localities under the PFS.'' The 
report may also be accessed directly from the following link: http://www.cms.hhs.gov/PhysicianFeeSched/10_Interim_Study.asp#TopOfPage.
    We accepted public comments on the interim report through November 
3, 2008. The alternative locality configurations discussed in the 
report are described briefly below in this section.

Option 1: CMS Core-Based Statistical Area (CBSA) Payment Locality 
Configuration

    This option uses the Office of Management and Budget (OMB's) 
Metropolitan Statistical Area (MSA) designations for the payment 
locality configuration. MSAs would be considered as urban CBSAs. 
Micropolitan Areas (as defined by OMB) and rural areas would be 
considered as non-urban (rest of State) CBSAs. This approach would be 
consistent with the IPPS pre-reclassification CBSA assignments and with 
the geographic payment adjustments used in other Medicare payment 
systems. This option would increase the number of PFS localities from 
89 to 439.

Option 2: Separate High-Cost Counties From Existing Localities 
(Separate Counties)

    Under this approach, higher cost counties are removed from their 
existing locality structure and they would each be placed into their 
own locality. This option would increase the number of PFS localities 
from 89 to 214, using a 5 percent GAF differential to separate high-
cost counties.

Option 3: Separate MSAs From Statewide Localities (Separate MSAs)

    This option begins with statewide localities and creates separate 
localities for higher cost MSAs (rather than removing higher cost 
counties from their existing locality as described in Option 2). This 
option would increase the number of PFS localities from 89 to 130, 
using a 5 percent GAF differential to separate high-cost MSAs.

Option 4: Group Counties Within a State Into Locality Tiers Based on 
Costs (Statewide Tiers)

    This option creates tiers of counties (within each State) that may 
or may not be contiguous but share similar practice costs. This option 
would increase the number of PFS localities from 89 to 140, using a 5 
percent GAF differential to group similar counties into statewide 
tiers.
    As discussed in Acumen's interim report, all four studied 
alternative locality configurations would increase the number of 
localities and separate higher cost areas from rural ``rest of state'' 
areas. As a result, payments to urban areas would increase, while rural 
areas would see a decrease in payment because they would no longer be 
grouped with higher cost ``urbanized'' areas. A number of public 
commenters on the draft report expressed support for Option 3 (separate 
MSAs from Statewide localities) because the commenters believed this 
alternative would improve payment accuracy over the current locality 
configuration and could mitigate possible payment reductions to rural 
areas as compared to Option 1 (CMS CBSAs). Therefore, Acumen is 
conducting a more in-depth analysis of the dollar impacts that would 
result from the application of Option 3.
    For a detailed discussion of the public comments on the 
contractor's interim locality study report, we refer readers to the CY 
2010 PFS proposed rule (74 FR 33534) and subsequent final rule with 
comment period (74 FR 61757).

E. PFS Update for CY 2010

1. Rebasing and Revising of the Medicare Economic Index (MEI)
a. Background
    The Medicare Economic Index (MEI) is required by section 1842(b)(3) 
of the Act, which states that prevailing charge levels beginning after 
June 30, 1973 may not exceed the level from the previous year except to 
the extent that the Secretary finds, on the basis of appropriate 
economic index data, that such higher level is justified by year-to-
year economic changes. Beginning July 1, 1975, and continuing through 
today, the MEI has met this requirement by reflecting the weighted-
average annual price change for various inputs needed to provide 
physicians' services. The MEI is a fixed-weight input price index, with 
an adjustment for the change in economy-wide, private nonfarm business 
multifactor productivity. This index is comprised of two broad 
categories: (1) Physician's own time; and (2) physician's practice 
expense (PE).
    The current form of the MEI was detailed in the November 25, 1992 
Federal Register (57 FR 55896) and was based in part on the 
recommendations of a Congressionally-mandated meeting of experts held 
in March 1987. Since that time, the structure of the MEI has remained 
essentially unchanged, with three exceptions. First, the MEI was 
rebased in 1998 (63 FR 58845), which moved the cost structure of the 
index from 1992 data to 1996 data. Second, the methodology for the 
productivity adjustment was revised in the CY 2003 PFS final rule (67 
FR 80019) to reflect the percentage change in the 10-year moving 
average of economy-wide private nonfarm business multifactor 
productivity. Third, the MEI was rebased in 2003 (68 FR 63239), which 
moved the cost structure of the index from 1996 data to 2000 data.
    We are proposing to rebase and revise the MEI and incorporate it 
into the CY 2011 PFS update. The terms ``rebasing'' and ``revising'', 
while often used interchangeably, actually denote different activities. 
Rebasing refers to moving the base year for the structure of costs of 
an input price index, while revising relates to other types of changes 
such as changing data sources, cost categories, or price proxies used 
in the input price index. As is always the case with a rebasing and 
revising exercise, we have attempted to use the most recently 
available, relevant, and appropriate information to develop the 
proposed MEI cost category weights and price proxies. In the following 
sections

[[Page 40088]]

of this proposed rule, we detail our proposals regarding the updated 
cost weights for the MEI expense categories, our rationale for 
selecting the price proxies in the MEI, and the results of the proposed 
rebasing and revising of the MEI.
b. Use of More Current Data
    The MEI was last rebased and revised in 2003 in the CY 2004 PFS 
final rule with comment period (68 FR 63239). The current base year for 
the MEI is 2000, which means that the cost weights in the index reflect 
physicians' expenses in 2000. However, we believe it is desirable to 
periodically rebase and revise the index so that the expense shares and 
their associated price proxies reflect more current conditions. For 
this reason, we propose to rebase the MEI to reflect appropriate 
physicians' expenses in 2006.
    We are proposing several changes to the expenses that are eligible 
to be included in the MEI. For instance, we are proposing to remove all 
costs related to drug expenses as drugs are not paid for under the PFS 
nor are they included in the definition of ``physicians' services'' for 
purposes of the Sustainable Growth Rate (SGR) system that is used to 
update the PFS. The details of the decision regarding the removal of 
physician-administered drugs from the SGR system can be found in the CY 
2010 PFS proposed rule and finalized in the CY 2010 final rule with 
comment period (74 FR 33651 and 74 FR 61961, respectively). 
Additionally, we are proposing to remove costs associated with 
separately billable supplies. The rationale for removing the separately 
billable supplies is discussed further below in section III.E.1.X of 
this proposed rule.
    We are proposing to revise the cost categories in the MEI by 
expanding the Office Expense category into nine detailed categories 
with additional price proxies associated with these categories. 
Additionally, we will continue to adjust the MEI for economy-wide 
multifactor productivity based on the 10-year moving average of total 
private nonfarm business multi-factor productivity.
c. Rebasing and Revising Expense Categories in the MEI
    The MEI is used in conjunction with the SGR system to update the 
PFS and represents the price component of that update. The proposed 
expense categories in the index, along with their respective weights, 
are primarily derived from data collected in the 2006 AMA Physician 
Practice Information Survey (PPIS) for self-employed physicians and 
selected self-employed non-Medical Doctor (non-MD) specialties. We 
included data from the following specialties in the MEI cost weight 
calculations (optometrists, oral surgeons, podiatrists, and 
chiropractors) consistent with the definition of the term ``physician'' 
in section 1861(r) of the Act. In summary, the term ``physician'' when 
used in connection with the performance of functions or actions an 
individual is legally authorized to perform means the following: (1) A 
doctor of medicine or osteopathy; (2) a doctor of dental surgery or of 
dental medicine; (3) a doctor of podiatric medicine; (4) a doctor of 
optometry; or (5) a chiropractor. For a complete definition, please see 
section 1861(r) of the Act. We weighted the expense data from the 
above-referenced specialties with the self-employed physician expense 
data using physician counts by specialty.
    The AMA data from the PPIS were used to determine expenditure 
weights for total expenses, physicians' earnings, physicians' benefits, 
employed physician payroll, nonphysician compensation, office expenses, 
professional liability insurance (PLI), medical equipment, medical 
supplies, and all other expenses. To further disaggregate into 
subcategories reflecting more detailed expenses, we used data from the 
2002 Bureau of Economic Analysis (BEA) Benchmark Input-Output table (I/
O), the 2006 Bureau of the Census Current Population Survey (CPS), the 
2006 Bureau of Labor Statistics (BLS) Occupational Employment Survey 
(OES) and Employment Cost for Employee Compensation Survey (ECEC), and 
the 2006 Internal Revenue Service (IRS) Statistics of Income (SOI) 
data. The development of each of the cost categories using these 
sources is described in detail below.
(1) Developing the Weights for Use in the MEI
    Developing a rebased and revised MEI requires selecting a base year 
and determining the appropriate expense categories. We are proposing to 
rebase the MEI to CY 2006. We choose CY 2006 as the base year for two 
primary reasons: (1) CY 2006 is the most recent year for which data 
were available; and (2) we believe that the CY 2006 data provide a 
representative distribution of physicians' compensation and PEs.
    Compared to the 2000-based MEI, we are proposing to include 9 new 
cost categories (along with their respective weights) that disaggregate 
the costs under the broader Office Expenses cost category. The 2000-
based MEI did not break these expenses into individual categories. A 
more detailed discussion is provided below in this section. In 
addition, we are proposing to exclude the Pharmaceutical cost category 
as pharmaceuticals are neither paid for under the PFS nor are they 
included in the definition of ``physicians' services'' for purposes of 
calculating the physician update via the SGR system (for more details 
see the CY 2010 PFS final rule with comment period (74 FR 61961 through 
61962)). Lastly, we are proposing to exclude the expenses associated 
with separately billable supplies since these items are not paid for 
under the PFS.
    We determined the number and composition of expense categories 
based on the criteria used to develop the current MEI and other CMS 
input price index expenditure weights. These criteria are timeliness, 
reliability, relevance, and public availability. Table 24 lists the set 
of mutually exclusive and exhaustive cost categories that make up the 
proposed rebased and revised MEI.

Table 24--Proposed 2006 MEI Cost Categories, Weights, and Price Proxies Compared to the 2000 MEI Cost Categories
                                                   and Weights
----------------------------------------------------------------------------------------------------------------
                                                Proposed 2006-
                 Cost category                      expense      2000 Expense      Proposed 2006 price proxies
                                                  weights 1 2       weights
----------------------------------------------------------------------------------------------------------------
Total.........................................          100.00         100.000  ................................
                                               -----------------------------------------------------------------
Physician's Own Time \3\......................          48.266          52.466  ................................
    Wages and Salaries........................          43.880          42.730  AHE Total Nonfarm Private.\5\

[[Page 40089]]

 
    Benefits 3 4..............................           4.386           9.735  ECI-Benefits Total Nonfarm
                                                                                 Private.\6\
Physician's Practice Expense..................          51.734          47.534  ................................
    Nonphysician Employee Compensation........          19.153          18.654  ................................
    Nonphysician Employee Wages and Salaries..          13.752          13.809  ................................
        Prof/Tech Wages.......................           6.006           5.887  ECI-Wages/Salaries: Private
                                                                                 Professional &Technical.
        Managerial Wages......................           1.446           3.333  ECI-Wages/Salaries: Private
                                                                                 Managerial.
        Clerical Wages........................           4.466           3.892  ECI-Wages/Salaries: Private
                                                                                 Clerical.
        Services Wages........................           1.834           0.696  ECI-Wages/Salaries: Private
                                                                                 Service.
    Nonphysician Employee Benefits \4\........           5.401           4.845  ECI-Ben: Private Blend.
    Office Expenses...........................          20.035          12.209  ................................
    Utilities.................................           1.139  ..............  CPI Fuel & Utilities.\7\
        Chemicals.............................           0.679  ..............  PPI for Other Basic Organic
                                                                                 Chemical Manufacturing
                                                                                 PPI325190.\8\
        Paper.................................           0.616  ..............  PPI for converted paper.
        Rubber & Plastics.....................           0.563  ..............  PPI for rubber and plastics.
        Telephone.............................           1.415  ..............  CPI for Telephone Services.
        Postage...............................           0.661  ..............  CPI for Postage.
        All Other Labor-Related...............           4.718  ..............  ECI Compensation Services
                                                                                 Occupations (ECIPCSONS).
        Fixed Capital.........................           8.410  ..............  CPI for Owner's Equivalent Rent.
        Moveable Capital......................           1.834  ..............  PPI for Machinery and Equipment.
    PLI.......................................           4.295           3.865  CMS-Prof. Liab. Phys. Premiums.
    Medical Equipment.........................           1.978           2.055  PPI-Medical Instruments & Equip.
    Pharmaceuticals and Medical Materials and            1.760           4.320  ................................
     Supplies.
Pharmaceuticals...............................  ..............           2.309  ................................
        Medical Materials and Supplies........           1.760           2.011  PPI Surg. Appliances and
                                                                                 Supplies/CPI(U) Med Supplies.
    Other Professional Expenses...............           4.513           6.433  CPI-U All Items Less Food and
                                                                                 Energy.
----------------------------------------------------------------------------------------------------------------
(1) Due to rounding, weights may not sum to 100.000 percent.
(2) Sources: 2006 Physician Practice Information Survey (PPIS), Center for Health Policy Research, American
  Medical Association; 2006 Employment Cost for Employee Compensation, U.S. Department of Labor, Bureau of Labor
  Statistics; 2006 Occupational Employment Statistics (OES), BLS; U.S. Department of Commerce, Bureau of
  Economic Analysis 2002 Benchmark Input Output Tables, and U.S. Department of Commerce, Bureau of the Census,
  2006 Current Population Survey.
(3) Includes employed physician payroll.
(4) Includes paid leave.
(5) Average Hourly Earnings (AHE).
(6) Employment Cost Index (ECI).
(7) Consumer Price Index (CPI).
(8) Producer Price Index (PPI).

    The development of each of the cost categories in the proposed 2006 
MEI is described, in detail, below.
(2) Physician's Own Time
    The component of the MEI that reflects the physician's own time is 
represented by the net income portion of business receipts. The 
proposed 2006 cost weight associated with the physician's own time 
(otherwise referred to as the Physician's Compensation cost weight) is 
based on 2006 AMA PPIS data for mean physician net income (physician 
compensation) for self-employed physicians and for the selected self-
employed specialties referenced previously in this rule.
    We are proposing to continue to add employed physician compensation 
to self-employed physician compensation in order to calculate an 
aggregate Physician Compensation cost weight. By including the 
compensation of employed physicians in the physician compensation 
expense category, these expenses will be adjusted by the appropriate 
price proxies for a physician's own time. The proposed 2006 Physician 
Compensation cost weight is 48.266 percent as compared to a 52.466 
percent share in the 2000-based MEI. We split the physician 
compensation component into subcategories: Wages & Salaries and 
Benefits. For Physician Compensation, the ratio for Wages & Salaries 
and Benefits was calculated using data from the PPIS. Self-employed 
physician wages & salaries accounted for 92.3 percent of physician 
earnings while physician benefits accounted for the remaining 7.8 
percent. For employed physician payroll, the distribution for wages & 
salaries and benefits for 2006 was 85.8 percent and 14.2 percent, 
respectively. This ratio was determined by calculating a weighted 
average of available SOI data for partnerships, corporations, and S-
corporations specific to physicians and outpatient care centers. Based 
on these proposed methods, the proposed 2006 Physician Wages & Salaries 
cost weight is 43.880 percent and the proposed 2006

[[Page 40090]]

Physician Benefits cost weight is 4.386 percent.
(3) Physician's Practice Expenses
    To determine the remaining individual Practice Expenses cost 
weights, we use mean expense data from the 2006 PPIS survey. The 
detailed explanations for the derivation of the individual weights 
under Practice Expenses are listed below.
(A) Nonphysician Employee Compensation
    The cost weight for Nonphysician Employee Compensation was 
developed using the 2006 AMA PPIS mean expenses for these costs. We 
further divided this cost share into Wages & Salaries and Benefits 
using 2006 BLS Employer Costs for Employee Compensation (ECEC) data for 
the Health Care and Social Assistance (private industry). Although this 
survey does not contain data specifically for offices of physicians, 
data are available to help determine the shares associated with wages & 
salaries and benefits for private industry health care and social 
assistance services (which include hospitals, nursing homes, offices of 
physicians, and offices of dentists). We believe these data provide a 
reasonable estimate of the split between wages and benefits for 
employees in physicians' offices. Data for 2006 in the ECEC for Health 
Care and Social Assistance indicate that wages and benefits are 71.8 
percent and 28.2 percent of compensation, respectively. The 2000-based 
MEI included a wage and benefit split of 74.0 percent and 26.0 percent 
of compensation.
    As in the 2000-based MEI, we are proposing to use 2006 Current 
Population Survey (CPS) data and 2006 BLS Occupational Employment 
Statistics (OES) data to develop cost weights for wages for 
nonphysician occupational groups. We determined total annual earnings 
for offices of physicians using employment data from the CPS and mean 
annual earnings from the OES. To arrive at a distribution for these 
separate categories, we determined annual earnings for each of the four 
categories (which are Professional & Technical workers, Managers, 
Clerical workers, and Service workers), using the Standard Occupational 
Classification (SOC) system. We then determined the overall share of 
the total for each. The proposed distribution, as well as the 
distribution from the 2000-based MEI are presented in Table 25.

    Table 25--Percent Distribution of Nonphysician Payroll Expense by
                    Occupational Group: 2006 and 2000
------------------------------------------------------------------------
                                                              2000
       BLS Occupational Group         2006 Expenditure     Expenditure
                                           shares            shares
------------------------------------------------------------------------
Total...............................           100.000           100.000
                                     -----------------------------------
    Professional & Technical Workers            43.671            42.635
    Managers........................            10.517            24.138
    Clerical Workers................            32.477            28.187
    Service Workers.................            13.336             5.040
------------------------------------------------------------------------
Values may not sum to 100 due to rounding.

    The decrease in the Management expenditure share is directly 
related to a decrease in the total number of employees in Management 
occupations in physicians' offices, in particular, ``Medical and health 
service managers.'' The decrease in expenditure share may also be due, 
in part to the methods used in this rebasing. That is, for the 2006-
based MEI, we are using data limited to ``Offices of physicians.'' In 
the 2000-based version of the index, the only data that were available 
to inform these estimates were inclusive of physician offices and 
clinics (``Offices of physicians and clinics''). An examination of 2006 
CPS and OES data comparing ``Outpatient care centers'' to ``Offices of 
physicians'' indicates that there is a higher share of management 
occupations in the ``Outpatient care centers'' than in ``Offices of 
physicians.''
    The increase in the Service Workers expenditures share is 
attributable to a substantive increase in the number of employees in 
service occupations, particularly, ``Medical assistants and other 
health care support occupations''.
(B) Office Expenses
    The aggregate Office Expenses cost weight was derived using the 
2006 AMA PPIS and is explained in more detail below in this section. 
This calculation resulted in a 20.035 percent share of total costs in 
2006 compared to a 12.209 percent share in the 2000-based index.
    For the 2006-based MEI, we propose to further disaggregate the 
Office Expenses into more detailed cost categories using the BEA 2002-
Benchmark I/O data for Offices of physicians, dentists, and other 
health practitioners (NAICS 621A00). We used this data to develop the 
nine detailed 2002 costs weights as a percent of total office expenses, 
as measured by the BEA I/O data. The total Office Expenses cost 
category was calculated by matching the BEA I/O data as closely as 
possible to the AMA survey data, the latter of which defined office 
expenses as ``office (non-medical) equipment and office (non-medical) 
supplies, as well as rent, mortgage, interest, maintenance, 
refrigeration, storage, security, janitorial, depreciation on medical 
buildings used in your practice, utilities, or other office computer 
systems (including information management systems/electronic medical 
record systems) and telephone.''
    We then aged the 2002 weights forward to 2006 to derive the 2006 
detailed office expense cost weights as a percent of total Office 
Expenses. The methodology we used to age the data forward involved 
applying the annual price changes from each respective price proxy to 
the appropriate cost categories. We repeated this practice for each 
year of the interval. We then applied the resulting 2006 distributions 
to the aggregate 2006 AMA Office Expenses weight to yield the detailed 
2006 Office Expenses' weights as a percent of total expenses.
    We are proposing to introduce these new, more detailed weights for 
the 2006-based index based on our intent to derive an increased level 
of precision while maintaining appropriate levels of aggregation in the 
market basket. The proposed proxies are described in section X. of this 
proposed rule. The following is a description of what is included in 
each of the detailed cost categories.
     Utilities: The Utilities cost weight includes expenses 
classified in the fuel,

[[Page 40091]]

oil and gas, water and sewage, and electricity industries. The proposed 
cost weight for utilities is 1.139 percent.
     Paper: The Paper cost weight includes expenses classified 
in the paper (including but not limited to paper, paperboard, and 
sanitary paper products) and printing industries. The proposed cost 
weight for paper is 0.616 percent.
     Chemicals: The Chemicals cost weight includes expenses 
classified in the basic organic and inorganic chemical manufacturing 
industry (accounting for about 45 percent of the chemical expenses), as 
well as other chemical industries including but not limited to 
industrial gas manufacturing and all other chemical product 
manufacturing. The proposed cost weight for chemicals is 0.679 percent.
     Rubber and Plastics: The Rubber and Plastics cost weight 
includes expenses classified in the rubber and plastic industries, 
including but not limited to, urethane and other foam product 
manufacturing and other plastic and rubber manufacturing industries. 
The proposed cost weight for Rubber and Plastics is 0.563 percent.
     Telephone: The telephone cost weight includes expenses 
classified in the telecommunications (accounting for the majority of 
the telephone expenses) and cable industries. The proposed cost weight 
for Telephone services is 1.415 percent.
     Postage: The Postage cost weight includes postal service 
expenses. The proposed cost weight for Postage is 0.661 percent.
     All Other Services: The All Other Services cost weight 
includes other service expenses including, but not limited to, 
nonresidential maintenance and repair, machinery repair, janitorial, 
and security services. This cost weight does not include expenses 
associated with professional services such as accounting, billing, 
legal and marketing which are included in the All Other Expenses cost 
weight derived using the AMA PPIS survey. The proposed cost weight for 
All Other Services is 4.718 percent.
     Fixed Capital: The Fixed Capital cost weight includes 
expenses for building leases and depreciation. The proposed cost weight 
for Fixed Capital is 8.410 percent.
     Moveable Capital: The Moveable Capital cost weight 
includes expenses for non-medical equipment including but not limited 
to, computer equipment and software, as well as the rental and leasing 
of automotive and industrial machinery equipment. The proposed cost 
weight for Moveable Capital is 1.834 percent.
(C) Professional Liability Insurance (PLI) Expense
    The weight for PLI expense was derived from the 2006 AMA survey and 
was calculated as the mean PLI expense expressed as a percentage of 
total expenses. This calculation resulted in a 4.513 percent share of 
total costs in 2006 compared to a 3.865 percent share in the 2000-based 
index. The increase in the weight for PLI reflects the current prices 
of premiums, as well as an update to the level of coverage purchased by 
physicians in 2006 compared to 2000.
(D) Medical Equipment Expenses
    The proposed weight for Medical Equipment was calculated using the 
2006 AMA PPIS mean expense data. This calculation resulted in a 1.978 
percent share of total costs in 2006 compared to a 2.055 percent share 
in the 2000-based index. By definition, this category includes the 
expenses related to depreciation, maintenance contracts, leases/rental 
of medical equipment used in diagnosis or treatment of patients. The 
category would also include the tax-deductible portion of the purchase 
price or replacement value of medical equipment, if not leased.
(E) Medical Supplies Expenses
    The proposed weight for Medical Supplies was calculated using the 
2006 AMA PPIS mean expense data. This calculation resulted in a 1.760 
percent share of total costs in 2006 compared to a 2.011 percent share 
in the 2000-based index. By definition, this category includes the 
expenses related to medical supplies such as sterile gloves, needles, 
bandages, specimen containers, and catheters. Additionally, we are 
proposing to exclude the expenses related to separately billable 
supplies as these expenses are not paid for under the PFS. The Medical 
Supply cost category does not include expenses related to drugs.
(F) All Other Professional Expenses
    The proposed weight for All Other Professional expenses was 
calculated using the 2006 AMA PPIS mean expense data. This calculation 
resulted in a 4.513 percent share of total costs in 2006 compared to a 
6.433 percent share in the 2000-based index. By definition, this 
category includes the expenses related to tax-deductible expenses for 
any other expenses not reported in another category from the PPIS. 
These expenses would include fees related to legal, marketing, 
accounting, billing, office management services, professional 
association memberships, maintenance of certification or licensure, 
journals and continuing education, professional car upkeep and 
depreciation, and any other professional expenses not reported 
elsewhere on the PPIS.
d. Selection of Price Proxies for Use in the MEI
    After the proposed 2006 cost weights for the rebased and revised 
MEI were developed, we reviewed all of the price proxies to evaluate 
their appropriateness. As was the case in the development of the 2000-
based MEI (68 FR 63239), most of the proxy measures we considered are 
based on BLS data and are grouped into one of the following five 
categories:
     Producer Price Indices (PPIs): PPIs measure price changes 
for goods sold in markets other than retail markets. These fixed-weight 
indexes are a measure of price change at the intermediate or final 
stage of production. They are the preferred proxies for physician 
purchases as these prices appropriately reflect the product's first 
commercial transaction.
     Consumer Price Indices (CPIs): CPIs measure change in the 
prices of final goods and services bought by consumers. Like the PPIs, 
they are fixed-weight indexes. Since they may not represent the price 
changes faced by producers, CPIs are used if there are no appropriate 
PPIs or if the particular expenditure category is likely to contain 
purchases made at the final point of sale.
     Average Hourly Earnings (AHEs): AHEs are available for 
production and nonsupervisory workers for specific industries, as well 
as for the nonfarm business economy. They are calculated by dividing 
gross payrolls for wages & salaries by total hours. The series reflects 
shifts in employment mix and, thus, is representative of actual changes 
in hourly earnings for industries or for the nonfarm business economy.
     ECIs for Wages & Salaries: These ECIs measure the rate of 
change in employee wage rates per hour worked. These fixed-weight 
indexes are not affected by employment shifts among industries or 
occupations and thus, measure only the pure rate of change in wages.
     ECIs for Employee Benefits: These ECIs measure the rate of 
change in employer costs of employee benefits, such as the employer's 
share of Social Security taxes, pension and other retirement plans, 
insurance benefits (life, health, disability, and accident), and paid 
leave. Like ECIs for wages & salaries, the ECIs for employee benefits 
are not affected by employment shifts among industries or occupations.

[[Page 40092]]

    When choosing wage and price proxies for each expense category, we 
evaluate the strengths and weaknesses of each proxy variable using the 
following four criteria.
     Relevance: The price proxy should appropriately represent 
price changes for specific goods or services within the expense 
category. Relevance may encompass judgments about relative efficiency 
of the market generating the price and wage increases.
     Reliability: If the potential proxy demonstrates a high 
sampling variability, or inexplicable erratic patterns over time, its 
viability as an appropriate price proxy is greatly diminished. Notably, 
low sampling variability can conflict with relevance--since the more 
specifically a price variable is defined (in terms of service, 
commodity, or geographic area), the higher the possibility of high 
sampling variability. A well-established time series is also preferred.
     Timeliness of actual published data: For greater 
granularity and the need to be as timely as possible, we prefer monthly 
and quarterly data to annual data.
     Public availability: For transparency, we prefer to use 
data sources that are publicly available.
    The BLS price proxy categories previously described meet the 
criteria of relevance, reliability, timeliness, and public 
availability. Below we discuss the proposed price-wage proxies for the 
rebased and revised MEI (as shown in Table 23).
(1) Expense Categories in the MEI
(A) Physician's Own Time (Physician Compensation)
    In the proposed revised and rebased MEI, we are using the AHE for 
the private nonfarm economy as the proxy for the Physician Wages & 
Salaries component (BLS series code: CEU0500000008).
    As discussed extensively in the November 2, 1998 final rule (63 FR 
58848), and again in the December 31, 2002 final rule (67 FR 80019), we 
believe that this price proxy represents the most appropriate proxy for 
use in the MEI. The AHE for the nonfarm business economy reflects the 
impacts of supply, demand, and economy-wide productivity for the 
average worker in the economy. As such, use of this proxy is consistent 
with the original legislative intent that the change in the physicians' 
earnings portion of the MEI follow the change in general earnings for 
the economy. Since earnings are expressed per hour, a constant quantity 
of labor input per unit of time is reflected. Finally, the use of the 
AHE data is also consistent with our using the BLS economy-wide private 
nonfarm business sector multifactor productivity measures since 
economy-wide wage increases reflect economy-wide productivity 
increases.
    The current 2000-based MEI uses the ECI for Total Benefits (BLS 
series code: CIU2030000000000I) for total private industry as the price 
proxy for Physician Benefits. We are proposing to use the same proxy 
for the 2006-based MEI. This means that both the wage and benefit 
proxies for physician earnings are derived from the private nonfarm 
business sector and are computed on a per-hour basis.
(B) Nonphysician Employee Compensation
    For the 2006-based MEI, we are proposing to use Current Population 
Survey (CPS) data on employment by occupation and earnings from the BLS 
Occupational Employment Statistics for NAICS 6211, Office of 
Physicians, to develop labor cost shares for the nonphysician 
occupational groups shown in Table 23. The 2000-based MEI was based on 
CPS data for the Standard Industrial Classification 801 and 803, which 
included both office of physicians and outpatient care centers. 
Beginning in 2003, BLS began publishing CPS data on a NAICS basis which 
provided data for office of physicians (NAICS 6211)and outpatient care 
centers (NAICS 6214) separately. We believe using data for office of 
physicians is appropriate for the 2006-based MEI. The BLS maintains an 
ECI for each selected industry group. We propose to use these ECIs as 
price proxies for nonphysician employee wages in the same manner they 
are used in the current MEI.
    As described in the CY 2008 PFS proposed rule (72 FR 38190), as a 
result of the discontinuation of the White Collar Benefit ECI for 
private workers, we are currently using a composite ECI benefit index. 
We are proposing to continue to use the composite ECI for nonphysician 
employees in the proposed rebased and revised MEI; however, we are 
proposing to revise the weights within that blend in order to reflect 
the more recent 2006 data. Table 26 lists the four ECI series and 
corresponding weights used to construct the 2006 composite benefit 
index.

 Table 26--CMS Composite Price Index for Nonphysician Employee Benefits
------------------------------------------------------------------------
                                                                  2006
                          ECI series                             Weight
                                                                  (%)
------------------------------------------------------------------------
Benefits, Private, Professional & Related....................         44
Benefits, Private, Management, Business, Financial...........         11
Benefits, Private, Office & Administrative Support...........         32
Benefits, Private, Service Occupations.......................         13
------------------------------------------------------------------------

(C) Utilities
    For the 2006-based MEI, we are proposing to use the CPI for Fuel 
and Utilities (BLS series code CUUR0000SAH2) to measure the 
price growth of this cost category. This cost category was not broken-
out separately in the 2000-based MEI.
(D) Chemicals
    For the 2006-based MEI, we are proposing to use the PPI for Other 
Basic Organic Chemical Manufacturing (BLS series code 
PCU32519-32519) to measure the price changes of this cost 
category. We are proposing this industry-based PPI because BEA's 2002 
benchmark I/O data show that the majority of the office of physicians' 
chemical expenses are attributable to Other Basic Organic Chemical 
Manufacturing (NAICS 32519). This cost category was not broken-out 
separately in the 2000-based MEI.
(E) Paper
    For the 2006-based MEI, we are proposing to use the PPI for 
Converted Paper and Paperboard (BLS series code WPU0915) to 
measure the price growth of this cost category. This cost category was 
not broken-out separately in the 2000-based MEI.
(F) Rubber and Plastics
    For the 2006-based MEI, we are proposing to use the PPI for Rubber 
and Plastic Products (BLS series code WPU07) to measure the 
price growth of this cost category. This cost category was not broken-
out separately in the 2000-based MEI.
(G) Telephone
    For the 2006-based MEI, we are proposing to use the CPI for 
Telephone Services (BLS series code CUUR0000SEED) to measure 
the price growth of this cost category. This cost category was not 
broken-out separately in the 2000-based MEI.

[[Page 40093]]

(H) Postage
    For the 2006-based MEI, we are proposing to use CPI for Postage 
(BLS series code CUUR0000SEEC01) to measure the price growth 
of this cost category. This cost category was not broken-out separately 
in the 2000-based MEI.
(I) All Other Services
    For the 2006-based MEI, we are proposing to use the ECI for 
Compensation for Service Occupations (private industry) (BLS series 
code CIU2010000300000I) to measure the price growth of this 
cost category. This cost category was not broken-out separately in the 
2000-based MEI.
(J) Fixed Capital
    For the 2006-based MEI, we are proposing to use the CPI for Owner's 
Equivalent Rent (BLS series code CUUS0000SEHC) to measure the 
price growth of this cost category. This price index represents about 
50 percent of the CPI for Housing which was used to in the 2000-based 
MEI to proxy total office expenses.
(K) Moveable Capital
    For the 2006-based MEI, we are proposing to use the PPI for 
Machinery and Equipment (series code WPU11) to measure the 
price growth of this cost category. This cost category was not broken-
out separately in the 2000-based MEI.
(L) Professional Liability Insurance
    In order to accurately reflect the price changes associated with 
PLI, each year, we solicit PLI premium data for physicians from a 
sample of commercial carriers. This information is not collected 
through a survey form, but instead is requested directly from, and 
provided by (on a voluntary basis), several national commercial 
carriers. As we require for our other price proxies, the professional 
liability price proxy is intended to reflect the pure price change 
associated with this particular cost category. Thus, it does not 
include changes in the mix or level of liability coverage. To 
accomplish this result, we obtain premium information from a sample of 
commercial carriers for a fixed level of coverage, currently $1 million 
per occurrence and a $3 million annual limit. This information is 
collected for every State by physician specialty and risk class. 
Finally, the State-level, physician-specialty data are aggregated by 
effective premium date to compute a national total, using counts of 
physicians by State and specialty as provided in the AMA publication, 
Physician Characteristics and Distribution in the U.S.
    The resulting data provide a quarterly time series, indexed to a 
base year consistent with the MEI, and reflect the national trend in 
the average professional liability premium for a given level of 
coverage, generally $1 million/$3 million of claims-made mature 
policies. From this series, quarterly and annual percent changes in PLI 
are estimated for inclusion in the MEI.
    The most comprehensive data on professional liability costs are 
held by the State insurance commissioners, but these data are available 
only with a substantial time lag and hence, the data currently 
incorporated into the MEI are much timelier. We believe that, given the 
limited data available on professional liability premiums, the 
information and methodology described above adequately reflect the PLI 
price trends facing physicians.
(M) Medical Equipment
    The Medical Equipment cost category includes depreciation, leases, 
and rent on medical equipment. We are proposing to use the PPI for 
Medical Instruments and Equipment (BLS series code: WPU1562) as the 
price proxy for this category, consistent with the price proxy used in 
the 2000-based MEI and other CMS input price indexes.
(N) Medical Materials and Supplies
    As is used in the 2000-based MEI, we are proposing to use a blended 
index comprised of 50/50 blend of the PPI Surgical Appliances (BLS 
series code: WPU156301) and the CPI-U for Medical Equipment and 
Supplies (BLS series code: CUUR0000SEMG). We believe physicians 
purchase the types of supplies contained within these proxies, 
including such items as bandages, dressings, catheters, I.V. equipment, 
syringes, and other general disposable medical supplies, via wholesale 
purchase, as well as at the retail level. Consequently, we are 
proposing to combine the two aforementioned indexes to reflect those 
modes of purchase.
(O) Other Professional Expenses
    This category includes the residual subcategory of other 
professional expenses such as accounting services, legal services, 
office management services, continuing education, professional 
association memberships, journals, professional car expenses, and other 
professional expenses. Given this heterogeneous mix of goods and 
services, we are proposing to use the CPI-U for All Items Less Food and 
Energy, consistent with the price proxy used in the 1996 and 2000-based 
MEI.
(2) Productivity Adjustment to the MEI
    The MEI has been adjusted for changes in productivity since its 
inception. In the CY 2003 PFS final rule (67 FR 80019), we implemented 
a change in the way the MEI was adjusted to account for those changes 
in productivity The MEI used for the 2003 physician payment update 
incorporated changes in the 10-year moving average of private nonfarm 
business (economy-wide) multifactor productivity that were applied to 
the entire index. Previously, the index incorporated changes in 
productivity by adjusting the labor portions of the index by the 10-
year moving average of economy-wide private nonfarm business labor 
productivity.
    We are proposing to continue to use the current method for 
adjusting the full MEI for multifactor productivity in the rebased and 
revised MEI.
    As described in the CY 2003 PFS final rule, we believe this 
adjustment is appropriate because it explicitly reflects the 
productivity gains associated with all inputs (both labor and non-
labor). We believe that using the 10-year moving average percent change 
in economy-wide multifactor productivity is appropriate for deriving a 
stable measure that helps alleviate the influence that the peak (or a 
trough) of a business cycle may have on the measure. The adjustment 
will be based on the latest available historical economy-wide nonfarm 
business multifactor productivity data as measured and published by 
BLS.
e. Results of Rebasing
    Table 27 illustrates the results of updating the MEI from the 
following changes to the weights for the Physician Compensation, 
Practice Expenses (excluding PLI), and PLI.

  Table 27--Percent Distribution of Selected Physician Expenses Used To
                    Calibrate RVUs: CYs 2006 and 2000
------------------------------------------------------------------------
                                                     CY 2006    CY 2000
                                                      weight     weight
                                                       (%)        (%)
------------------------------------------------------------------------
Physician Compensation (Own Time).................     48.266     52.466
Practice Expenses (less PLI)......................     47.439     43.669
PLI...............................................      4.295      3.865
------------------------------------------------------------------------

    The rebased and revised MEI has several differences as compared to 
the 2000-based MEI; these changes have been discussed in detail in 
prior

[[Page 40094]]

sections of this rule. Table 28 shows the average calendar year percent 
change from CY 2004 to CY 2011 for both the 2000- and 2006-based MEIs. 
The 2006-based MEI annual percent changes differ from the 2000-based 
MEI annual percent changes by 0.0 to 0.8 percentage point. In the 5 
most recent years (CYs 2007-2011), the annual percent change in the 
rebased and revised MEI was within 0.3 percentage point of the percent 
change in the 2000-based MEI. In the earlier years, there were bigger 
differences between the annual percent change in the rebased and 
revised MEI and the 2000-based MEI. The majority of these differences 
can be attributed to the lower benefit cost weight, as measured by the 
2006 AMA data, and the exclusion of the drug cost weight. The remaining 
differences are attributable to the higher cost weight for PLI, as 
measured by the 2006 AMA data.

 Table 28--Annual Percent Change in the Current and Proposed Revised and
                               Rebased MEI
------------------------------------------------------------------------
                                          Proposed 2006-   Current 2000-
              Update year A                  based MEI       based MEI
------------------------------------------------------------------------
CY 2004.................................             2.4             2.7
CY 2005.................................             2.1             2.9
CY 2006.................................             2.0             2.5
CY 2007.................................             1.7             2.0
CY 2008.................................             1.9             1.8
CY 2009.................................             1.7             1.7
CY 2010.................................             1.4             1.2
CY 2011 B...............................             0.3             0.3
Avg. Change for CYs 2004-2011...........             1.7             1.9
------------------------------------------------------------------------
A Update year based on historical data through the second quarter of the
  prior calendar year. For example, the 2010 update is based on
  historical data through the second quarter 2009.
B Based on the 1st quarter 2010 forecast by HIS Global Insight. With
  historical data through the 4th quarter 2009.

    As shown in Table 29, the projection of the proposed rebased and 
revised MEI for the CY 2011 PFS proposed rule is an increase of 0.3 
percent, identical to the projected increase using the 2000-based MEI. 
In the CY 2011 PFS final rule, we will incorporate historical data 
through the second quarter of 2010; therefore, the current estimated 
increase of 0.3 percent for 2011 may differ in the final rule.

 Table 29--Forecasted Annual Percent Change in the Current and Proposed
                   Revised and Rebased MEI for CY 2011
------------------------------------------------------------------------
                                          Proposed 2006-
                                             based MEI    2000-based MEI
------------------------------------------------------------------------
CY 2011.................................             0.3             0.3
------------------------------------------------------------------------


 Table 30--Forecasted Annual Percent Change in the Proposed Revised and
                 Rebased MEI CY 2011, All Categories \1\
------------------------------------------------------------------------
                                                           Projected  CY
             Cost categories                2006 Weight    2011  percent
                                             \2\  (%)         changes
------------------------------------------------------------------------
MEI Total, productivity adjusted........         100.000             0.3
Productivity: 10[dash]year moving                    N/A             1.3
 average of MFP.........................
MEI Total, without productivity                  100.000             1.6
 adjustment.............................
    Physician Compensation (Own Time)             48.266             2.4
     \3\................................
        Wages and Salaries..............          43.880             2.5
        Benefits........................           4.386             1.5
    Practice Expenses...................          51.734             0.9
        Nonphysician Compensation.......          19.153             1.5
            Nonphysician Wages..........          13.752             1.5
                P&T.....................           6.006             1.2
                Management..............           1.446             1.0
                Clerical................           4.466             1.8
                Services................           1.834             2.0
            Nonphysician Benefits.......           5.401             1.4
        Other Practice Expenses.........          26.308             0.4
            Office Expenses.............          20.035             0.8
                Utilities...............           1.139            -3.0
                Chemicals...............           0.679            -1.1
                Paper...................           0.616            -1.0
                Rubber & Plastics.......           0.563            -0.7
                Telephone...............           1.415             1.1
                Postage.................           0.661             5.5
                All Other Services......           4.718             2.0

[[Page 40095]]

 
                Fixed Capital...........           8.410             0.9
                Moveable Capital........           1.834            -0.1
            PLI \4\.....................           4.295            -2.2
            Medical Equipment...........           1.978             0.8
            Medical supplies............           1.760             0.5
        All Other Expenses..............           4.513             1.4
------------------------------------------------------------------------
\1\ The forecasts are based upon the latest available Bureau of Labor
  Statistics data as of December 2009.
\2\ The weights shown for the MEI components are the 2006 base-year
  weights, which may not sum to subtotals or totals because of rounding.
  The MEI is a fixed-weight, Laspeyres-type input price index whose
  category weights indicate the distribution of expenditures among the
  inputs to physicians' services for CY 2006. To determine the MEI level
  for a given year, the price proxy level for each component is
  multiplied by its 2006 weight. The sum of these products (weights
  multiplied by the price index levels) overall cost categories yields
  the composite MEI level for a given year. The annual percent change in
  the MEI levels is an estimate of price change over time for a fixed
  market basket of inputs to physicians' services.
\3\ The measures of productivity, average hourly earnings, Employment
  Cost Indexes, as well as the various Producer and Consumer Price
  Indexes can be found on the Bureau of Labor Statistics Web site at
  http://stats.bls.gov.
\4\ Derived from a CMS survey of several major commercial insurers N/A
  Productivity is factored into the MEI categories as an adjustment to
  the price variables; therefore, no explicit weight exists for
  productivity in the MEI.

    In addition to the proposed revisions to the MEI mentioned earlier 
in this section, we are also proposing to convene a technical advisory 
panel later this year to review all aspects of the MEI, including the 
inputs, input weights, price-measurement proxies, and productivity 
adjustment. We will ask the panel to assess the relevance and accuracy 
of these inputs to current physician practices. The panel's analysis 
and recommendations will be considered in future rule making to ensure 
that the MEI accurately and appropriately meets its intended statutory 
purpose. We are requesting comments from the physician community and 
other interested members of the public on any other specific issues 
that should be considered by the technical panel.
f. Adjustments to the RVU Shares To Match the Proposed Rebased MEI 
Weights
    As described in the previous section, we are proposing to rebase 
the MEI for CY 2011 based on the most current data and establish new 
weights for physician work, PE, and malpractice under the MEI. As 
stated in the previous section, the MEI was rebased to a CY 1996 base 
year beginning with the CY 1999 MEI (63 FR 58845), and to a CY 2000 
base year beginning with the CY 2004 MEI (68 FR 63239). For both the CY 
1999 and CY 2004 rebasing, we made adjustments to ensure that our 
estimates of aggregate PFS payments for work, PE, and malpractice were 
in proportion to the weights for these categories in the rebased MEI 
(63 FR 58829 and 69 FR 1095).
    Consistent with our past practice when the MEI has been rebased, we 
are proposing to make adjustments to ensure that estimates of aggregate 
CY 2011 PFS payments for work, PE, and malpractice are in proportion to 
the weights for these categories in the rebased CY 2011 MEI.
    Our proposal would necessitate increasing the proportion of 
aggregate CY 2011 PFS payments for PE and malpractice and decreasing 
the proportion for work. This could be accomplished by applying 
adjustments directly to the work, PE, and malpractice RVUs. However, we 
are cognizant of the public comments made during prior rulemaking on 
issues related to scaling the work RVUs. Many commenters have indicated 
a preference for the work RVUs to remain stable over time and for any 
necessary adjustments that would otherwise be made broadly to the work 
RVUs to be accomplished in an alternative manner. For example, in past 
5-Year Reviews of the work RVUs, many commenters have cited stability 
in the work RVUs, among other reasons, in their requests that any 
required budget neutrality adjustments not be made directly to the work 
RVUs. Given these prior comments, we are proposing to make the 
necessary MEI rebasing adjustments without adjusting the work RVUs. 
Instead, we are proposing to increase the PE RVUs by an adjustment 
factor of 1.168 and the malpractice RVUs by an adjustment factor of 
1.413. The RVUs in Addendum B to this proposed rule reflect the 
application of these adjustment factors. We note that an application of 
the 1.413 adjustment factor to the malpractice RVUs for services with 
malpractice RVUs of 0.01 will, due to rounding, result in malpractice 
RVUs of 0.01.
    Section 1848(c)(2)(B)(ii)(II) of the Act requires that changes to 
RVUs cannot cause the amount of expenditures for a year to differ by 
more than $20 million from what expenditures would have been in the 
absence of the changes. Therefore, as required by section 
1848(c)(2)(B)(ii) of the Act, we are proposing to make an adjustment of 
0.921 to the CY 2011 conversion factor to ensure that the 1.168 
adjustment to the PE RVUs and the 1.413 adjustment to the malpractice 
RVUs do not cause an increase in CY 2011 PFS expenditures. The current 
law estimate of the CY 2011 CF is $26.6574.

III. Code-Specific Issues for the PFS

A. Therapy Services

1. Outpatient Therapy Caps for CY 2011
    Section 1833(g) of the Act applies an annual, per beneficiary 
combined cap on expenses incurred for outpatient physical therapy and 
speech-language pathology services under Medicare Part B. A similar 
separate cap for outpatient occupational therapy services under 
Medicare Part B also applies. The caps do not apply to expenses 
incurred for therapy services furnished in an outpatient hospital 
setting. The caps were in effect during 1999, from September 1, 2003 
through December 7, 2003, and beginning January 1, 2006. The caps are a 
permanent provision, that is, there is no end date specified in the 
statute for therapy caps. Beginning January 1, 2006, the Deficit 
Reduction Act (Pub. L. 109-171) (DRA) provided for exceptions to the 
therapy caps until December 31, 2006. The exceptions

[[Page 40096]]

process for therapy caps has been extended through December 31, 2009 
pursuant to three subsequent amendments (in MEIA-TRHCA, MMSEA, and 
MIPPA).
    Section 1833(g)(5) of the Act (as amended by section 3103 of the 
ACA) extended the exceptions process for therapy caps through December 
31, 2010. We will announce the amount of the therapy cap for CY 2011 in 
the CY 2011 PFS final rule with comment period. The annual change in 
the therapy cap is computed by multiplying the cap amount for CY 2010, 
which is $1,860, by the MEI for CY 2011, and rounding to the nearest 
$10. This amount is added to the CY 2010 cap to obtain the CY 2011 cap. 
The agency's authority to provide for exceptions to therapy caps 
(independent of the outpatient hospital exception) will expire on 
December 31, 2010, unless the Congress acts to extend it. If the 
current exceptions process expires, the caps will be applicable in 
accordance with the statute, except for services furnished and billed 
by outpatient hospitals.
2. Alternatives to Therapy Caps
a. Background
    In section 4541 of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
(BBA), the Congress enacted the financial limitations on outpatient 
therapy services (the ``therapy caps'' discussed above for physical 
therapy, occupational therapy, and speech-language pathology). At the 
same time, the Congress requested that the Secretary submit a Report to 
Congress that included recommendations on the establishment of a 
revised coverage policy for outpatient physical therapy services and 
outpatient occupational therapy services under the statute. The 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) placed 
the first of a series of moratoria on implementation of the limits. In 
addition, it required focused medical review of claims and revised the 
report requirements in section 4541(d)(2) of the BBA to request a 
report that included recommendations on the following: (A) The 
establishment of a mechanism for assuring appropriate utilization of 
outpatient physical therapy services, outpatient occupational therapy 
services, and speech-language pathology services; and (B) the 
establishment of an alternative payment policy for such services based 
on classification of individuals by diagnostic category, functional 
status, prior use of services (in both inpatient and outpatient 
settings), and such other criteria as the Secretary determines 
appropriate, in place of the limits.
    In 1999, therapy services were not defined, but services documented 
as therapy were billed and reported when furnished by a variety of 
individuals in many different settings. These services were not 
identified in a way that would allow analysis of utilization or 
development of alternative payment policies.
    We have studied therapy services with the assistance of a number of 
contractors over the past 11 years. Reports of these projects are 
available on the CMS Web site at http://www.cms.gov/TherapyServices/. 
On November 9, 2004, we delivered the Report to Congress, Number 
137953, ``Medicare Financial Limitations on Outpatient Therapy 
Services'' that referenced two utilization analyses. We periodically 
updated the utilization analyses and posted other contracted reports in 
order to further respond to the requirements of the BBRA. Subsequent 
reports highlighted the expected effects of limiting services in 
various ways and presented plans to collect data about patient 
condition using available tools. The general belief was that if patient 
condition could be reliably determined, an objective payment policy 
could be developed that would ensure appropriate payment for 
appropriately utilized services.
    Over the past decade, significant progress has been made in 
identifying the outpatient therapy services that are billed to 
Medicare, the demographics of the beneficiaries who utilize those 
services, the types of services, the HCPCS codes used to bill the 
services, the allowed and paid amounts of the services, and the 
settings, geographic locations, and provider types where services are 
furnished.
    Some of the information that is necessary to ensure appropriate 
utilization and develop objective and equitable payment alternatives to 
therapy caps based on patient condition has proven difficult to 
develop. The influence of prior use of inpatient services on outpatient 
use of therapy services was not accessible due to systems issues and 
differences in the policies, billing, and reporting practices for 
inpatient and outpatient therapy services. The weakness of the ICD-9-CM 
diagnostic codes in describing the condition of the rehabilitation 
patient obscured analyses of claims to assess the need for therapy 
services. The primary diagnosis on the claim is a poor predictor for 
the type and duration of therapy services required, which complicates 
assignment of patient cohorts for analysis. Although changes to the 
guidance in the Medicare Benefit Policy Manual (Pub. 100-02) on 
documentation of therapy services in 2005 improved the consistency of 
records and facilitated chart review, it became increasingly obvious 
that neither claims analysis nor chart review could serve as a reliable 
and valid method to determine a patient's need for services or to form 
the basis for equitable payment. We concluded that in order to develop 
alternative payment approaches to the therapy caps, we needed a method 
to identify patients with similar risk-adjusted conditions (cohorts) 
and then we would identify the therapy services that are necessary for 
the patients to attain the best outcomes with the most efficient use of 
resources.
    While we studied therapy utilization, a number of proprietary tools 
were developed by researchers in the professional community to assess 
the outcomes of therapy. Some tool sponsors collected sufficient 
information to predict with good reliability the amount or length of 
treatment that would result in the best expected outcomes. We 
encouraged the use of these proprietary tools in manual instructions, 
but proprietary tools do not serve CMS' purposes because modification 
of proprietary tools may only be done by the tool sponsor. There now 
are some versions of the tools in the public domain and they are being 
utilized widely to identify patient conditions and, by some insurers, 
to pay for efficient and effective treatment. Examples of such tools 
including the National Outcomes Measurement System (NOMS) by the 
American Speech-Language Hearing Association and Patient Inquiry by 
Focus On Therapeutic Outcomes, Inc. (FOTO).
    In 2006, Focus on Therapeutic Outcomes, Inc. delivered to CMS a 
report titled, ``Pay for Performance for Physical Therapy and 
Occupational Therapy,'' which is also available on the CMS Web site at 
http://www.cms.gov/TherapyServices. The purpose of this project was to 
simulate a pay-for-performance implementation, designed to align 
financial incentives with the achievement of better clinical outcomes 
from services that were delivered efficiently. The project, funded by 
HHS/CMS Grant 18-P-93066/9-01, demonstrated the predictive 
validity of the risk-adjusted pay-for-performance model and the 
feasibility of reducing payments without affecting services to 
beneficiaries who need them.
b. Current Activities
    The Tax Relief and Health Care Act of 2006 (TRHCA) extended the 
therapy cap

[[Page 40097]]

exceptions process through December 31, 2007 and provided funds used 
for two CMS projects related to developing alternative payment 
approaches for therapy services that are based on beneficiary needs. A 
5-year project titled ``Development of Outpatient Therapy 
Alternatives'' (DOTPA), awarded to RTI International, was initiated in 
order to develop a comprehensive and uniform therapy-related data 
collection instrument, assess its feasibility, and determine the subset 
of the measures that we could routinely and reliably collect in support 
of payment alternatives. While DOTPA will identify measurement items 
relevant to payment, the project will not deliver a standardized 
measurement tool. We may either develop a tool or allow other tools to 
be used for payment purposes when they include those items that 
identify the following: (a) Beneficiary need; and (b) outcomes (that is 
effectiveness of therapy services). In addition to therapy caps, the 
DOTPA project addresses our interest in value-based purchasing by 
identifying components of value, including beneficiary need and the 
effectiveness of therapy services.
    The DOTPA project reports are available on the contractor's Web 
site at http://optherapy.rti.org/. The data collection design and 
instrument development have been completed, and a Paperwork Reduction 
Act (PRA) package was submitted for approval of the data collection 
forms by the Office of Management and Budget (OMB). The Federal 
Register notice for the second round of public comment on this package 
was published on April 23, 2010 (75 FR 21296). Once the PRA package is 
approved, the contractor will begin data collection. While approval is 
pending, the contractor is recruiting potential participants in the 
data collection, developing training materials for participants, and 
updating the project web site. We are not seeking public comments on 
the DOTPA project in this proposed rule.
    The TRCHA also funded the 2-year project contracted to Computer 
Sciences Corporation (CSC) titled ``Short Term Alternatives for Therapy 
Services'' (STATS). STATS will provide recommendations regarding 
alternative payment approaches to therapy caps that could be considered 
before completion of the DOTPA project. The STATS project draws upon 
the analytical and clinical expertise of contractors and stakeholders 
to consider policies, measurement tools, and claims data that are 
currently available to provide further information about patient 
condition and the outcomes of therapy services. The final report, due 
in the fall of CY 2010, will include recommended actions we could take 
within 2 or 3 calendar years to replace the current cap limits on 
therapy services with a policy that pays appropriately for necessary 
therapy services.
c. Potential Short-Term Approaches to Therapy Caps
    On June 30, 2009, we received a draft of the CSC report titled 
``STATS Outpatient Therapy Practice Guidelines,'' a summary of expert 
workgroup discussions, and several short-term payment alternatives for 
consideration. CSC discussed options based on the assumption that 
short-term policy changes should facilitate the development of adequate 
function and/or outcomes reporting tools. In the long-term, CSC 
recommended that payment be based on function or quality measurements 
that adequately perform risk adjustment for episode-based payment 
purposes.
    Based on the draft report, additional stakeholder input, and 
subsequent communications with the contractor, in this proposed rule we 
are discussing several potential alternatives to the therapy caps that 
could lead to more appropriate payment for medically necessary and 
effective therapy services that are furnished efficiently. We are 
soliciting public comments on this proposed rule regarding all aspects 
of these alternatives, including the potential associated benefits or 
problems, clinical concerns, practitioner administrative burden, 
consistency with other Medicare and private payer payment policies, and 
claims processing considerations. We are not proposing either short-
term or long-term payment alternatives to the therapy caps at this 
time. However, we refer readers to section II.C.4.(c) of this proposed 
rule for our CY 2011 proposal to expand the MPPR policy to ``always 
therapy'' services furnished in a single session in order to pay more 
appropriately for therapy services, taking into consideration the 
expected efficiencies when services are furnished together. While we 
are not proposing the adoption of an MPPR policy for therapy services 
specifically as an alternative to the therapy caps, we acknowledge that 
by paying more appropriately for combinations of therapy services that 
are commonly furnished in a single session, practitioners would be able 
to furnish more medically necessary therapy services to a given 
beneficiary before surpassing the caps. This proposed policy would have 
the potential to reduce the number of beneficiaries impacted by the 
therapy caps in a given year.
    The three specific short-term options that we are discussing in 
this proposed rule would not require statutory changes. Some would 
require moderate reporting changes that would yield more detailed 
information about patient function and progress to inform future 
payment approaches and facilitate the medical review of services above 
the therapy caps at the present time. Others require new coding and 
bundled per-session payment that would be a first step toward episode-
based payment. They are not necessarily independent of each other. 
Under each of these alternatives, administrative simplification with 
respect to current policies, such as HCPCS code edits and ``ICD-9-CM to 
HCPCS code'' crosswalk edits that serve to limit utilization without 
regard to the patient's clinical presentation, could be pursued in the 
context of these options.
    The first option would modify the current therapy caps exceptions 
process to capture additional clinical information regarding therapy 
patient severity and complexity in order to facilitate medical review. 
This approach would complement the DOTPA project, which is identifying 
items to measure patient condition and outcomes. We believe the first 
option may have the greatest potential for rapid implementation that 
could yield useful information in the short-term. We are especially 
interested in detailed public comments on this option that could inform 
a potential proposal to adopt such an alternative through future 
rulemaking. The second option would involve introducing additional 
claims edits regarding medical necessity, in order to reduce 
overutilization. The third option would be to adopt a per-session 
bundled payment that would vary based on patient characteristics and 
the complexity of evaluation and treatment services furnished in the 
session. Each option would require significant provider and contractor 
education, and all would necessitate major claims processing systems 
changes. Moreover, some of the options may affect beneficiaries by 
changing the type or amount of services covered by Medicare or the 
beneficiary's cost sharing obligations.
    Option (1): Revise therapy caps exceptions process by requiring the 
reporting of new patient function-related Level II HCPCS codes and 
severity modifiers.
    This option would require that clinicians submit beneficiary 
function-related nonpayable HCPCS codes to replace the -KX modifier 
(Specific

[[Page 40098]]

required documentation on file). Codes would not be submitted on every 
claim, but at episode onset and at periodic intervals (for example, 
progress report intervals of 12 sessions or 30 days--whichever is 
less). Codes would be submitted for all patients in order for the 
claims to be paid and not only those claims approaching or surpassing 
the therapy caps. The current -KX modifier is not useful to identify 
claims exceeding therapy caps, because it is used for services both 
before and after the caps are exceeded, and it must be used on the 
entire claim for facilities. New codes also would not identify claims 
above the cap, but they would perform the same function as the current 
-KX modifier to signal that documentation in the medical record 
supported medical necessity that should lead to an exception to the 
therapy caps. The codes would also provide more information for medical 
review.
    Six Level II HCPCS G-codes representing functions addressed in the 
plan of care and 5 (or 7) modifiers representing severity/complexity 
would be utilized to report information on the claim.
    Examples of six new function-related G-codes:
     GXXXU--Impairments to body functions and/or structures--
current.
     GXXXV--Impairments to body functions and/or structures--
goal.
     GXXXW--Activity limitations and/or participation 
restrictions--current.
     GXXXX--Activity limitations and/or participation 
restrictions--goal.
     GXXXY--Environmental barriers--current.
     GXXXZ--Environmental barriers--goal.
    Two potential severity/complexity scales have been suggested that 
would require the adoption of 5 or 7 new severity modifiers, 
respectively. Under one scenario, modifiers based on the International 
Classification of Function could identify severity as follows:
     None (0 to 4 percent);
     MILD (5 to 24 percent);
     MODERATE (25 to 49 percent);
     SEVERE (50 to 95 percent); or
     COMPLETE (96 to 100 percent).
    Alternatively, a proportional severity/complexity scale would use 7 
modifiers to describe impairments, limitations, or barriers:
     0 percent;
     1 to 19 percent;
     20 to 39 percent;
     40 to 59 percent;
     50 to 79 percent;
     80 to 99 percent; or
     100 percent.
    Implementation of this general approach would require 6 months to 2 
years to modify claims processing for the current therapy caps and 
exceptions processing of claims, and to develop, pilot test, and refine 
coding before applying the approach nationally. While therapists 
initially would need to learn the new codes and update their billing 
systems, ultimately their reporting burden would be reduced because the 
-KX modifier would not be required on each claim line for patients with 
expenditures approaching or exceeding the therapy caps. This option 
could potentially result in a small reduction in outpatient therapy 
expenditures due to increased Medicare contractor scrutiny of episodes 
where functional severity scores did not change over time, or to other 
atypical reporting patterns associated with the new codes.
    In the long-term, these codes and modifiers could be mapped to 
reliable and validated measurement tools (either currently available 
tools in the public domain or newly developed tools from items on the 
DOTPA instrument or the Continuity Assessment Record and Evaluation 
(CARE) tool). When statistically robust patient condition information 
has been collected from claims data, it may be possible to develop 
Medicare payment approaches for outpatient therapy services that would 
pay appropriately and similarly for efficient and effective services 
furnished to beneficiaries with similar conditions who have good 
potential to benefit from the services furnished. At a minimum, the new 
codes would allow contractors to more easily identify and limit the 
claims for beneficiaries that show no improvement over reasonable 
periods of time.
    Option (2): Enhance existing therapy caps exceptions process by 
applying medical necessity edits when per-beneficiary expenditures 
reach a predetermined value.
    The existing automatic process for exceptions, and the revised 
exceptions process described in Option 1 above, pay practitioners 
indefinitely for services if they attest on the claim by appending a 
specific modifier to therapy HCPCS codes that the services being 
furnished are medically necessary and that supporting documentation is 
included in the medical record. Unless the contractor uses claims edits 
or does post payment review, these processes do not identify or limit 
unusually high annual per-beneficiary utilization. High utilization is 
not limited to beneficiaries with multiple or complex conditions. We 
could use existing therapy utilization data to develop annual per-
beneficiary medical necessity payment edits, such as limits to the 
number of services per session, per episode, or per diagnostic 
grouping, for exceptions to the therapy caps which could be set at 
benchmark payment levels that only a small percentage of beneficiaries 
would surpass in a single year. Once these levels were reached, 
additional claims would be denied and practitioners would need to 
appeal those denials if they wished to challenge Medicare's nonpayment.
    This alternative would require 1 to 2 years to implement as an 
expansion of existing policy, and its effects could be anticipated by 
analysis of the current utilization of therapy services. Additional 
practitioner burden would be incurred in the small number of cases 
exceeding the per-beneficiary expenditure edits when the practitioner 
chooses to appeal the medical necessity denial.
    Option (3): Introduce per-session ``Evaluation/Assessment and 
Intervention'' (E&I) codes to bundle payment for groups of current 
therapy HCPCS codes into a single per-session payment.
    As discussed in section II.C.4.(c) of this proposed rule, multiple 
therapy services are often furnished in a single session, and we are 
proposing to expand the MPPR policy to ``always therapy'' services in 
CY 2011 in order to take into consideration the efficiencies that occur 
when multiple services (the typical therapy scenario) are furnished in 
one session to a beneficiary. Furthermore, we note that section 
1848(c)(2)(K) of the Act (as added by section 3134 of the ACA) 
regarding potentially misvalued codes under the PFS specifies that the 
Secretary may make appropriate coding changes, which may include 
consolidation of individual services into bundled codes for payment 
under the PFS, as part of her review and adjustment of the relative 
values for services identified as potentially misvalued.
    This option would require that practitioners submit a single new 
Level II HCPCS code to represent all the therapy services currently 
reported and paid separately for an outpatient therapy session. Payment 
for the HCPCS code would be based on patient characteristics (as 
identified through prior CMS contractor analyses) and the complexity of 
the evaluation/assessment and intervention services furnished during 
the session. The new coding requirements would not disrupt the current 
exceptions process or the revised exceptions process described in 
Option (1) above. Approximately 12 E&I codes would be needed, taking 
into consideration the basic algorithm shown in Table 31.

[[Page 40099]]



                       Table 31--Evaluation/Assessment & Intervention Level II HCPCS Codes
----------------------------------------------------------------------------------------------------------------
                                                          Evaluation/Assessment complexity
                                   -----------------------------------------------------------------------------
                                             Minimal                  Moderate                 Significant
----------------------------------------------------------------------------------------------------------------
Intervention Level:
    None..........................  E&I Code 1       E&I Code 2       E&I Code 3.
    Minimal.......................  E&I Code 4       E&I Code 5       E&I Code 6.
    Moderate......................  E&I Code 7       E&I Code 8       E&I Code 9.
    Significant...................  E&I Code 10      E&I Code 11      E&I Code 12.
----------------------------------------------------------------------------------------------------------------

    We would need to develop and test operational definitions for each 
E&I code so that practitioners would be able to properly report 
services and appropriate relative values could be established for each 
per-session code. We believe that a pilot study might reveal that the 
different practice patterns for the three therapy professions (physical 
therapy, occupational therapy, and speech-language pathology) could 
necessitate separate relative value determinations for each E&I code by 
type of therapy service furnished. As a result, up to 36 total new 
Level II HCPCS codes could be needed (12 per discipline).
    We anticipate that the definitions of E&I codes 1 through 3 and 7 
through 12 would describe services that may only be furnished by a 
``clinician'' (therapist, physician, or nonphysician practitioner). E&I 
codes 1 through 3 would be reported for sessions that consisted only of 
evaluations. In addition, the definitions of E&I codes 4 through 6 
would describe services that could be furnished by or under the 
permissible supervision of all qualified outpatient therapy 
professionals. Based upon historical therapy utilization patterns, the 
vast majority of E&I codes submitted would likely fall in the 4 through 
9 code range. We would expect the RVUs under the PFS for all E&I codes 
to take into consideration the efficiencies when multiple services 
(those that would be currently reported under multiple CPT codes) are 
furnished.
    This option would require 2 to 4 years to add new codes and conduct 
a short-term pilot study to refine coding and value the 12 new HCPCS 
codes (or 36 if they are specific to each therapy discipline). There 
would be significant initial practitioner administrative burden to 
learn new codes and update billing systems. However, ultimately, with 
elimination of the practitioner's reporting of 76 different codes and 
many of the associated claims processing edits, the administrative 
burden of reporting therapy services to Medicare would be minimized. 
This bundled approach to reporting and payment could result in more 
appropriate valuation of therapy services that reflects efficiencies 
when individually reported services are furnished in the same session. 
As a result, it could lead to reduced therapy expenditures, as well as 
a reduction in the number of beneficiaries affected by the therapy caps 
in a given year.
    In conclusion, we emphasize that we continue to be committed to 
developing alternatives to the therapy caps that would provide 
appropriate payment for medically necessary and effective therapy 
services furnished to Medicare beneficiaries based on patient needs, 
rather than the current therapy caps which establish financial 
limitations on Medicare payment for therapy services in some settings 
regardless of medical necessity. The Congress has repeatedly intervened 
to allow exceptions to these caps for certain time periods, and the 
current exceptions are automatically processed based on a 
practitioner's attestation that medical necessity is documented in the 
chart for an individual patient. We believe that, ultimately, payment 
for therapy services should incentivize the most effective and 
efficient care, consistent with Medicare's focus on value in its 
purchasing.
    Therefore, we are soliciting public comments on potential 
alternatives to the therapy caps, including those discussed in this 
section of this proposed rule. The STATS contractor has worked closely 
with a broad variety of clinicians, administrators, scientists, 
researchers, and other contractors to develop the 3 alternatives 
presented this discussion. We welcome all public comments on this 
propose rule from interested stakeholders, including individual 
therapists from both facility and nonfacility settings treating Part B 
(outpatient) beneficiaries. Among the topics of interest to us are the 
following:
     Recommendations for alternative payment policies (options 
discussed in this proposed rule or others) that address patient needs, 
while minimizing payment for inefficient services or those of limited 
patient benefit;
     Assessment of the practitioner burden associated with the 
recommended policies;
     Likelihood that recommended changes would minimize fraud, 
abuse, and waste;
     Whether the recommendations could assist CMS in obtaining 
meaningful information on patient function and how that information 
could be utilized;
     Whether measurement tools relevant to assessing the need 
for therapy services exist in the public domain and how they might be 
utilized;
     What function information should be collected and how it 
could be utilized to ensure necessary care, while minimizing payment 
for inefficient services or those of limited patient benefit; and
     How therapist behavior, plans of care, or patient 
scheduling would be affected by the recommended alternatives.
    We are committed to finding alternatives to the current therapy cap 
limitations on expenditures for outpatient therapy services that will 
ensure that beneficiaries continue to receive those medically necessary 
therapy services that maximize their health outcomes. We continue to 
dedicate our resources to identifying alternatives that would encourage 
the most efficient and cost-effective treatments. We believe motivated 
therapists, with attention to the most cost-effective practices, can 
incorporate practice efficiencies that benefit patients by achieving 
the best possible results at the lowest cost.
    Our STATS and DOTPA projects, which are currently engaged in data 
collection and analysis to inform short-term and long-term alternatives 
to the therapy caps, respectively, lay the foundation for future 
payment alternatives for outpatient therapy services. We are optimistic 
that the STATS project will identify short-term, feasible alternatives 
that may be tested in the future. The DOTPA project will create a tool 
and test its use to collect patient condition information that can then 
be applied to identify patient need

[[Page 40100]]

for therapy services. Together, these projects may provide the basis 
for a long-term plan to reshape Medicare's payment policy for 
outpatient therapy services to align with the value-based purchasing 
principles that are now guiding principles of the Medicare program. We 
encourage the public to provide comments so that we may consider all 
perspectives as we continue our work in this important area.

B. Diabetes Self-Management Training (DSMT) Services (HCPCS Codes G0108 
and G0109)

1. Background
    Section 4105(a) of BBA provided coverage for DSMT in outpatient 
settings without limiting this coverage to hospital outpatient 
departments. DSMT services consist of educational and training services 
furnished to an individual with diabetes by a certified provider in an 
outpatient setting.
    Section 4105(a) of the BBA stipulated that training would be 
furnished by a ``certified provider'' which is a physician or other 
individual or entity that also provides other items or services for 
which payment may be made under Medicare. This program is intended to 
educate beneficiaries in the successful self-management of diabetes. 
The program includes instructions in self-monitoring of blood glucose; 
education about diet and exercise; an insulin treatment plan developed 
specifically for the patient who is insulin-dependent; and motivation 
for patients to use the skills for self-management. DSMT services are 
reported under HCPCS codes G0108 (Diabetes outpatient self-management 
training services, individual, per 30 minutes) and G0109 (Diabetes 
outpatient self-management training services, group session (2 or 
more), per 30 minutes).
2. Proposed Payment for DSMT Services
    In accordance with section 4105(a) of the BBA, Medicare payment for 
outpatient DSMT services is made under the PFS as specified in Sec.  
414.1 through Sec.  414.48. When we created HCPCS codes G0108 and 
G0109, the only direct costs included in the PE were registered nurse 
labor. Section 410.144(a)(4)(a) states that the DSMT team includes at 
least a registered dietitian and a certified diabetes educator. We did 
not establish work RVUs for DSMT services because we believed training 
would typically be performed by individuals other than a physician, 
such as a registered nurse (65 FR 83130). However, since that time, we 
have received requests from a number of stakeholders, including the 
American Association of Clinical Endocrinologists (AACE), the American 
Association of Diabetes Educators (AADE), and the Juvenile Diabetes 
Research Foundation, to include physician work in valuing DSMT services 
that is similar to the physician work that has been included in medical 
nutrition therapy (MNT) services since CY 2007 and kidney disease 
education (KDE) services since CY 2010. The stakeholders argued that 
because physicians coordinate DSMT programs, provide patient 
instruction, and communicate with referring physicians, physician work 
should be included in the RVUs for DSMT services. The stakeholders also 
requested that we reconsider the direct PE inputs for DMST services and 
include clinical labor for diabetes educators at a higher hourly rate 
instead of registered nurse labor. In addition, they stated that the 
supplies and equipment in the PE for DSMT services should be the same 
as for KDE services, with additional direct PE inputs for a diabetic 
educator curriculum, data tracking software, and DSMT program 
accreditation.
    For CY 2011, we are proposing to assign physician work RVUs to DSMT 
services that are comparable, as adjusted for the service times of the 
HCPCS codes, to the work RVUs for MNT services. We are proposing that 
HCPCS G0108 for 30 minutes of individual DSMT services would be 
crosswalked to CPT code 97803 (Medical nutrition therapy; re-assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes) for purposes of assigning work RVUs, with the physician work 
RVUs for CPT code 97803 multiplied by two to account for the greater 
time associated with HCPCS code G0108 (that is, 30 minutes). We are 
also proposing that HCPCS G0109 for 30 minutes of group DSMT services 
would be crosswalked to CPT code 97804 (Medical nutrition therapy; 
group (2 or more individuals(s)), each 30 minutes) for purposes of 
assigning work RVUs. The rationale for the proposed work RVUs for the 
DSMT HCPCS G-codes is based on the similarity of DSMT services to MNT 
services in the individual (CPT code 97803) and group (CPT code 97804) 
setting.
    For CY 2011, we are also proposing to modify the PE inputs for DSMT 
services to reflect the current equipment and supplies for the KDE 
HCPCS G-codes implemented in the CY 2010 PFS final rule with comment 
period (74 FR 61901) (that is, HCPCS codes G0420 (Face-to-face 
educational services related to the care of chronic kidney disease; 
individual, per session, per one hour) and G0421 (Face-to-face 
educational services related to the care of chronic kidney disease; 
group, per session, per one hour)), based on the similarity in the 
equipment and supplies necessary for DSMT and KDE services. We have 
made adjustments to some of the equipment times for the 30 minute DSMT 
individual and group services as compared to the 1 hour individual and 
group KDE services. We are also including a diabetic educator 
curriculum and data tracking software in the PE inputs for DSMT 
services, but it is our general practice not to include program 
accreditation costs in those PE inputs. With respect to clinical labor, 
rather than changing the current labor type for DSMT services, we are 
proposing to utilize the same approach as we adopted for MNT services 
when we provided physician work RVUs for those services in CY 2007 (71 
FR 69645). Specifically, we are removing all of the clinical labor from 
the group DSMT code and most of the clinical labor from the individual 
DSMT code, given that we are proposing work RVUs for both DSMT codes 
for CY 2011.
    We believe these proposals would value DSMT services more 
consistently with other similar services that are paid under the PFS. 
As a result of our proposed CY 2011 changes, the proposed work RVUs for 
HCPCS codes G0108 and G0109 are 0.90 and 0.25, respectively. As 
described above, we are also proposing to modify the direct PE inputs 
for these codes for CY 2011.

C. End-Stage Renal Disease Related Services for Home Dialysis (CPT 
Codes 90963, 90964, 90965, and 90966)

1. End-Stage Renal Disease Home Dialysis Monthly Capitation Payment 
Services (CPT Codes 90963, 90964, 90965, and 90966)
    In the CY 2004 PFS final rule with comment period (68 FR 63216), we 
established new Level II HCPCS G-codes for end-stage renal disease 
(ESRD) monthly capitation payment (MCP) services. For center-based 
patients, payment for the G-codes varied based on the age of the 
beneficiary and the number of face-to-face visits furnished each month 
(for example, 1 visit, 2-3 visits and 4 or more visits). Under the MCP 
methodology, the lowest payment applied when a physician provided one 
visit per month; a higher payment was provided for two to three visits 
per month. To receive the highest payment, a physician would have to 
provide at least four ESRD-related visits per month. However, payment 
for home dialysis MCP services only varied by the age of beneficiary. 
Although we did not initially specify a frequency of required

[[Page 40101]]

visits for home dialysis MCP services, we stated that we ``expect 
physicians to provide clinically appropriate care to manage the home 
dialysis patient'' (68 FR 63219).
    Effective January 1, 2009, the CPT Editorial Panel created new CPT 
codes to replace the G-codes for monthly ESRD-related services, and we 
accepted the new codes for use under the PFS in CY 2009. The CPT codes 
for monthly ESRD-related services for home dialysis patients include 
the following, as displayed in Table 32: 90963, 90964, 90965, and 
90966. In addition, the clinical vignettes used for the valuation of 
CPT codes 90963, 90964, 90965, and 90966 include scheduled (and 
unscheduled) examinations of the ESRD patient.
    Given that we pay for a physician (or practitioner) to evaluate the 
ESRD patient over the course of an entire month under the MCP, we 
believe that it is clinically appropriate for the physician (or 
practitioner) to have at least one in-person, face-to-face encounter 
with the patient per month. Therefore, we are proposing to require the 
MCP physician (or practitioner) to furnish at least one in-person 
patient visit per month for home dialysis MCP services (as described by 
CPT codes 90963 through 90966). This requirement would be effective for 
home dialysis MCP services beginning January 1, 2011. We believe this 
requirement reflects appropriate, high quality medical care for ESRD 
patients being dialyzed at home and generally would be consistent with 
the current standards of medical practice.
2. Daily and Monthly ESRD-Related Services (CPT Codes 90951 through 
90970)
    In CY 2008, the AMA RUC submitted recommendations for valuing the 
new CY 2009 CPT codes displayed in Table 32 that replaced the MCP HCPCS 
G-codes for monthly ESRD-related services. We accepted these codes for 
use under the PFS.

              Table 32--MCP Codes Recognized Under the PFS
------------------------------------------------------------------------
         MCP code                         Long descriptor
------------------------------------------------------------------------
90951....................  End-stage renal disease (ESRD) related
                            services monthly, for patients younger than
                            2 years of age to include monitoring for the
                            adequacy of nutrition, assessment of growth
                            and development, and counseling of parents;
                            with 4 or more face-to-face physician visits
                            per month.
90952....................  End-stage renal disease (ESRD) related
                            services monthly, for patients younger than
                            2 years of age to include monitoring for the
                            adequacy of nutrition, assessment of growth
                            and development, and counseling of parents;
                            with 2-3 face-to-face physician visits per
                            month.
90953....................  End-stage renal disease (ESRD) related
                            services monthly, for patients younger than
                            2 years of age to include monitoring for the
                            adequacy of nutrition, assessment of growth
                            and development, and counseling of parents;
                            with 1 face-to-face physician visit per
                            month.
90954....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 2-11 years of
                            age to include monitoring for the adequacy
                            of nutrition, assessment of growth and
                            development, and counseling of parents; with
                            4 or more face-to-face physician visits per
                            month.
90955....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 2-11 years of
                            age to include monitoring for the adequacy
                            of nutrition, assessment of growth and
                            development, and counseling of parents; with
                            2-3 face-to-face physician visits per month.
90956....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 2-11 years of
                            age to include monitoring for the adequacy
                            of nutrition, assessment of growth and
                            development, and counseling of parents; with
                            1 face-to-face physician visit per month.
90957....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 12-19 years
                            of age to include monitoring for the
                            adequacy of nutrition, assessment of growth
                            and development, and counseling of parents;
                            with 4 or more face-to-face physician visits
                            per month.
90958....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 12-19 years
                            of age to include monitoring for the
                            adequacy of nutrition, assessment of growth
                            and development, and counseling of parents;
                            with 2-3 face-to-face physician visits per
                            month.
90959....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 12-19 years
                            of age to include monitoring for the
                            adequacy of nutrition, assessment of growth
                            and development, and counseling of parents;
                            with 1 face-to-face physician visit per
                            month.
90960....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 20 years of
                            age and older; with 4 or more face-to-face
                            physician visits per month.
90961....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 20 years of
                            age and older; with 2-3 face-to-face
                            physician visits per month.
90962....................  End-stage renal disease (ESRD) related
                            services monthly, for patients 20 years of
                            age and older; with 1 face-to-face physician
                            visit per month.
90963....................  End-stage renal disease (ESRD) related
                            services for home dialysis per full month,
                            for patients younger than 2 years of age to
                            include monitoring for the adequacy of
                            nutrition, assessment of growth and
                            development, and counseling of parents.
90964....................  End-stage renal disease (ESRD) related
                            services for home dialysis per full month,
                            for patients 2-11 years of age to include
                            monitoring for the adequacy of nutrition,
                            assessment of growth and development, and
                            counseling of parents.
90965....................  End-stage renal disease (ESRD) related
                            services for home dialysis per full month,
                            for patients 12-19 years of age to include
                            monitoring for the adequacy of nutrition,
                            assessment of growth and development, and
                            counseling of parents.
90966....................  End-stage renal disease (ESRD) related
                            services for home dialysis per full month,
                            for patients 20 years of age and older.
------------------------------------------------------------------------

    There are four additional CPT codes for ESRD-related services that 
are reported on a per-day basis. These daily CPT codes are: 90967 (End-
stage renal disease (ESRD) related services for dialysis less than a 
full month of service, per day; for patients younger than 2 years of 
age); 90968 (End-stage renal disease (ESRD) related services for 
dialysis less than a full month of service, per day; for patients 2-11 
years of age); 90969 (End-stage renal disease (ESRD) related services 
for dialysis less than a full month of service, per day; for patients 
12-19 years of age); and 90970 (End-stage renal disease (ESRD) related 
services for dialysis less than a full month of service, per day; for 
patients 20 years of age and older).
    For the MCP codes displayed in Table 32, the AMA RUC initially

[[Page 40102]]

recommended 36 minutes of clinical labor time for the pre-service 
period. They also recommended an additional 6 minutes in the post-
period for CPT codes 90960, 90961, 90962, and 90966. For the four codes 
describing daily services (CPT codes 90967 through 90970), the AMA RUC 
recommended including 1.2 minutes of clinical labor per day, which is 
the prorated amount of pre-service clinical labor included in the 
monthly codes. The AMA RUC also recommended that CPT codes 90952 and 
90953 be contractor-priced.
    In the CY 2009 PFS final rule with comment period (73 FR 69898), we 
asked the AMA RUC to reconsider their recommended PE inputs in the 
interest of making certain that they accurately reflected the typical 
direct PE resources required for these services. In addition, we asked 
the AMA RUC to review the physician times for CPT codes 90960 and 90961 
that are used in the calculation of the PE RVUs. We accepted the work 
values for the new CPT codes for ESRD-related services that were 
recommended by the AMA RUC.
    Since CY 2009, we have continued to calculate the PE RVUs for the 
entire series of MCP codes displayed in Table 32 by using the direct PE 
inputs from the predecessor HCPCS G-codes, except for CPT codes 90952 
and 90953 which are contractor-priced. We have also continued to use 
the physician time associated with the predecessor HCPCS G-codes for 
CPT codes 90960 and 90961 for purposes of calculating the PE RVUs.
    In CY 2009, the AMA RUC submitted new recommendations for CPT codes 
90951 and 90954 through 90970. For each of the MCP codes (CPT code 
90951 and CPT codes 90954 through 90966), the AMA RUC recommended an 
increased pre-service clinical staff time of 60 minutes. For each of 
the daily dialysis service codes (CPT codes 90967 through 90970), the 
AMA RUC recommended an increased clinical labor time of two minutes, 
which is the prorated amount of clinical labor included in the monthly 
codes. The AMA RUC also recommended an additional 38 minutes of 
physician time for CPT codes 90960 and 90961. This resulted in a total 
physician time of 128 minutes and 113 minutes, respectively, for these 
codes. The AMA RUC continued to recommend that CPT codes 90952 and 
90953 be contractor-priced.
    For CY 2011, we are proposing to accept these AMA RUC 
recommendations as more accurate reflections of the typical direct PE 
resources required for these services. Therefore, we are proposing to 
develop the PE RVUs for CPT code 90951 and CPT codes 90954 through 
90970 using the direct PE inputs as recommended by the AMA RUC and 
reflected in the proposed CY 2011 PE database, which is available on 
the CMS Web site under the supporting data files for the CY 2011 PFS 
proposed rule at: http://www.cms.gov/PhysicianFeeSched/. We are also 
proposing to use the AMA RUC-recommended physician times for CPT codes 
90960 and 90961. Consistent with the AMA RUC's recommendations, we are 
proposing to continue to contractor-price CPT codes 90952 and 90953.

D. Portable X-Ray Set-Up (HCPCS Code Q0092)

    When a portable x-ray is furnished to a single patient, as many as 
four component HCPCS codes may be billed and paid for the service, 
including the portable x-ray transportation (HCPCS code R0070 
(Transportation of portable x-ray equipment and personnel to home or 
nursing home, per trip to facility or location, one patient seen)); the 
portable x-ray set-up (HCPCS code Q0092 (Set-up of portable x-ray 
equipment)); and the professional and technical components of the x-ray 
service itself (CPT 70000 series). Currently, the direct PE database 
contains x-ray equipment in both the radiology codes in the 70000 
series of CPT and HCPCS code Q0092, the code for the set-up of a 
portable x-ray. In the technical component of the x-ray service is the 
direct PE input of a radiology room which contains x-ray equipment for 
the various radiology codes in the 70000 series of CPT. In addition, 
portable x-ray equipment is included as a direct PE input for HCPCS 
code Q0092. Thus, x-ray equipment currently is recognized within the 
direct PE values for two of the HCPCS codes that would be reported for 
the portable x-ray service, resulting in an overvaluation of the 
comprehensive portable x-ray service.
    Therefore, for CY 2011 we are proposing to remove portable x-ray 
equipment as a direct PE input for HCPCS code Q0092, in order to pay 
more appropriately for the x-ray equipment used to furnish a portable 
x-ray service. We believe the resulting payment for the comprehensive 
portable x-ray service would more appropriately reflect the resources 
used to furnish portable x-ray services by providing payment for the x-
ray equipment solely through payment for the technical component of the 
x-ray service that is furnished.

E. Pulmonary Rehabilitation Services (HCPCS Code G0424)

    In the CY 2010 PFS proposed rule (74 FR 33614), we proposed to 
create new HCPCS G-code G0424 (Pulmonary rehabilitation, including 
aerobic exercise (includes monitoring), per session, per day) to 
describe the services of a pulmonary rehabilitation (PR) program as 
specified in section 144(a) of the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA). Using CPT code 93797 (Cardiac rehab 
without telemetry) as a reference code, we proposed to assign 0.18 work 
RVUs and 0.01 malpractice RVUs to G0424. To establish PE RVUs, we 
reviewed the PE inputs of similar services, particularly those of the 
respiratory therapy HCPCS codes G0237 (Therapeutic procedures to 
increase strength or endurance or respiratory muscles, face to face, 
one on one, each 15 minutes (includes monitoring)) and G0238 
(Therapeutic procedures to improve respiratory function, other than 
described by G0237, one on one, face to face, per 15 minutes (includes 
monitoring)), as well as the cardiac rehabilitation codes, CPT codes 
93797 and 93798 (Physician services for outpatient cardiac 
rehabilitation; with continuous ECG monitoring (per session)). In the 
CY 2010 PFS final rule with comment period (74 FR 61886), we finalized 
our proposal with modifications to the code descriptor and PE inputs, 
as recommended by some commenters.
    Based on commenters' recommendations from the CY 2010 PFS final 
rule with comment period and further information furnished by 
stakeholders, we are proposing to increase the work RVUs for HCPCS code 
G0424 to 0.28 for CY 2011 to be comparable to the work RVUs for cardiac 
rehabilitation with monitoring (CPT code 93798) in view of the 
monitoring required for HCPCS code G0424.
    In addition, we are also proposing to increase the clinical labor 
time for the respiratory therapist from 15 minutes to 30 minutes and to 
crosswalk the PE equipment inputs for HCPCS code G0424 to those for 
respiratory treatment services (HCPCS code G0238), which include a 1-
channel ECG and a pulse oximeter. We would retain the treadmill 
currently assigned to HCPCS code G0424 and adjust the equipment time to 
45 minutes. While several public commenters recommended this equipment, 
these commenters also requested a full 60 minutes of respiratory 
therapist time be included in the PE for HCPCS code G0424, comparable 
to the 15 minutes of

[[Page 40103]]

respiratory therapist time included in the one-on-one codes for 15 
minutes of respiratory treatment services (HCPCS codes G0237 and 
G0238). However, because PR services reported under HCPCS code G0424 
can be furnished either individually or in groups, we believe that 30 
minutes of respiratory therapist time would be more appropriate for 
valuing the typical PR service.

F. Application of Tissue-Cultured Skin Substitutes to Lower Extremities 
(HCPCS Codes GXXX1 and GXXX2)

    There are currently two biological products, Apligraf and 
Dermagraft, which are FDA-approved for the treatment of diabetic foot 
ulcers. While commonly used by podiatrists for this purpose, these 
products are also used by other specialists in the treatment of other 
clinical conditions, such as burns.
    Many Medicare contractors have established local coverage 
determinations specifying the circumstances under which these services 
are covered. In the case of diabetic foot ulcers, clinical studies of 
Apligraf weekly application were based on up to 5 treatments over a 12-
week period. In contrast, Dermagraft was applied weekly, up to 8 
treatments over a 12-week period.
    The skin substitute CPT codes were reviewed and new codes were last 
created by the CPT Editorial Panel for CY 2006. There are currently 2 
skin repair CPT codes that describe Apligraf application, one primary 
code, CPT code 15340 (Tissue cultured allogeneic skin substitute; first 
25 sq cm or less) and one add-on code, CPT code 15341 (Tissue cultured 
allogeneic skin substitute; each additional 25 sq cm, or part thereof 
(List separately in addition to code for primary procedure)) and 4 
codes that describe Dermagraft application, two initial codes based on 
body area, CPT codes 15360 (Tissue cultured allogeneic dermal 
substitute, trunk, arms, legs; first 100 sq cm or less, or 1 percent of 
body area of infants and children) and 15365 (Tissue cultured 
allogeneic dermal substitute, face, scalp, eyelids, mouth, neck, ears, 
orbits, genitalia, hands, feet, and/or multiple digits; first 100 sq cm 
or less, or 1 percent of body area of infants and children) and two 
add-on codes, CPT codes 15361 (Tissue cultured allogeneic dermal 
substitute, trunk, arms, legs; each additional 100 sq cm, or each 
additional 1 percent of body area of infants and children, or part 
thereof (List separately in addition to code for primary procedure)) 
and 15366 (Tissue cultured allogeneic dermal substitute, face, scalp, 
eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, and/or 
multiple digits; each additional 100 sq cm, or each additional 1 
percent of body area of infants and children, or part thereof (List 
separately in addition to code for primary procedure)).
    Several stakeholders have expressed concern about the 
appropriateness and equity of the coding and payment for these 
services, given their similar uses and the office resources required 
when the products are applied repeatedly over a number of weeks for 
treatment of lower extremity ulcers. They are concerned that current 
coding, with the associated payment policies and relative values, does 
not provide for appropriate payment for the services based on how they 
are furnished. In addition, some stakeholders believe that the current 
coding and payment provides a financial incentive for the selection of 
one tissue-cultured product over another, rather than facilitating 
clinical decisionmaking based solely on the most clinically appropriate 
product for the patient's case. For example, the Dermagraft and 
Apligraf application codes have 90-day and 10-day global periods, 
respectively, and their current values include several follow-up office 
visits. When patients are treated periodically with repeated 
applications of the products over several weeks, the patients may be 
seen in follow-up by the physician. However, those encounters would not 
be evaluation and management visits but, instead, would be procedural 
encounters that would typically be valued differently under the PFS 
than the follow-up office visits currently included in the values for 
the Dermagraft and Apligraf application codes. Furthermore, while 
different stakeholders have indicated that debridement and site 
preparation are variably performed when these products are applied, the 
CPT codes for Dermagraft application allow separate reporting of these 
preparation services when they are performed, while the Apligraf 
application codes bundle these services. Since CY 2006, the PFS has 
accepted the RUC work and PE recommendations for the Dermagraft and 
Apligraf application codes and has paid accordingly.
    With respect to Medicare payment policy, some Medicare contractors 
allow the use of modifier -58 (Staged or related procedure or service 
by the same physician during the postoperative period) to be reported 
with the skin substitute application codes and provide full payment for 
the service each time it is performed, even if the subsequent 
application(s) is within the global period of the service. Other 
contractors do not allow the use of modifier -58, and therefore, 
provide a single payment for a series of applications over 90 days or 
10 days, as applicable to the particular code reported for the 
product's initial application.
    Because of the current inconsistencies in valuing similar skin 
substitute application services and the common clinical scenarios for 
their use for Medicare beneficiaries, we believe that it would be 
appropriate to temporarily create Level II HCPCS G-codes to report 
application of tissue-cultured skin substitutes applied to the lower 
extremities in order to provide appropriate and consistent payment for 
the services as they are commonly furnished. Therefore, we are 
proposing to create two new HCPCS G-codes for CY 2011, GXXX1 
(Application of tissue cultured allogeneic skin substitute or dermal 
substitute; for use on lower limb, includes the site preparation and 
debridement if performed; first 25 sq cm or less) and GXXX2 
(Application of tissue cultured allogeneic skin or dermal substitute; 
for use on lower limb, includes the site preparation and debridement if 
performed; each additional 25 sq cm), that would be recognized for 
payment under the PFS for the application of Apligraf or Dermagraft to 
the lower limb. These codes would not allow separate reporting of CPT 
codes for site preparation or debridement. We emphasize that we would 
expect that the use of these HCPCS G-codes for payment under Medicare 
would be temporary, while stakeholders work through the usual channels 
to establish appropriate coding for these services that reflects the 
current common clinical scenarios in which the skin substitutes are 
applied. Furthermore, we would expect to receive recommendations from 
the AMA RUC for appropriate work values and direct practice expense 
inputs for the applicable codes, according to the usual process for new 
or revised codes.
    Under the PFS, as a temporary measure, the HCPCS G-codes would be 
assigned a 0-day global period so payment would be made each a time a 
covered service was furnished. We are proposing to base payment on the 
physician work relative values and the direct PE inputs for the 
existing CPT codes for Apligraf application, with adjustments for the 
global period differences because the HCPCS G-codes and the Apligraf 
application CPT codes. These CPT codes resemble the new HCPCS G-codes 
in terms of wound size description and the inclusion of site 
preparation and debridement in their current values so we believe they

[[Page 40104]]

appropriately represent the physician work involved in the proposed 
HPCPCS G-codes. However, we would adjust the work RVUs of the Apligraf 
application codes to derive the HCPCS G-code proposed CY 2011 work 
values by extracting the values for any office visits and discharge day 
management services because the HCPCS G-codes have a 0-day global 
period. In addition, we would adjust the direct PE inputs of the 
Apligraf application codes to develop the proposed CY 2011 direct PE 
inputs of the HPCPS G-codes that have a 0-day global period.
    Our crosswalks and adjustments result in proposed CY 2011 work RVUs 
of 2.22 for HPCPCS code GXXX1 and 0.50 for HCPCPS GXXX2. The proposed 
direct PE inputs for HCPCS codes GXXX1 and GXXX2 are included in the 
direct PE database for the CY 2011 proposed rule that is posted on the 
CMS Web site at http://www.cms.gov/PhysicianFeeSched/PFSFRN/list.asp.
    We note that many Medicare contractors currently have local 
coverage policies that specify the circumstances under which Medicare 
covers the application of skin substitutes. The local coverage policies 
may include diagnostic or prior treatment requirements, as well as 
frequency limitations on the number and periodicity of treatments. We 
expect that these policies would be updated in the context of the 
temporary new HCPCS G-codes that we are proposing for use in CY 2011 to 
report the application of tissue cultured allogeneic skin or dermal 
substitutes. We are proposing to establish the HCPCS G-codes for 
temporary use in CY 2011 in order to improve the consistency and 
resource-based nature of PFS payments for skin substitute application 
services that require similar resources. However, we note our continued 
interest in ensuring that skin substitutes are properly utilized for 
Medicare beneficiaries who will benefit from that treatment. We will 
continue to monitor the utilization of these services and plan to 
identify any concerning trends in utilization that contractors may want 
to examine further through medical review or other approaches.

G. Canalith Repositioning (CPT Code 95992)

    For CY 2009, CPT created a new code for canalith repositioning, 
specifically CPT code 95992 (Canalith repositioning procedure(s) (e.g., 
Epley maneuver, Semont maneuver), per day). This service may be 
furnished by both physicians and therapists. Although we accepted the 
RUC-recommended work RVUs and PE inputs, we initially bundled this 
procedure on an interim basis in the CY 2009 PFS final rule with 
comment period (73 FR 69896), indicating that we believed it would be 
paid through the E/M service that it would accompany. Subsequently, in 
view of concerns from therapists who cannot furnish E/M services, we 
clarified that therapists could report one of the generally defined 
therapy CPT codes when canalith repositioning was furnished. In the CY 
2010 PFS final rule with comment period (74 FR 61766), we changed the 
code's status under the PFS to ``not recognized for payment under 
Medicare,'' consistent with our expectation that another payable code 
would be reported when the service was furnished.
    Based on further information from stakeholders regarding the 
distinct and separate nature of this procedure from an E/M service and 
their request that we recognize this CPT code for payment, similar to 
our separate payment for most other procedures commonly furnished in 
association with an E/M service, we are proposing to recognize CPT code 
95992 for payment under the CY 2011 PFS, consistent with our typical 
treatment of most other codes for minor procedures. In doing so, we are 
proposing to change the code's status to ``A'' and utilize the CY 2009 
RUC recommendations for work RVUs (0.75) and PE inputs for establishing 
its payment in CY 2011. (That is, status ``A'' means Active code. These 
codes are separately payable under the PFS if covered.) Because 
canalith repositioning (CPT code 95992) can be furnished by physicians 
or therapists as therapy services under a therapy plan of care or by 
physicians as physicians' services outside of a therapy plan of care, 
we would add CPT code 95992 to the ``sometimes therapy'' list on the 
therapy code abstract file.

H. Intranasal/Oral Immunization Codes (CPT Codes 90467, 90468, 90473, 
and 90474)

    To ensure that the PE RVUs are consistent between the intranasal/
oral and injectable immunization administration CPT codes that describe 
services that utilize similar PE resources, we are proposing to 
crosswalk the PE values for CPT code 90471 (Immunization administration 
(includes percutaneous, intradermal, subcutaneous, or intramuscular 
injections); one vaccine (single or combination vaccine/toxoid)) to CPT 
codes 90467 (Immunization administration younger than age 8 years 
(includes intranasal or oral routes of administration) when the 
physician counsels the patient/family; first administration (single or 
combination vaccine/toxoid), per day) and 90473 (Immunization 
administration by intranasal or oral route; one vaccine (single or 
combination vaccine/toxoid)).
    Similarly, we are also proposing to crosswalk the PE values for CPT 
code 90472 (Immunization administration (includes percutaneous, 
intradermal, subcutaneous, or intramuscular injections); each 
additional vaccine (single or combination vaccine/toxoid) (List 
separately in addition to code for primary procedure)) to CPT codes 
90468 (Immunization administration younger than age 8 years (includes 
intranasal or oral routes of administration) when the physician 
counsels the patient/family; each additional administration (single or 
combination vaccine/toxoid), per day (List separately in addition to 
code for primary procedure)) and 90474 (Immunization administration by 
intranasal or oral route; each additional vaccine (single or 
combination vaccine/toxoid) (List separately in addition to code for 
primary procedure)).

I. Refinement Panel Process

    As discussed in the November 25, 1992 PFS final rule (57 FR 55938), 
we adopted a refinement panel process to assist us in reviewing the 
public comments on interim physician work RVUs for CPT codes with that 
status in each year and developing final work values for the subsequent 
year. Our decision to convene multispecialty panels of physicians was 
based on our need to balance the interests of those who commented on 
the work RVUs against the budgetary and redistributive effects that 
could occur if we accepted extensive increases in work RVUs across a 
broad range of services. The refinement panel reviews and discusses the 
work involved in each procedure and then each member individually rates 
the work of the procedure. Since 1992, the refinement panels' 
recommendation to change a work value or to retain the interim value 
has hinged solely on the outcome of a statistical test on the ratings 
(an F-test).
    Depending on the number and range of codes that public commenters, 
typically specialty societies, request be subject to refinement, we 
establish refinement panels with representatives from 4 groups of 
physicians: Clinicians representing the specialty most identified with 
the procedures in question; physicians with practices in related 
specialties; primary care physicians; and contractor medical directors 
(CMDs). Typically the refinement panels meet in the summer prior to the 
promulgation of the final rule finalizing the RVUs for the codes.

[[Page 40105]]

Typical panels have included 8 to 10 physicians across the 4 groups. 
Over time, the statistical test used to evaluate the RVU ratings of 
individual panel members have become less reliable as the physicians in 
each group have tended to select a previously discussed value, rather 
than independently evaluating the work. In addition, the resulting RVUs 
have occasionally exhibited rank order anomalies (that is, a more 
complex procedure is assigned lower RVUs than a less complex 
procedure).
    Most recently, section 1848(c)(2)(K) of the Act (as added by 
section 3134 of the ACA) authorizes the Secretary to review potentially 
misvalued codes and make appropriate adjustments to the relative 
values. In addition, MedPAC has encouraged CMS to critically review the 
values assigned to the services under the PFS. MedPAC has stated its 
belief that CMS has historically relied too heavily on specialty 
societies to identify services that are misvalued by accepting so many 
recommendations of the RUC.
    We believe the refinement panel process continues to provide 
stakeholders with a meaningful opportunity for review and discussion of 
the interim work RVUs with a clinically diverse group of experts that 
then provides informed recommendations to CMS. Therefore, we would like 
to continue the refinement process, including the established 
composition that includes representatives from the 4 groups of 
physicians, but with administrative modification and clarification. 
Specifically, for refinement panels beginning in CY 2011 (that is, for 
those codes with CY 2011 interim values that would be subject to 
refinement during CY 2011), we are proposing to eliminate the use of 
the F-test and instead base revised RVUs on the median work value of 
the panel members' ratings. We believe this approach will simplify the 
refinement process administratively, while resulting in a final panel 
recommendation that reflects the summary opinion of the panel members 
based on a commonly used measure of central tendency that is not 
significantly affected by outlier values. In addition, we are 
clarifying that we have the final authority to set the RVUs, and 
therefore, may make adjustments to the work RVUs resulting from 
refinement if policy concerns warrant their modification.

J. Remote Cardiac Monitoring Services (CPT Codes 93012, 93229, 93268, 
and 93271)

    In the CY 2010 PFS final rule with comment period (74 FR 61755), we 
indicated that we continued to have concerns about the issue of 
developing PE RVUs for services that are utilized 24 hours a day, 7 
days a week (24/7), such as those that require certain monitoring 
system equipment. The PE equipment methodology was developed for 
equipment that is in use during standard physician's office business 
hours and not this type of 24/7 equipment. We stated that we would 
conduct further analysis of this issue. Services that were contractor-
priced in CY 2009 remained contractor-priced in CY 2010. We also 
indicated that any proposed changes will be communicated through future 
rulemaking.
    Since publication of the CY 2010 PFS final rule with comment 
period, we have focused our additional analysis on four of the CPT 
codes that commenters have brought to our attention because they 
involve concurrent, remote, 24/7 attended monitoring of multiple 
patients from a central location: CPT code 93012 (Telephonic 
transmission of post-symptom electrocardiogram rhythm strip(s); 24-hour 
attended monitoring, per 30 day period of time; tracing only); CPT code 
93229 (Wearable mobile cardiovascular telemetry with 
electrocardiographic recording, concurrent computerized real time data 
analysis and greater than 24 hours of accessible ECG data storage 
(retrievable with query) with ECG triggered and patient selected events 
transmitted to a remote attended surveillance center for up to 30 days; 
technical support for connection and patient instructions for use, 
attended surveillance, analysis and physician prescribed transmission 
of daily and emergent data reports); CPT code 93268 (Wearable patient 
activated electrocardiographic rhythm derived event recording with 
presymptom memory loop, 24-hour attended monitoring, per 30 day period 
of time; includes transmission, physician review and interpretation); 
and CPT 93271 code (Wearable patient activated electrocardiographic 
rhythm derived event recording with presymptom memory loop, 24-hour 
attended monitoring, per 30 day period of time; monitoring, receipt of 
transmissions, and analysis).
    Of these four codes, CPT code 93229 is currently contractor-priced 
in CY 2010, meaning that the local Medicare contractors determine 
payment rates for the service within the PFS geographic areas in their 
jurisdiction. The three services that are currently nationally-priced 
on the PFS are in the first year of a 4-year transition to lower 
payment rates based on the use of the PPIS data adopted in the CY 2010 
PFS final rule with comment period. We refer readers to section II.A.2. 
of this proposed rule for a description of the general PFS PE 
methodology that is the basis for the following discussion of 
approaches to establishing PE RVUs for these four CPT codes.
    We examined several alternative methods for developing PE RVUS upon 
which PFS payment rates for these four CPT codes could be based. Each 
of these services involves transmission of information from multiple 
patients who wear individual monitoring devices that transmit patient-
specific information to centralized equipment that is simultaneously in 
use for multiple patients. We believe it would be most consistent with 
the principles underlying the PFS PE methodology to classify the 
centralized monitoring equipment as an indirect cost since it is 
servicing multiple patients at the same time. After classifying this 
equipment as an indirect cost, we used our standard methodology to 
calculate an indirect practice cost index value for each code based on 
the PE/HR survey data of the historical mix of specialties providing 
these services. Establishing payment rates for these codes based on 
this approach would result in decreases in the payment rates for these 
services, including the typical contractor's price for CPT code 93229. 
For the three services that are nationally priced, these decreases 
would be relative to the lower payment rates based on the use of the 
PPIS data after the 4-year transition.
    We also received PE/HR data from the Remote Cardiac Services 
Provider Group (RCSPG), a group of IDTF suppliers of these types of 
services. For sensitivity analysis purposes, we substituted these data 
for the PE/HR data of the specialties performing these services, while 
continuing to treat the centralized monitoring equipment as an indirect 
cost. We found that establishing payment rates for these codes based on 
the approach of using the submitted RCSPG PE/HR data would again result 
in decreases in the payment rates for these services, including the 
typical contractor's price for CPT code 93229. As in the prior 
alternative, the decreases for the nationally priced codes would be 
relative to the payment rates reflecting the 4-year transition to the 
PPIS data.
    Although we believe that it would be most consistent with the 
principles underlying the PE methodology to classify the centralized 
monitoring equipment as an indirect cost, we also performed a 
sensitivity analysis of the payment rates if the centralized monitoring 
equipment were classified as a direct cost. In this simulation, we

[[Page 40106]]

assumed that the centralized monitoring equipment was in year-round 
use, 7 days per week for 24 hours per day. We found that establishing 
payment rates for these codes based on the approach of classifying the 
centralized monitoring equipment as a direct cost would again result in 
decreases in the payment rates for the nationally priced services 
relative to their payment rates after the 4-year transition to the use 
of the PPIS data, as well as to the typical current contractor's price 
for CPT code 93229.
    Finally, we considered proposing contractor-pricing for all four of 
these services for CY 2011. However, we are cognizant of past public 
comments on this issue that have requested that all of these services 
be priced nationally on the PFS, including the one service (CPT code 
93229) that is currently contractor-priced.
    We also considered that the services currently priced nationally on 
the PFS are scheduled to receive lower payment rates under the 4-year 
transition to the PPIS data and that the contractor's price for CPT 
93229 was recently reduced in the area where the majority of the 
billings for this service currently occur.
    After taking all these factors into consideration, we are not 
proposing CY 2011 methodological or direct cost input changes for CPT 
codes 93012, 93268, or 93271--the services that are currently 
nationally priced under the PFS. We are also proposing to continue 
contractor-pricing for CPT 93229 for CY 2011. We continue to be 
interested in public comments on this issue, including responses to our 
analysis of alternative approaches to establishing PE RVUs for 24/7 
services, and further discussion of the issues we have identified in 
our alternative pricing methodologies. In addition, while we have 
focused the 24/7 services analysis to date on developing the PE RVUs 
for remote cardiac monitoring services, there may be 24/7 services in 
other areas of medicine, either currently paid under the PFS or in 
development for the future. Therefore, we are also interested in public 
comments on these current or emerging 24/7 services, including 
descriptions of the similarities or differences between these other 
services and remote cardiac monitoring services, particularly with 
respect to the issues we have identified in our analysis of alternative 
approaches to establishing PE RVUs for remote cardiac monitoring 
services under the PFS.

IV. Medicare Telehealth Services for the Physician Fee Schedule

A. Billing and Payment for Telehealth Services

1. History
    Prior to January 1, 1999, Medicare coverage for services delivered 
via a telecommunications system was limited to services that did not 
require a face-to-face encounter under the traditional model of medical 
care. Examples of these services included interpretation of an x-ray or 
electrocardiogram or electroencephalogram tracing, and cardiac 
pacemaker analysis.
    Section 4206 of the BBA provided for coverage of, and payment for, 
consultation services delivered via a telecommunications system to 
Medicare beneficiaries residing in rural health professional shortage 
areas (HPSAs) as defined by the Public Health Service Act. 
Additionally, the BBA required that a Medicare practitioner 
(telepresenter) be with the patient at the time of a teleconsultation. 
Further, the BBA specified that payment for a teleconsultation had to 
be shared between the consulting practitioner and the referring 
practitioner and could not exceed the fee schedule payment which would 
have been made to the consultant for the service provided. The BBA 
prohibited payment for any telephone line charges or facility fees 
associated with the teleconsultation. We implemented this provision in 
the CY 1999 PFS final rule with comment period (63 FR 58814).
    Effective October 1, 2001, section 223 of the Medicare, Medicaid 
and SCHIP Benefits Improvement Protection Act of 2000 (Pub. L. 106-554) 
(BIPA) added a new section 1834(m) to the Act which significantly 
expanded Medicare telehealth services. Section 1834(m)(4)(F)(i) of the 
Act defines Medicare telehealth services to include consultations, 
office visits, office psychiatry services, and any additional service 
specified by the Secretary, when delivered via a telecommunications 
system. We first implemented this provision in the CY 2002 PFS final 
rule with comment period (66 FR 55246). Section 1834(m)(4)(F)(ii) 
required the Secretary to establish a process that provides for annual 
updates to the list of Medicare telehealth services. We established 
this process in the CY 2003 PFS final rule with comment period (67 FR 
79988).
    As specified in regulations at Sec.  410.78(b), we generally 
require that a telehealth service be furnished via an interactive 
telecommunications system. Under Sec.  410.78(a)(3), an interactive 
telecommunications system is defined as multimedia communications 
equipment that includes, at a minimum, audio and video equipment 
permitting two-way, real-time interactive communication between the 
patient and the practitioner at the distant site. Telephones, facsimile 
machines, and electronic mail systems do not meet the definition of an 
interactive telecommunications system. An interactive 
telecommunications system is generally required as a condition of 
payment; however, section 1834(m)(1) of the statute does allow the use 
of asynchronous ``store-and-forward'' technology in delivering these 
services when the originating site is a Federal telemedicine 
demonstration program in Alaska or Hawaii. As specified in regulations 
at Sec.  410.78(a)(1), store and forward means the asynchronous 
transmission of medical information from an originating site to be 
reviewed at a later time by the practitioner at the distant site.
    Medicare telehealth services may be provided to an eligible 
telehealth individual notwithstanding the fact that the individual 
practitioner providing the telehealth service is not at the same 
location as the beneficiary. An eligible telehealth individual means an 
individual enrolled under Part B who receives a telehealth service 
furnished at an originating site. As specified in BIPA, originating 
sites are limited under section 1834(m)(3)(C) of the statute to 
specified medical facilities located in specific geographic areas. The 
initial list of telehealth originating sites included the office of a 
practitioner, a critical access hospital (CAH), a rural health clinic 
(RHC), a federally qualified health center (FQHC) and a hospital. More 
recently, section 149 of the Medicare Improvements for Patients and 
Providers Act of 2008 (Pub. L. 110-275) (MIPPA) expanded the list of 
telehealth originating sites to include hospital-based renal dialysis 
centers, skilled nursing facilities (SNFs), and community mental health 
centers (CMHCs). In order to serve as a telehealth originating site, 
these sites must be located in an area designated as a rural health 
professional shortage area (HPSA), in a county that is not in a 
metropolitan statistical area (MSA), or must be an entity that 
participates in a Federal telemedicine demonstration project that has 
been approved by (or receives funding from) the Secretary of Health and 
Human Services as of December 31, 2000. Finally, section 1834(m) of the 
statute does not require the eligible telehealth individual to be

[[Page 40107]]

presented by a practitioner at the originating site.
2. Current Telehealth Billing and Payment Policies
    As noted above, Medicare telehealth services can only be furnished 
to an eligible telehealth beneficiary in an originating site. An 
originating site is defined as one of the specified sites where an 
eligible telehealth individual is located at the time the service is 
being furnished via a telecommunications system. In general, 
originating sites must be located in a rural HPSA or in a county 
outside of an MSA. The originating sites authorized by the statute are 
as follows:

 Offices of a physician or practitioner
 Hospitals
 CAHs
 RHCs
 FQHCs
 Hospital-Based or Critical Access Hospital-Based Renal 
Dialysis Centers (including Satellites)
 SNFs
 CMHCs

    Currently approved Medicare telehealth services include the 
following:

 Initial inpatient consultations
 Follow-up inpatient consultations
 Office or other outpatient visits
 Individual psychotherapy
 Pharmacologic management
 Psychiatric diagnostic interview examination
 End Stage Renal Disease (ESRD) related services
 Individual medical nutrition therapy (MNT)
 Neurobehavioral status exam
 Individual health and behavior assessment and intervention 
(HBAI)

    In general, the practitioner at the distant site may be any of the 
following, provided that the practitioner is licensed under State law 
to furnish the service being furnished via a telecommunications system:

 Physician
 Physician assistant (PA)
 Nurse practitioner (NP)
 Clinical nurse specialist (CNS)
 Nurse midwife
 Clinical psychologist
 Clinical social worker
 Registered dietitian or nutrition professional

    Practitioners furnishing Medicare telehealth services are located 
at a distant site, and they submit claims for telehealth services to 
the Medicare contractors that process claims for the service area where 
their distant site is located. Section 1834(m)(2)(A) of the Act 
requires that a practitioner who furnishes a telehealth service to an 
eligible telehealth individual be paid an amount equal to the amount 
that the practitioner would have been paid if the service had been 
furnished without the use of a telecommunications system. Distant site 
practitioners must submit the appropriate HCPCS procedure code for a 
covered professional telehealth service, appended with the -GT (Via 
interactive audio and video telecommunications system) or -GQ (Via 
asynchronous telecommunications system) modifier. By reporting the -GT 
or -GQ modifier with a covered telehealth procedure code, the distant 
site practitioner certifies that the beneficiary was present at a 
telehealth originating site when the telehealth service was furnished. 
The usual Medicare deductible and coinsurance policies apply to the 
telehealth services reported by distant site practitioners.
    Section 1834(m)(2)(B) of the Act provides for payment of a facility 
fee to the originating site. To be paid the originating site facility 
fee, the provider or supplier where the eligible telehealth individual 
is located must submit a claim with HCPCS code Q3014 (Telehealth 
originating site facility fee), and the provider or supplier is paid 
according to the applicable payment methodology for that facility or 
location. The usual Medicare deductible and coinsurance policies apply 
to HCPCS code Q3014. By submitting HCPCS code Q3014, the originating 
site authenticates that it is located in either a rural HPSA or non-MSA 
county or is an entity that participates in a Federal telemedicine 
demonstration project that has been approved by (or receives funding 
from) the Secretary of Health and Human Services as of December 31, 
2000 as specified in section 1834(m)(4)(C)(i)(III) of the Act.
    As described above, certain professional services that are commonly 
furnished remotely using telecommunications technology, but that do not 
require the patient to be present in-person with the practitioner when 
they are furnished, are covered and paid in the same way as services 
delivered without the use of telecommunications technology when the 
practitioner is in-person at the medical facility furnishing care to 
the patient. Such services typically involve circumstances where a 
practitioner is able to visualize some aspect of the patient's 
condition without the patient being present and without the 
interposition of a third person's judgment. Visualization by the 
practitioner can be possible by means of x-rays, electrocardiogram or 
electroencephalogram tracings, tissue samples, etc. For example, the 
interpretation by a physician of an actual electrocardiogram or 
electroencephalogram tracing that has been transmitted via telephone 
(that is, electronically, rather than by means of a verbal description) 
is a covered physician's service. These remote services are not 
Medicare telehealth services as defined under section 1834(m). Rather, 
these remote services that utilize telecommunications technology are 
considered physicians' services in the same way as services that are 
furnished in-person without the use of telecommunications technology; 
they are paid under the same conditions as in-person physicians' 
services (with no requirements regarding permissible originating 
sites), and should be reported in the same way (that is, without the -
GT or -GQ modifier appended).

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

    As noted above, 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 with 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 
requested 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 in-person 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 in-person delivery of the requested service.

[[Page 40108]]

    Since establishing the process to add or remove services from the 
list of approved telehealth services, we have added the following to 
the list of Medicare telehealth services: Individual HBAI services; 
psychiatric diagnostic interview examination; ESRD services with 2 to 3 
visits per month and 4 or more visits per month (although we require at 
least 1 visit a month to be furnished in-person by a physician, CNS, 
NP, or PA in order to examine the vascular access site); individual 
MNT; neurobehavioral status exam; and initial and follow-up inpatient 
telehealth consultations for beneficiaries in hospitals and skilled 
nursing facilities (SNFs).
    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 2010 are considered 
for the CY 2012 proposed rule. Each request for adding a service to the 
list of Medicare telehealth services must include any supporting 
documentation the requester wishes us to consider as we review the 
request. Because we use the annual PFS rulemaking process as a vehicle 
for making changes to the list of Medicare telehealth services, 
requestors should be advised that any information submitted is subject 
to public disclosure for this purpose. For more information on 
submitting a request for an addition to the list of Medicare telehealth 
services, including where to mail these requests, we refer readers to 
the CMS Web site at http://www.cms.gov/telehealth/.

C. Submitted Requests for Addition to the List of Telehealth Services 
for CY 2011

    We received requests in CY 2009 to add the following services as 
Medicare telehealth services effective for CY 2011: (1) Individual 
kidney disease education (KDE) services; (2) individual diabetes self-
management training (DSMT) services; (3) group KDE, DSMT, MNT, and HBAI 
services; (4) initial, subsequent, and discharge day management 
hospital care services; (5) initial, subsequent, discharge day 
management, and other nursing facility care services; (6) 
neuropsychological testing services; (7) speech-language pathology 
services; and (8) home wound care services. The following presents a 
discussion of these requests, including our proposals for additions to 
the CY 2011 telehealth list.
1. Individual KDE Services
    The American Society of Nephrology, Dialysis Patient Citizens, 
AMGEN, and Kidney Care Partners submitted requests to add individual 
KDE services, reported by HCPCS code G0420 (Face-to-face educational 
services related to the care of chronic kidney disease; individual, per 
session, per one hour), to the list of approved telehealth services for 
CY 2011 on a category 1 basis.
    Individual KDE services, covered under the new Medicare KDE benefit 
effective for services furnished beginning in CY 2010, are defined as 
face-to-face educational services provided to a patient with stage IV 
chronic kidney disease (CKD). We believe the interaction between a 
practitioner and a beneficiary receiving individual KDE services is 
similar to the education, assessment, and counseling elements of 
individual MNT services, reported by HCPCS code G0270 (Medical 
nutrition therapy; reassessment and subsequent intervention(s) 
following second referral in same year for change in diagnosis, medical 
condition or treatment regimen (including additional hours needed for 
renal disease), individual, face to face with the patient, each 15 
minutes); CPT code 97802 (Medical nutrition therapy; initial assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes); and CPT code 97803 (Medical nutrition therapy; re-assessment 
and intervention, individual, face-to-face with the patient, each 15 
minutes), all services that are currently on the telehealth list.
    Therefore, we are proposing to add HCPCS code G0420 to the list of 
telehealth services for CY 2011 on a category 1 basis. Consistent with 
this proposal, we are also proposing to revise our regulations at Sec.  
410.78(b) and Sec.  414.65(a)(1) to include individual KDE as a 
Medicare telehealth service.
2. Individual DSMT Services
    The Tahoe Forest Health System and the Marshfield Clinic submitted 
requests to add individual DSMT services, reported by HCPCS code G0108 
(Diabetes outpatient self-management training services, individual, per 
30 minutes), to the list of telehealth services for CY 2011 on a 
category 1 basis. In the CY 2009 PFS final rule with comment period (73 
FR 69743), we stated that we believe individual DSMT services are not 
analogous to individual MNT services because of the element of skill-
based training that is encompassed within individual DSMT services that 
is not an aspect of individual MNT services (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 have stated our 
belief that DSMT, whether provided to an individual or a group, must be 
evaluated as a category 2 service as specified in the CY 2009 PFS 
proposed rule (73 FR 38516). We have considered several previous 
requests to add DSMT to the list of Medicare telehealth services. We 
have not added individual DSMT to the list of telehealth services 
because we believe that skill-based training, such as teaching patients 
how to inject insulin, would be difficult to accomplish effectively 
without the physical presence of the teaching practitioner (70 FR 45787 
and 70157, and 73 FR 38516 and 69743).
    In considering the new request to add individual DSMT services to 
the list of telehealth services in CY 2011, we have taken into account 
requestors' argument that individual DSMT services are highly similar 
to individual MNT services and that injection training constitutes just 
a small proportion of DSMT services. Except for the component of 
individual DSMT services that involves instruction in self-
administration of injectable drugs for eligible beneficiaries, we agree 
with the requestors that individual DSMT services are similar to 
individual MNT services, which are currently on the list of Medicare 
telehealth services. We note that Medicare coverage of DSMT services 
was initially authorized in the Balanced Budget Act of 1997. After more 
than a decade of Medicare coverage, the most recent information shows 
that DSMT continues to be significantly underutilized in the context of 
the eligible population of Medicare beneficiaries. While we are 
uncertain to what extent geographic barriers to care contribute to this 
underutilization, given the morbidity associated with poorly managed 
diabetes and the growing evidence-base regarding effective DSMT 
services, we believe it is very important to facilitate Medicare 
beneficiary access to these underutilized services. While we have 
previously been concerned about treating the components of DSMT 
services differently in the context of considering DSMT services for 
the telehealth list, we believe that our concern regarding the skill-
based injection training component of DSMT services can be addressed by 
imposing a requirement that a minimum portion of the training be 
furnished in-person.

[[Page 40109]]

We note that for beneficiaries who meet the coverage criteria, Medicare 
covers 10 hours of DSMT services in the year following the initial 
training, as described in the Medicare Benefit Policy Manual (Pub. 100-
02, Chapter 15, Section 300.3). Taking into consideration the initial 
year coverage of DSMT services, we are proposing that a minimum of 1 
hour of instruction in injection training must be furnished in-person 
during the year following the initial DSMT service. Imposing this 
condition would allow us to expand access to DSMT services by adding 
individual DSMT services to the list of telehealth services, while 
ensuring effective injection training for beneficiaries.
    Therefore, we are proposing to add HCPCS code G0108 to the list of 
telehealth services beginning in CY 2011. We are also proposing that, 
as a condition of payment for individual DSMT services furnished as 
telehealth services to an eligible telehealth individual, a minimum of 
1 hour of in-person instruction in the self-administration of 
injectable drugs must be furnished to the individual during the year 
following the initial DSMT service. The injection training may be 
furnished through either individual or group DSMT services. By 
reporting the -GT or -GQ modifier with HCPCS code G0108 as a telehealth 
service, the distant site practitioner would certify that the 
beneficiary has received or will receive 1 hour of in-person DSMT 
services for purposes of injection training during the year following 
the initial DSMT service. Consistent with this proposal, we are 
proposing to revise our regulations at Sec.  410.78(b) and Sec.  
414.65(a)(1) to include individual DSMT services as a Medicare 
telehealth service, with the exception of 1 hour of in-person 
instruction in self-administration of injectable drugs which must be 
furnished to the eligible telehealth individual as individual or group 
DSMT services during the year following the initial DSMT service.
    We note that, as specified in Sec.  410.141(e), individual DSMT 
services may be furnished by a physician, individual, or entity that 
furnishes other services for which direct Medicare payment may be made 
and that submits necessary documentation to, and is accredited by, an 
accreditation organization approved by CMS. However, consistent with 
the statutory requirements of section 1834(m)(1) of the Act and as 
provided in Sec.  410.78(b)(1) and (b)(2) of our regulations, Medicare 
telehealth services, including individual DSMT furnished as a 
telehealth service, could only be furnished by a licensed PA, NP, CNS, 
certified nurse-midwife, clinical psychologist, clinical social worker, 
or registered dietitian or nutrition professional.
3. Group KDE, MNT, DSMT, and HBAI Services
    The American Society of Nephrology, Dialysis Patient Citizens, 
AMGEN, Tahoe Forest Health Systems, Kidney Care Partners, the American 
Telemedicine Association, and the Marshfield Clinic submitted requests 
to add one or more of the following group services to the telehealth 
list for CY 2011:
     Group KDE services, reported by HCPCS code G0421 (Face-to-
face educational services related to the care of chronic kidney 
disease; group, per session, per one hour);
     Group MNT services, reported by CPT code 97804 (Medical 
nutrition therapy; group (2 or more individual(s)), each 30 minutes);
     Group DSMT services, reported by HCPCS code G0109 
(Diabetes outpatient self-management training services, group session 
(2 or more), per 30 minutes); and/or
     Group HBAI services, reported by CPT code 96153 (Health 
and behavior intervention, each 15 minutes, face-to-face; group (2 or 
more patients)) and 96154 (Health and behavior intervention, each 15 
minutes, face-to-face; family (with the patient present)).
    When furnished as individual services, HBAI and MNT services are 
currently on the list of Medicare telehealth services. Furthermore, we 
are proposing to add individual KDE and DSMT services to the list of 
Medicare telehealth services beginning in CY 2011 as described above.
    In the CY 2007 and CY 2010 PFS rulemaking cycles (70 FR 45787 and 
70157, and 74 FR 33543 and 61764), we stated that we did not believe 
that group services could be appropriately delivered through 
telehealth. We have observed that currently there are no group services 
approved as Medicare telehealth services and that there is a different 
interactive dynamic between the practitioner and his or her patients in 
group services as compared to individual services. We previously have 
considered requests to add various group services to the list of 
Medicare telehealth services on a category 2 basis because we have 
believed that, especially given the interactive dynamic between 
practitioners and their patients, group services are not similar to 
other services on the list of Medicare telehealth services. Therefore, 
we have maintained that it is necessary to evaluate the addition of 
group services by comparing diagnostic findings or therapeutic 
interventions when services are furnished via telehealth versus when 
services are furnished in-person.
    We continue to believe that the group dynamic may be a critical and 
defining element for certain services, and that this characteristic 
precludes many group services from being considered on a category 1 
basis for addition to the list of Medicare telehealth services. For 
example, we believe that due to the therapeutic nature of the group 
dynamic that is integral to group psychotherapy, group psychotherapy is 
fundamentally different from other Medicare telehealth services and, 
therefore, could not be considered on a category 1 basis for addition 
to the telehealth services list. For the same reason, in the absence of 
evidence to the contrary, we do not believe group psychotherapy 
services could be appropriately delivered through telehealth.
    However, upon further consideration, with regard to the particular 
group education and training services for which we received requests 
for addition to the Medicare telehealth services list, we believe the 
group dynamic is not central to the core education and training 
components of these particular services, specifically DSMT, MNT, KDE, 
and HBAI services. We believe that these group services are 
sufficiently similar to the individual, related services that are 
already on the telehealth services list or are proposed for addition 
beginning in CY 2011. Specifically, we believe that for these group 
services, which consist principally of an information exchange for the 
purpose of education and training, the roles of, and interactions 
between, the patients and the practitioner are sufficiently similar to 
the related individual education and training services that the 
services can be furnished appropriately as a telehealth service.
    Therefore, we are proposing to add HCPCS code G0421 for group KDE 
services, CPT code 97804 for group MNT services, HCPCS code G0109 for 
group DSMT services, and CPT codes 96153 and 96154 for group HBAI 
services to the Medicare telehealth services list on a category 1 
basis. Furthermore, because the concerns we raised above regarding 
adequate injection training with the addition of individual DSMT are 
also present for group DSMT, we are proposing to require the same 
minimum of 1 hour of in-person instruction for injection training 
within the year following the initial DSMT service for any beneficiary 
that receives DSMT services via

[[Page 40110]]

telehealth. By reporting the -GT or -GQ modifier with HCPCS code G0109, 
the distant site practitioner would certify that the beneficiary has 
received or will receive 1 hour of in-person DSMT services for purposes 
of injection training during the year following the initial DSMT 
service. Consistent with this proposal to add these group education and 
training services, we are also proposing to revise our regulations at 
Sec.  410.78(b) and Sec.  414.65(a)(1) to include group KDE, MNT, DSMT, 
and HBAI services as Medicare telehealth services, with the exception 
of 1 hour of in-person instruction of individual or group DSMT services 
in the year following the initial DSMT service.
    As described above for individual DSMT services, we note that group 
DSMT services may be furnished by a physician, individual, or entity 
that furnishes other services for which direct Medicare payment may be 
made and that submits necessary documentation to, and is accredited by, 
an accreditation organization approved by CMS, as specified in Sec.  
410.141(e) for DSMT services. However, consistent with the statutory 
requirements of section 1834(m)(1) of the Act and as provided in Sec.  
410.78(b)(1) and (b)(2) of our regulations, Medicare telehealth 
services, including group DSMT furnished as a telehealth service, could 
only be furnished by a licensed PA, NP, CNS, certified nurse-midwife, 
clinical psychologist, clinical social worker, or registered dietitian 
or nutrition professional.
4. Initial, Subsequent, and Discharge Day Management Hospital Care 
Services
    The University of Louisville School of Medicine, the American 
Telemedicine Association, and Mille Lacs Health System submitted 
various requests to add initial hospital care services (reported by CPT 
codes 99221 (Level 1 initial hospital care), 99222 (Level 2 initial 
hospital care), and 99223 (Level 3 initial hospital care)); subsequent 
hospital care services (reported by CPT codes 99231 (Level 1 subsequent 
hospital care), 99232 (Level 2 subsequent hospital care), and 99233 
(Level 3 subsequent hospital care)); and/or hospital discharge day 
management services (reported by CPT codes 99238 (Hospital discharge 
day management; 30 minutes or less) and 99239 (Hospital discharge day 
management; more than 30 minutes) to the Medicare telehealth services 
list beginning in CY 2011, generally on a category 1 basis. Some of the 
requestors also recommended that we limit the delivery of these 
services through telehealth to the provision of services to patients 
with a psychiatric diagnosis or to those treated in a psychiatric 
hospital or licensed psychiatric bed.
    We appreciate the recommendations of the requestors to 
substantially expand the list of Medicare telehealth services. The 
requestors submitted a number of studies regarding the outcomes of 
telehealth services in caring for patients with psychiatric diagnoses. 
However, we note that the CPT codes for hospital care services are used 
to report care for hospitalized patients with a variety of diagnoses, 
including psychiatric diagnoses. We do not believe it would be 
appropriate to add services to the telehealth list only for certain 
diagnoses because the service described by a HCPCS code is essentially 
the same service, regardless of the patient's diagnosis. When 
evaluating the addition of services for telehealth on a category 1 
basis, our focus is on the roles of, and interactions among, the 
beneficiary, the physician or practitioner, and the telepresenter (if 
applicable), which generally are similar across diagnoses for services 
that may be reported with the same HCPCS codes. Even in the unique case 
of certain ESRD services, we limited additions to the list of Medicare 
telehealth services based on the appropriateness of certain specific 
codes, taking into consideration the full service descriptions (69 FR 
47511). Therefore, we continue to believe that it is most appropriate 
to consider additions to the list of telehealth services based on the 
overall suitability of the services described by the relevant HCPCS 
codes to delivery through telehealth.
    In the CY 2005, CY 2008, and CY 2009 PFS rulemakings (69 FR 47510 
and 66276, 72 FR 38144 and 66250, and 73 FR 38517 and 69745, 
respectively), we did not add initial, subsequent, or discharge day 
management hospital care services to the list of approved telehealth 
services because of our concern regarding the use of telehealth for the 
ongoing evaluation and management (E/M) for the generally high acuity 
of hospital inpatients. While we continue to have some concern in this 
area, we also share the requestors' interest in improving access for 
hospitalized patients to care furnished by treating practitioners. 
Therefore, we have reevaluated these services in the context of the CY 
2011 requests, including considering the possibility that these 
services could be added on a category 1 basis based on their 
resemblance to services currently on the telehealth list, such as 
initial and follow-up inpatient telehealth consultations. The following 
presents a discussion of our review of the subcategories of hospital 
care services included in these requests.
    Currently, one of the three codes for an initial hospital care 
service (specifically CPT codes 99221, 99222, or 99223) is reported for 
the first hospital inpatient E/M visit to the patient by the admitting 
or a consulting practitioner when that visit is furnished in-person. In 
addition, we note that currently there are several HCPCS G-codes on the 
Medicare telehealth services list that may be reported for initial and 
follow-up inpatient consultations through telehealth, specifically 
HCPCS codes G0406 (Follow-up inpatient telehealth consultation, 
limited, physicians typically spend 15 minutes communicating with the 
patient via telehealth); G0407 (Follow-up inpatient telehealth 
consultation, intermediate, physicians typically spend 25 minutes 
communicating with the patient via telehealth); G0408 (Follow-up 
inpatient telehealth consultation, complex, physicians typically spend 
35 minutes or more communicating with the patient via telehealth); 
G0425 (Initial inpatient telehealth consultation, typically 30 minutes 
communicating with the patient via telehealth); G0426 (Initial 
inpatient telehealth consultation, typically 50 minutes communicating 
with the patient via telehealth); and G0427 (Initial inpatient 
telehealth consultation, typically 70 minutes or more communicating 
with the patient via telehealth).
    While initial inpatient consultation services are currently on the 
list of approved telehealth services, there are no services on the 
current list of telehealth services that resemble initial hospital care 
for an acutely ill patient by the admitting practitioner who has 
ongoing responsibility for the patient's treatment during the hospital 
course. Therefore, we are unable to consider initial hospital care 
services on a category 1 basis for the telehealth list.
    We have reviewed the documentation submitted in support of adding 
the initial hospital care codes to the Medicare telehealth services 
list as category 2 requests. Most of the studies provided by the 
requestors were specific to the treatment of patients with particular 
diagnoses. Additionally, the studies were not specific to initial 
hospital care visits by admitting practitioners. Finally, most of the 
studies concluded that more research was required in order to establish 
medical equivalence between telehealth and in-person services. 
Therefore, we received no information that provides robust support for 
the addition of initial hospital care services to the approved 
telehealth list on a category 2 basis. The

[[Page 40111]]

initial hospital care codes describe the first visit to the 
hospitalized patient by the admitting practitioner who may or may not 
have seen the patient in the decision-making phase regarding 
hospitalization. We believe it is critical that the initial hospital 
visit by the admitting practitioner be conducted in-person to ensure 
that the practitioner with ongoing treatment responsibility 
comprehensively assesses the patient's condition upon admission to the 
hospital through a thorough in-person examination. Therefore, we are 
not proposing to add initial hospital care services to the Medicare 
telehealth services list for CY 2011.
    We have again considered adding subsequent hospital care services 
reported by CPT codes 99231 through 99233 to the telehealth list for CY 
2011 on a category 1 basis. In the CY 2005 and CY 2008 PFS proposed 
rules (69 FR 47511 and 72 FR 38155), we stated that the potential 
acuity of patients in the hospital setting precludes consideration of 
subsequent hospital visits as similar to existing telehealth services. 
However, as stated earlier, we also note that HCPCS codes for initial 
and follow-up inpatient consultation services are on the list of 
telehealth services. These E/M services are furnished to high acuity 
hospitalized patients, although not by the admitting practitioner 
himself or herself. However, in light of the increasingly prevalent 
care model that entails multidisciplinary team care for patients with 
complex medical illnesses that involve multiple body systems, 
consulting practitioners may often play a key, intensive, and ongoing 
role in caring for hospitalized patients. Therefore, we believe that 
subsequent hospital care visits by a patient's admitting practitioner 
may sufficiently resemble follow-up inpatient consultation services to 
consider these subsequent hospital care services on a category 1 basis 
for the telehealth list. While we still believe the potential acuity of 
hospital inpatients is greater than those patients likely to receive 
currently approved Medicare telehealth services, we also believe that 
it would be appropriate to permit some subsequent hospital care 
services to be furnished through telehealth in order to ensure that 
hospitalized patients have frequent encounters with their admitting 
practitioner. However, we also continue to believe that the majority of 
these visits should be in-person to facilitate the comprehensive, 
coordinated, and personal care that medically volatile, acutely ill 
patients require on an ongoing basis.
    Therefore, we are proposing that subsequent hospital care services, 
specifically CPT codes 99231, 99232, and 99233, be added to the list of 
telehealth services on a category 1 basis for CY 2011, but with some 
limitations on the frequency that these services may be furnished 
through telehealth. Because of our concerns regarding the potential 
acuity of hospital inpatients, we are proposing to limit the provision 
of subsequent hospital care services through telehealth to once every 3 
days. We are confident that admitting practitioners will continue to 
make appropriate in-person visits to all patients who need such care 
during their hospitalization. Consulting practitioners should continue 
to use the inpatient telehealth consultation HCPCS G-codes, 
specifically G0406, G0407, G0408, G0425, G0426, or G0427 when reporting 
consultations furnished to inpatients via telehealth.
    Consistent with this proposal, we are proposing to revise Sec.  
410.78(b) and Sec.  414.65(a)(1) to include subsequent hospital care 
services as Medicare telehealth services, with the limitation of one 
telehealth subsequent hospital care service every 3 days.
    We also considered adding hospital discharge day management 
services to the list of telehealth services. These services, reported 
by CPT codes 99238 and 99239, include the final examination of the 
patient, discussion of the hospital stay, instructions for continuing 
care to all relevant caregivers, and preparation of discharge records, 
prescriptions, and referral forms. These services are furnished when a 
practitioner deems it medically reasonable and necessary to assess a 
patient's readiness for discharge and to prepare a patient for 
discharge from an acute care environment to a less intensive setting. 
There are no services on the current list of telehealth services that 
resemble such preparation of a patient for discharge. We believe it is 
especially important that, if a practitioner furnishes a discharge day 
management service, the service be furnished in-person in order to 
allow the practitioner to comprehensively assess the patient's status 
in preparation for discharge so that the patient will have a higher 
likelihood of making a successful transition to the less intensive 
setting. Therefore, we are not considering hospital discharge day 
management services for addition to the Medicare telehealth services 
list on a category 1 basis.
    We have reviewed the documentation submitted by requestors in 
support of adding these codes to the Medicare telehealth services list 
on a category 2 basis. Most of the submitted studies were specific to 
the treatment of patients with specific diagnoses and were not specific 
to discharge services. Additionally, most of the studies concluded that 
more research was required in order to establish medical equivalence 
between telehealth and in-person services. The submitted documentation 
did not provide the necessary evidence to alter our previous conclusion 
that hospital discharge day management services should be provided in-
person in light of the acuity of hospitalized patients, their typically 
complex post-hospitalization care needs, and the importance of patient 
education by the admitting practitioner who had ongoing responsibility 
for the patient's treatment during the hospital stay. Therefore, we are 
not proposing to add hospital discharge day management services to the 
list of telehealth services for CY 2011.
5. Initial, Subsequent, Discharge Day Management, and Other Nursing 
Facility Care Services
    The American Telemedicine Association and the Marshfield Clinic 
submitted requests to add nursing facility care codes, covering the 
spectrum of initial (reported by CPT codes 99304 (Level 1 initial 
nursing facility care), 99305 (Level 2 initial nursing facility care) 
and 99306 (Level 3 initial nursing facility care)); subsequent 
(reported by CPT codes 99307 (Level 1 subsequent nursing facility 
care), 99308 (Level 2 subsequent nursing facility care), 99309 (Level 3 
subsequent nursing facility care), and 99310 (Level 4 subsequent 
nursing facility care)); discharge day management (reported by CPT 
codes 99315 (Nursing facility discharge day management; 30 minutes or 
less) and 99316 (Nursing facility discharge day management; more than 
30 minutes)); and other (reported by CPT code 99318 (Evaluation and 
management of a patient involving an annual nursing facility 
assessment)) services, to the Medicare telehealth services list 
beginning in CY 2011. The requests for the addition of these services 
expressed concerns regarding limited access to care if we do not allow 
these services to be furnished through telehealth, and requested that 
CMS acknowledge the recent Congressional inclusion of nursing 
facilities as telehealth originating sites by adding these codes to the 
list of Medicare telehealth services.
    In the CY 2010 PFS proposed and final rules (74 FR 33544 and 74 FR 
61762), we discussed concerns about potential disparities in patient 
acuity between nursing facility services and the current list of 
Medicare telehealth

[[Page 40112]]

services. We have also declined to add HCPCS codes to the Medicare 
telehealth services list that are used exclusively to describe 
Federally-mandated nursing facility visits. As discussed in the CY 2010 
PFS proposed rule (74 FR 33543), the long-term care regulations at 
Sec.  483.40(c) require that residents of SNFs receive initial and 
periodic personal visits. These regulations ensure that at least a 
minimal degree of personal contact between a practitioner and a SNF 
resident is maintained, both at the point of admission to the facility 
and periodically during the course of the resident's stay. We continue 
to believe that these federally-mandated visits should be conducted in-
person, and not as Medicare telehealth services. Therefore, in the CY 
2010 PFS final rule with comment period, we revised Sec.  410.78 to 
preclude physicians and other practitioners from furnishing the 
physician visits required under Sec.  483.40(c) through telehealth.
    We reviewed the use of telehealth for each of the subcategories of 
nursing facility services included in the requests for CY 2011. We 
identified the E/M services that fulfill Federal requirements for 
personal visits under Sec.  483.40(c), and we are not proposing for CY 
2011 to add any HCPCS codes to the Medicare telehealth services list 
that are used exclusively to describe these Federally-mandated visits. 
These codes include the CPT codes for initial nursing facility care 
(CPT codes 99304 through 99306) that are used to report the initial E/M 
visit that fulfills Federally-mandated requirements under Sec.  
483.40(c) and other nursing facility service (CPT code 99318) that is 
only payable by Medicare if the visit is substituted for a federally-
mandated visit under Sec.  483.40(c).
    The nursing facility discharge day management services reported 
under CPT code 99315 and 99316 are E/M visits that prepare a nursing 
facility resident for discharge from the facility. There are no 
Medicare requirements that such a service be furnished. If a 
practitioner chooses to furnish this service, we continue to believe 
that an in-person visit is most appropriate in order to ensure the 
resident is prepared for discharge from the nursing facility. These 
services are furnished when a practitioner deems it medically 
reasonable and necessary to assess a patient's readiness for and to 
prepare a patient being discharged from the monitored nursing facility 
environment to another typically less intensive setting. There are no 
services on the current list of telehealth services that resemble such 
preparation of a patient for discharge. As in the case of hospital 
discharge day management services, we believe it is especially 
important that, if a practitioner furnishes a nursing facility 
discharge day management service, the service be furnished in-person. 
The practitioner must be able to comprehensively assess the patient's 
status in preparation for discharge so that the patient will have a 
higher likelihood of making a successful transition from the nursing 
facility to another setting. Therefore, we are not considering nursing 
facility discharge day management services for addition to the Medicare 
telehealth services list on a category 1 basis. When we considered the 
addition of these services under category 2, we had no evidence that 
nursing facility discharge services furnished through telehealth are 
equivalent to in-person discharge services. Therefore, we are not 
proposing to add nursing facility discharge day management services to 
the CY 2011 telehealth list.
    Subsequent nursing facility services, reported by CPT codes 99307 
through 99310, may be used to report either a federally-mandated 
periodic visit under Sec.  483.40(c) or another E/M visit, prior to or 
after the initial nursing facility care visit, as long as the 
subsequent nursing facility care visit is medically reasonable and 
necessary for the resident's care. While we continue to believe that 
many SNF residents have complex medical care needs, we believe that it 
is appropriate to consider the addition of these codes to the 
telehealth list on a category 1 basis. As we state above in the context 
of our discussion of subsequent hospital care services, the HCPCS codes 
for initial and follow-up inpatient consultation services for nursing 
facility patients are on the list of Medicare telehealth services, and 
subsequent nursing facility services are similar to those services. 
These E/M services are furnished to high acuity, complex SNF patients, 
although not by the admitting practitioner himself or herself. 
Therefore, we believe that subsequent nursing facility visits by a 
patient's admitting practitioner sufficiently resemble follow-up 
inpatient consultation services to consider them on a category 1 basis 
for the telehealth list. We have concluded that it would be appropriate 
to permit some subsequent nursing facility care services to be 
furnished through telehealth to ensure that complex nursing facility 
patients have frequent encounters with their admitting practitioner, 
although we continue to believe that the federally-mandated visits 
should be in-person to facilitate the comprehensive, coordinated, and 
personal care that these complex patients require on an ongoing basis.
    Therefore, we are proposing that subsequent nursing facility care 
services, specifically CPT codes 99307, 99308, 99309 and 99310, be 
added to the list of Medicare telehealth services on a category 1 basis 
beginning in CY 2011, with some limitations on furnishing these 
services through telehealth. Because of our concerns regarding the 
potential acuity and complexity of SNF inpatients, we are proposing to 
limit the provision of subsequent nursing facility care services 
furnished through telehealth to once every 30 days. We are especially 
interested in public comments, including any evidence regarding 
patterns of high quality care and clinical outcomes, regarding this 
proposal to limit the provision of subsequent nursing facility care 
services furnished through telehealth to once every 30 days. We remain 
committed to ensuring that SNF inpatients receive appropriate in-person 
visits and that Medicare pays only for medically reasonable and 
necessary care. Currently and continuing in CY 2011, an unlimited 
number of initial and follow-up consultation services may be furnished 
through telehealth to these patients so we believe that only a limited 
number of subsequent nursing facility care services by the admitting 
practitioner would be appropriate for SNF inpatients. Finally, we are 
specifying that subsequent nursing facility care services reported for 
a Federally-mandated periodic visit under Sec.  483.40(c) may not be 
furnished through telehealth. In light of this proposal for CY 2011, we 
remain confident that admitting practitioners will continue to make 
appropriate in-person visits to all patients who need such care during 
their SNF stay.
    Consistent with this proposal, we are proposing to revise Sec.  
410.78(b) and Sec.  414.65(a)(1) to include subsequent nursing facility 
care services as Medicare telehealth services, with the limitation of 
one telehealth subsequent nursing facility care service every 30 days. 
Federally-mandated periodic visits may not be furnished through 
telehealth, as specified currently in Sec.  410.78(e)(2).
6. Neuropsychological Testing
    The American Telemedicine Association submitted a request to add 
neuropsychological testing services, described by CPT codes 96119 
(Neuropsychological testing (e.g., Halstead-Reitan Neuropsychological 
Battery, Wechsler Memory Scales and Wisconsin Card Sorting Test), per 
hour

[[Page 40113]]

of the psychologist's or physician's time, both face-to-face time 
administering tests to the patient and time interpreting these test 
results and preparing the report); and 96119 (Neuropsychological 
testing (e.g., Halstead-Reitan Neuropsychological Battery, Wechsler 
Memory scales and Wisconsin Card Sorting Test), with qualified health 
care professional interpretation and report, administered by 
technician, per hour of technician time, face-to-face), to the list of 
telehealth services for CY 2011 based on their similarity to other 
telehealth services.
    In the CY 2008 PFS final rule with comment period (72 FR 66251), we 
stated that we have received conflicting comments and data regarding 
the appropriateness of furnishing neuropsychological testing via 
telehealth. While we appreciate the recent request for addition of 
these same services to the Medicare telehealth services list, we do not 
believe that these services are similar to services currently on the 
Medicare telehealth services list and, therefore, we conclude that they 
would not be appropriate for consideration or addition under category 
1. In this year's request for the addition of the these services, we 
received no information to indicate that the diagnostic findings of 
neuropsychological testing through telehealth are similar to those 
based upon in-person testing, and therefore, that testing through 
telehealth does not affect the patient's diagnosis. Therefore, we are 
not proposing to add neuropsychological testing services to the list of 
approved Medicare telehealth services for CY 2011.
7. Speech-Language Pathology Services
    The Marshfield Clinic submitted a request to add various speech-
language pathology services to the list of approved telehealth services 
for CY 2011. Speech-language pathologists are not permitted under 
section 1842(b)(18)(C) of the Act to furnish and receive payment for 
Medicare telehealth services. Therefore, we are not proposing to add 
any speech-language pathology services to the list of Medicare 
telehealth services for CY 2011. For further discussion of these 
services in the context of telehealth, we refer readers to the CY 2005 
and CY 2007 PFS proposed and final rules with comment period (69 FR 
47512 and 66276, and 71 FR 48995 and 69657).
8. Home Wound Care Services
    Wound Care Associates, LLC, submitted a request to add wound care 
in the home setting to the list of Medicare telehealth services. A 
patient's home is not permitted under current statute to serve as an 
originating site for Medicare telehealth services. Therefore, we are 
not proposing to add home wound care services to the list of Medicare 
telehealth services for CY 2011.

D. Summary of CY 2011 Telehealth Proposals

    In summary, we are proposing to add the following requested 
services to the list of Medicare telehealth services for CY 2011:
     Individual and group KDE services (HCPCS codes G0420 and 
G0421, respectively);
     Individual and group DSMT services, with a minimum of 1 
hour of in-person instruction to be furnished in the year following the 
initial DSMT service to ensure effective injection training (HCPCS 
codes G0108 and G0109, respectively);
     Group MNT and HBAI services (CPT codes 97804, and 96153 
and 96154, respectively);
     Subsequent hospital care services, with the limitation for 
the patient's admitting practitioner of one telehealth visit every 3 
days (CPT codes 99231, 99232, and 99233); and
     Subsequent nursing facility care services, with the 
limitation for the patient's admitting practitioner of one telehealth 
visit every 30 days (CPT codes 99307, 99308, 99309, and 99310).
    Furthermore, we are proposing to revise Sec.  410.78(b) and Sec.  
414.65(a)(1) accordingly. Specifically, we are proposing to add 
individual and group KDE services, individual and group DSMT services, 
group MNT services, group HBAI services, and subsequent hospital care 
and nursing facility care services to the list of telehealth services 
for which payment will be made at the applicable PFS payment amount for 
the service of the practitioner. In addition, we have reordered the 
listing of services in these two sections and removed ``initial and 
follow-up inpatient telehealth consultations furnished to beneficiaries 
in hospitals and SNFs'' in Sec.  410.78(b) because these are described 
by the more general term ``professional consultations'' that is in the 
same section. Finally, we are continuing to specify that the physician 
visits required under Sec.  483.40(c) may not be furnished as 
telehealth services.

V. Provisions of the Patient Protection and Affordable Care Act of 2010

    The following section addresses certain provisions of the Patient 
Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 
23, 2010, as amended by the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152) enacted on March 30, 2010 (collectively 
known as the Affordable Care Act (ACA)).

A. Section 3002: Improvements to the Physician Quality Reporting System

    Section 3002 of ACA makes a number of changes to the Physician 
Quality Reporting Initiative (PQRI), including authorizing incentive 
payments through 2014, and requiring a penalty beginning in 2015, for 
eligible professionals who do not satisfactorily submit quality data. 
For a more detailed discussion of the provisions of section 3002 of the 
ACA, please refer to section VI.G.1. of this proposed rule.

B. Section 3003: Improvements to the Physician Feedback Program and 
Section 3007: Value-based Payment Modifier Under the Physician Fee 
Schedule

1. Background
    As required under section 1848(n) of the Act, as added by section 
131(c) of MIPPA, we established and implemented by January 1, 2009, the 
Physician Resource Use Measurement & Reporting (RUR) Program for 
purposes of providing confidential reports to physicians that measure 
the resources involved in furnishing care to Medicare beneficiaries. 
Section 1848(n) of the Act also authorizes CMS to include information 
on the quality of care furnished to Medicare beneficiaries by a 
physician or group of physicians.
    We are continuing a phased implementation of the program. Phase I 
was discussed in the CY 2010 proposed and final rules (74 FR 33589, and 
74 FR 61844, respectively), and has been completed. Phase I consisted 
of several activities including extensive data analysis to inform 
decisions about topics such as measures, attribution, and risk 
adjustment and formative testing of report design with practicing 
physicians. We concluded Phase I by sending to individual practicing 
physicians in 12 geographic areas \1\ several hundred reports that 
contained per capita and episode-based cost information.
---------------------------------------------------------------------------

    \1\ The 12 geographic areas are: Boston, MA, Syracuse, NY, 
Northern New Jersey, Greenville, SC, Miami, FL, Little Rock, AR, 
Indianapolis, IN, Cleveland, OH, Lansing, MI, Phoenix, AZ, Seattle, 
WA, and Orange County, CA.
---------------------------------------------------------------------------

    Phase I of the Program focused on providing confidential feedback 
on resource use measures. Section 1848(n)(1)(A)(iii) of the Act states 
that the Secretary may also include information on the quality of care

[[Page 40114]]

furnished to Medicare beneficiaries by physicians (or groups of 
physicians) in the feedback reports. We believe that providing 
physicians with feedback on both quality and cost is consistent with 
the direction of other CMS value based purchasing (VBP) initiatives. As 
a result, we decided to include quality measures in Phase II of the 
program and, in particular, we considered measures used in PQRI and 
claims-based measures such as GEM measures (74 FR 61846).
    Section 1848(n)(1)(A)(ii) also states that the Secretary may 
provide reports at the physician group level. Accordingly, as part of 
Phase II of the program, we will also include reporting to group 
practices, defined as more than one physician practicing medicine 
together (74 FR 61846). In addition, we noted that the definition 
applies to the following types of physician groups: (1) Formally 
established single or multi-specialty group practices; (2) physicians 
practicing in defined geographic regions; and (3) physicians practicing 
within facilities or larger systems of care (74 FR 61846). As we 
continue with Phase II, we plan to report to both physician group 
practices and their affiliated practitioners, recognizing that many 
physicians practice in arrangements other than solo practices. We 
believe that using both group and individual level reporting will also 
allow us to gain experience with the sample size issues that arise when 
individual physicians have too few Medicare beneficiaries with specific 
conditions to generate reliable information. (See the CY 2010 final 
rule with comment period (74 FR 61844) for a detailed discussion of 
plans for Phase II.)
2. Effect of the ACA of 2010 on the Program
    The ACA contains two provisions relevant to the RUR program. 
Section 3003 continues the confidential feedback program and requires 
the Secretary, beginning in 2012, to provide reports that compare 
patterns of resource use of individual physicians to other physicians. 
In addition, section 3007 of the ACA requires the Secretary to apply a 
separate, budget-neutral payment modifier to the Fee-For-Service 
physician fee schedule payment formula. The payment modifier, which 
will be phased in beginning January 1, 2015 through January 1, 2017, 
will provide for differential payment under the fee schedule to a 
physician or groups of physicians, and later, possibly to other 
eligible professionals, based upon the relative quality and cost of 
care of their Medicare beneficiaries. Accordingly, our goal is to have 
Medicare physicians receive a confidential feedback report prior to 
implementation of the payment modifier. We view these two provisions as 
complementary, as we expect the work done for the confidential feedback 
program under section 3003 of the ACA will inform our implementation of 
the payment modifier under section 3007 of the ACA. The approach used 
in the confidential feedback reports will serve as the foundation for 
implementing the payment modifier. Specifically, throughout future 
phases of reports under the RUR program, we will continue to enhance 
our measures and methods and improve the content of the reports based 
on both our research and the feedback of stakeholders before the 
payment modifier begins to affect physician payments in 2015.
    We plan to engage in a large-scale effort to garner widespread 
stakeholder involvement with regard to how we continue to build and 
expand the confidential feedback program and transition to 
implementation of the payment modifier. We recognize that such a 
payment modifier may have an impact on the delivery of care to Medicare 
beneficiaries. Reports that will be produced in the future based on 
changes as a result of section 3003 of the ACA will contain both cost 
and quality data, and work done to improve these reports with regard to 
fair and actionable measures in each of these domains will aid our 
decision making in how to apply the payment modifier. We intend to seek 
stakeholder input on various aspects of program design, including cost 
and quality measures, methodologies for compositing measures, and 
feedback report content and delivery. Such feedback may be gathered 
through rulemaking, open door forums, or other mechanisms.
3. Phase II Proposed Changes
    We anticipate that reports in Phase II of the RUR Program will be 
distributed in the fall of 2010. We are proposing, however, several 
changes to the program parameters for Phase II that were finalized in 
prior rules. First, we plan to discontinue our use of commercially-
available proprietary episode grouping software. In particular, section 
3003 of the ACA requires that the Secretary develop a Medicare-specific 
episode grouper by January 1, 2012, the details of which must be made 
public. This grouper will address the limitations found in the 
proprietary software.
    We recognize that episode-specific cost information is meaningful 
and actionable for physicians, and we plan to provide such information 
in feedback reports after the public grouper software is developed. 
Prior to that, we may consider other potential interim options for 
grouping to provide such information. We believe that our use of 
proprietary episode grouping software in previous phases of the program 
had limitations. These software products were not intended for use with 
Medicare claims data, and we discovered several problems with the data 
outputs. Specifically, the groupers do not work well to create episodes 
for beneficiaries with multiple chronic conditions, which is a 
significant portion of Medicare beneficiaries.
    For example, when a beneficiary with a chronic disease is 
hospitalized for an acute condition, that beneficiary most likely also 
receives treatments unrelated to the condition for which he or she is 
hospitalized, but related to the chronic disease. The groupers, which 
are proprietary and often referred to as ``black boxes,'' do not enable 
users to understand the coding to determine how to accomodate these 
issues. Therefore, CMS had to make several decisions about how to pre-
process the claims data so that the groupers could recognize and 
attempt to deal with these issues in the clinical grouping logic. After 
report production in Phase I, we discovered several problems with the 
pre-processing, which resulted in inaccurate episode cost information 
being disseminated.
    Until a Medicare-specific episode grouping software is developed, 
we plan to produce reports for Phase II that contain per capita cost 
information. More specifically, instead of episode-specific cost 
information, we plan to provide overall per capita cost information, as 
well as per capita cost information for those beneficiaries with five 
common chronic diseases: (1) Diabetes, (2) congestive heart failure, 
(3) coronary artery disease, (4) chronic obstructive pulmonary disease, 
and (5) prostate cancer. This information will not be specific to the 
cost of treating the disease itself, but will provide total Part A/B 
per capita cost information, as well as service category breakdowns, 
for treating the subset of attributed beneficiaries with that disease.
    Second, while commenters have been generally supportive of 
including PQRI measures in the reports, we propose not including data 
from PQRI in the reports. The current support contractor for this 
program has only 2007 PQRI data. This was the first year of PQRI, and 
participation was still quite low. Because of the low number of 
physicians reporting under PQRI, and because providers have the 
flexibility to choose which measures to report under

[[Page 40115]]

PQRI, we believe it would be difficult to make meaningful peer 
comparisons for purposes of these reports. Instead, for Phase II, we 
propose using the claims-based measures developed by CMS in the 
Generating Medicare Physician Quality Performance Measurement Results 
(GEM) project.\2\ This is a core set of 12 process quality measures 
that can be calculated using only administrative claims data. However, 
in future phases of the program, we intend to explore the possibility 
of linking this program to the HITECH incentive program for meaningful 
use of electronic health records, and the group practice reporting 
option in PQRI. Both of these programs offer measures and measure sets, 
as well as methods of reporting data which may be more conducive to 
meaningful peer comparisons among physicians.
---------------------------------------------------------------------------

    \2\  http://www.cms.gov/GEM.
---------------------------------------------------------------------------

    Third, we propose to distribute reports electronically in Phase II, 
by leveraging the infrastructure used to distribute PQRI feedback 
reports. This infrastructure will enable groups to utilize an 
electronic portal to download their Phase II reports. Individual 
practitioners will be able to contact their MACs/fiscal intermediaries 
to receive an e-mailed copy of their reports. We have received feedback 
from physicians that the reports distributed in Phase I were too long 
and cumbersome to manage in hard copy. Our intent is a condensed report 
with electronic dissemination that allows for easier navigation. We are 
seeking public comment on the above proposals.
4. Implementation of Sections 3003 and 3007 of the ACA
    The Affordable Care Act provisions that we mention above contain 
several important implementation dates. In addition to developing an 
episode grouper by January 1, 2012, we are required to publish the cost 
and quality measures we intend to use in determining the payment 
modifier to be effective on January 1, 2012. We are also required to 
begin implementing the program parameters through rulemaking in 2013. 
The payment modifier is effective on January 1, 2015, with a phased 
implementation so that all physicians paid under the physician fee 
schedule will be subject to the modifier by January 1, 2017. On or 
after January 1, 2017, we have the authority to also apply the payment 
modifier to other eligible professionals.
    In anticipation of implementing sections 3003 and 3007 of the ACA, 
we intend to perform extensive data analysis and research, and to seek 
stakeholder input on issues related to cost and quality measures so 
that we can be prepared to publish, by January 1, 2012, those measures 
we intend to use for the payment modifier. We intend for the work done 
in determining measures for use in the payment modifier to inform the 
continued dissemination of confidential feedback reports to both 
individual physicians and physician groups. Specifically, the measures 
chosen for use in the payment modifier will be candidates for inclusion 
in future phases of the confidential feedback reports.
    As mentioned above, Phase I included reports to several hundred 
physicians. In Phase II we anticipate disseminating reports to about 40 
large physician groups and the approximately 2,000 physicians 
affiliated with those groups. We anticipate future phases of the 
reports to include additional dissemination to increasing numbers of 
practitioners and groups such that virtually every applicable Medicare 
practitioner receives a report prior to implementation of the payment 
modifier.
5. Comments Sought on Specific Statistical Issues Related to the ACA 
Sections 3003 and 3007
    We recognize that there are many important decisions to be made 
when implementing a program that compares physicians to their peers, 
especially when such information can lead to differential payment. 
Since the inception of the RUR program, all data have been price 
standardized which includes accounting for geographic adjustments. We 
have identified important statistical issues in previous rules, and as 
we have done in previous rules, CMS seeks input on several of these 
topics as they relate to future phases of reports. These include, but 
are not limited to: risk adjustment; attribution; benchmarking; peer 
groups; minimum case sizes; cost and quality measures; and compositing 
methods. To date, the public comments we have received have not led us 
to a single methodology to propose for dealing with any of these 
issues. Therefore, we do not make formal proposals in this proposed 
rule. Specific parameters of the RUR program are based on the most 
current information we have available to us. These parameters will 
continue to evolve and we will continue to evaluate them as the state 
of the art in these areas continues to improve. Therefore, we seek 
public comment on these issues.
a. Risk Adjustment
    The cost data used in Phase I will be risk adjusted. For the per 
capita costs, we used the Hierarchical Condition Categories (HCC) model 
developed for risk adjustment in Medicare Advantage plans. This model 
takes into account beneficiary characteristics such as age, sex, and 
Medicaid status, and then predicts costs for beneficiaries based on 
their unique mix of health conditions. Several other socioeconomic 
factors, such as the median income per capita in the county where the 
physician practices, were used. For the episode costs, we used the risk 
adjustment/severity levels in the proprietary grouper software.
    The cost data in Phase II are risk adjusted using the HCC model, 
but excluding the additional socioeconomic factors such as the median 
income per capita in the county where the physician practices, as 
mentioned above. Regression analyses indicated that these additional 
socioeconomic factors did little to improve the fit of the model, so we 
will not include them. And since there are no episode-based costs in 
Phase II--only annual per capita costs--the HCC model will be the only 
method used. Other methods of risk adjustment exist that we have not 
used, such as the CC (complications and comorbidities) and MCC (major 
complications and comorbidities) indicators implemented in the 2008 MS-
DRG system.
    The quality data included in Phase II will not be risk adjusted 
because the GEM measures are all clinical process measures, and it is 
generally accepted that such measures need not be risk adjusted. 
Beneficiaries should receive the indicated preventive services (for 
example, breast cancer screening) regardless of their demographic 
characteristics or presence or absence of health conditions.
    We seek comment on the appropriate method for risk adjusting cost 
data, as well as our reasoning for not risk adjusting clinical process 
quality measures.
b. Attribution
    Deciding which physician(s) is/are responsible for the care of 
which beneficiaries is an important aspect of measurement. CMS must 
strike a balance between only attributing cost information to 
physicians for the services they personally delivered, and attributing 
costs to physicians based on a more encompassing view of the services 
provided to each beneficiary so as to encourage better care 
coordination and accountability for patient outcomes.
    There are several methods that are generally used for attributing 
beneficiaries' costs to physicians for the purposes of measuring and 
comparing

[[Page 40116]]

performance. In Phase I, we used two different attribution 
methodologies. Half of the reports used the ``multiple-proportional'' 
attribution, in which a beneficiary's costs were summed, and then 
divided among the physicians who treated that beneficiary in the same 
proportion as their share of evaluation and management (E&M) services 
provided. The other half of the reports used the ``plurality-minimum'' 
method, in which a beneficiary's entire cost (either for the episode or 
for the year) was attributed to the physician who performed the 
plurality of the E&M services, subject to a minimum percentage (in that 
case, 10 percent).
    In Phase II reports, we plan to use the ``plurality-minimum'' 
method with a minimum percentage threshold of E&M services of 20 
percent for individual physicians and a minimum percentage threshold of 
E&M services of 30 percent of the E&M services for physician group 
level reports. These minimum threshold determinations were based on our 
analysis of the claims data. We recognize that other attribution 
methods exist, which may be either more or less appropriate given the 
aspect of care one is measuring. For example, it may be desirable to 
attribute the entire cost of a surgical episode to the performing 
surgeon. Another method for attributing costs is referred to as 
``multiple-even,'' in which the entire beneficiary's cost is attributed 
to multiple physicians who treated the beneficiary.
    We seek comment on the topic of attribution methodologies, 
including both of those we have already used in the program, as well as 
others that may or may not be mentioned here.
c. Benchmarking and Peer Groups
    Determining the relevant comparisons to make among physicians is 
also an important policy aspect of the program. CMS' research conducted 
in Phase I of the program indicated that physicians prefer to be 
compared only to those physicians most like them (that is, the 
narrowest peer group). We recognize the importance of fair comparison, 
but are also faced with the challenge that very narrow peer groups are 
most often not large enough to make statistically significant 
comparisons.
    The individual-level reports in both phases of the program have 
contained, or will contain, two peer group comparisons: (1) Physicians 
in the same specialty in the same geographic area; and (2) physicians 
in the same specialty across all 12 geographic areas. In each of these 
peer groups, a physician is shown where he or she falls on a 
distribution that specifically identified the 10th, 50th, and 90th 
percentiles. These benchmarks were finalized on an interim basis in the 
CY 2010 proposed rule (74 FR 33589).
    In determining applicability for episode measures in Phase I, we 
used a statistical reliability test. For per capita measures in Phase 
I, a physician had to have 20 or more beneficiaries to be measured and 
compared. There was no minimum peer group size requirement.
    The original MIPPA mandate requires CMS to make comparisons among 
physicians on cost, and gives the Secretary the authority to include 
comparisons on quality. The use of quality measures in the program was 
finalized in the CY 2010 final rule (74 FR 61846). In Phase II, 
comparisons with appropriate peer groups will be made for both cost and 
quality. Phase II reports will be provided only to those physicians 
that have 30 or more patients for each of the cost measures. For the 
quality measures, we plan to use the measure specifications in the GEM 
project to define minimum case sizes, which are at least 11 
beneficiaries. We also plan to impose a minimum peer group size of 30 
in Phase II for both the cost and quality measures. A minimum sample 
size of 30 is generally accepted in the research community as the 
minimum sample size to represent a group and make comparisons.
    We seek comment on the most appropriate and relevant peer groups 
for comparison, including the appropriate minimum case sizes and 
minimum peer group sizes. We are also interested in methodologies that 
can account for small case sizes.
d. Cost and Quality Measures and Compositing Methods
    As mentioned above, and in previous rules, section 
1848(n)(1)(A)(ii) of the Act gives the Secretary the authority to 
include both cost and quality information in the feedback reports. In 
Phase I, we chose to use only cost information, and used both per 
capita and episode cost measurements. As mentioned above, we previously 
finalized the use of quality measures in Phase II (74 FR 61846), but 
propose to discontinue our use of episode cost measurements. We have 
yet to include any composite measures of cost or quality in the 
feedback reports.
    Section 3007 of the ACA requires CMS to pay physicians 
differentially based on a modifier derived with composites of both 
quality and cost measures. Accordingly, we will need to devise a 
methodology in the future for compositing cost measures and quality 
measures, including considering, among other things, possible 
methodologies to develop a single score. In the future, episode-based 
cost measures developed using the public Medicare-specific episode 
grouper software also may be considered in developing a composite 
score. Other domains of measures that may be considered include 
patient-level utilization statistics (for example, emergency department 
visits per 1,000 patients) and structural measures such as whether a 
provider has adopted an electronic health record. We recognize that 
measure composites are methodologically and operationally complex and, 
therefore, we are seeking comment on this topic.
    We plan to continue a phased approach in the future. Although we 
will continue to move from phase-to-phase, any substantive changes to 
the RUR program will be implemented through rulemaking. We also 
anticipate continuing to gather feedback from stakeholders about the 
important data-driven policy topics that affect the feedback reports.

C. Section 3102: Extension of the Work Geographic Index Floor and 
Revisions to the Practice Expense Geographic Adjustment Under the 
Medicare Physician Fee Schedule, and Protections for Frontier States as 
Amended by Section 10324

    Section 1848(e)(1)(E) of the Act (as amended by section 3102(a) of 
the ACA) extends application of the 1.0 work GPCI floor for services 
furnished through December 31, 2010. In addition, section 1848(e)(1) of 
the Act (as amended by section 3102(b) of the ACA) specifies that for 
CY 2010 and CY 2011, the employee wage and rent portions of the PE GPCI 
must reflect only one-half of the relative cost differences for each 
locality compared to the national average and includes a ``hold 
harmless'' provision for any PFS locality that would receive a 
reduction to its PE GPCI resulting from the limited recognition of cost 
differences. Section 1848(e)(1) of the Act (as amended by section 
3102(b) of the ACA) also requires an analysis of the current methods 
and data sources used to determine the relative cost differences in 
office rent and employee wages compared to the national average and the 
cost share weights assigned to each PE GPCI component: Employee wages, 
office rent, and supplies. Finally, section 1848(e)(1) of the Act (as 
amended by section 3102(b) of the ACA) requires the Secretary to make 
appropriate adjustments to the PE GPCI by no later than January 1, 
2012. In addition, section 1848(e)(1) of the Act (as amended by section 
10324(c) of the ACA) establishes a 1.0 PE GPCI floor for services 
furnished in frontier states effective January 1, 2011. The

[[Page 40117]]

provisions of the ACA related to the GPCIs are discussed in detail in 
section II.D. of this proposed rule.

D. Section 3103: Extension of Exceptions Process for Medicare Therapy 
Caps

    Section 1833(g)(5) of the Act (as amended by section 3103 of the 
ACA) extends the exceptions process for therapy caps through December 
31, 2010. Therapy caps are discussed in detail in section III.A. of 
this proposed rule.

E. Section 3104: Extension of Payment for Technical Component of 
Certain Physician Pathology Services

    Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554), as 
amended by section 732 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173), section 104 of 
division B of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), section 104 of the Medicare, Medicaid, and SCHIP 
Extension Act of 2007 (MMSEA) (Pub. L. 110-173), and section 136 of the 
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 
(Pub. L. 110-275) is amended by section 3104 of the ACA to continue 
payment to independent laboratories for the TC of physician pathology 
services for fee-for-service Medicare beneficiaries who are inpatients 
or outpatients of a covered hospital through CY 2010. The technical 
component (TC) of physician pathology services refers to the 
preparation of the slide involving tissue or cells that a pathologist 
interprets. The professional component (PC) of physician pathology 
services refers to the pathologist's interpretation of the slide.
    When the hospital pathologist furnishes the PC service for a 
hospital patient, the PC service is separately billable by the 
pathologist. When an independent laboratory's pathologist furnishes the 
PC service, the PC service is usually billed with the TC service as a 
combined service.
    Historically, any independent laboratory could bill the Medicare 
contractor under the PFS for the TC of physician pathology services for 
hospital patients even though the payment for the costs of furnishing 
the pathology service (but not its interpretation) was already included 
in the bundled inpatient stay payment to the hospital. In the CY 2000 
PFS final rule with comment period (64 FR 59408 through 59409), we 
stated that this policy has contributed to the Medicare program paying 
twice for the TC service: (1) To the hospital, through the inpatient 
prospective payment rate, when the patient is an inpatient; and (2) to 
the independent laboratory that bills the Medicare contractor, instead 
of the hospital, for the TC service. While the policy also permits the 
independent laboratory to bill for the TC of physician pathology 
services for hospital outpatients, in this case, there generally would 
not be duplicate payment because we would expect the hospital to not 
also bill for the pathology service, which would be paid separately to 
the hospital only if the hospital were to specifically bill for it. We 
further indicated that we would implement a policy to pay only the 
hospital for the TC of physician pathology services furnished to its 
inpatients.
    Therefore, in the CY 2000 PFS final rule with comment period, we 
revised Sec.  415.130(c) to state that for physician pathology services 
furnished on or after January 1, 2001 by an independent laboratory, 
payment is made only to the hospital for the TC furnished to a hospital 
inpatient. Ordinarily, the provisions in the PFS final rule with 
comment period are implemented in the following year. However, the 
change to Sec.  415.130 was delayed 1 year (until January 1, 2001), at 
the request of the industry, to allow independent laboratories and 
hospitals sufficient time to negotiate arrangements.
    Full implementation of Sec.  415.130 was further delayed by section 
542 of the BIPA and section 732 of the MMA, which directed us to 
continue payment to independent laboratories for the TC of physician 
pathology services for hospital patients for a 2-year period beginning 
on January 1, 2001 and for CYs 2005 and 2006, respectively.
    In the CY 2007 MPFS final rule with comment period (71 FR 69624 and 
69788), we amended Sec.  415.130 to provide that, for services 
furnished after December 31, 2006, an independent laboratory may not 
bill the carrier for the TC of physician pathology services furnished 
to a hospital inpatient or outpatient. However, section 104 of the 
MIEA-TRHCA continued payment to independent laboratories for the TC of 
physician pathology services for hospital patients through CY 2007, and 
section 104 of the MMSEA further extended such payment through the 
first six months of CY 2008.
    Section 136 of the MIPPA extended the payment through CY 2009. Most 
recently, section 3104 of the ACA amended the prior legislation to 
extend the payment through CY 2010.
    Consistent with this legislative change, we are proposing to revise 
Sec.  415.130(d) to: (1) Amend the effective date of our payment policy 
to reflect that for services furnished after December 31, 2010, an 
independent laboratory may not bill the Medicare contractor for the TC 
of physician pathology services furnished to a hospital inpatient or 
outpatient; and (2) reformat this subsection into subparagraphs.

F. Sections 3105 and 10311: Extension of Ambulance Add-Ons

1. Amendment to Section 1834(l)(13) of the Act
    Section 146(a) of the MIPPA amended section 1834(l)(13)(A) of the 
Act to specify that, effective for ground ambulance services furnished 
on or after July 1, 2008 and before January 1, 2010, the ambulance fee 
schedule amounts for ground ambulance services shall be increased as 
follows:
     For covered ground ambulance transports which originate in 
a rural area or in a rural census tract of a metropolitan statistical 
area, the fee schedule amounts shall be increased by 3 percent.
     For covered ground ambulance transports which do not 
originate in a rural area or in a rural census tract of a metropolitan 
statistical area, the fee schedule amounts shall be increased by 2 
percent.
    Sections 3105(a) and 10311(a) of the ACA further amend section 
1834(l)(13)(A) of the Act to extend the payment add-ons described above 
for an additional year, such that these add-ons also apply to covered 
ground ambulance transports furnished on or after January 1, 2010 and 
before January 1, 2011. We are revising Sec.  414.610(c)(1)(i) to 
conform the regulations to this statutory requirement. This statutory 
requirement is self-implementing. A plain reading of the statute 
requires only a ministerial application of the mandated rate increase, 
and does not require any substantive exercise of discretion on the part 
of the Secretary. For further information regarding the extension of 
these payment add-ons, please see Transmittal 706 (Change Request 6972) 
dated May 21, 2010.
2. Amendment to Section 146(b)(1) of MIPPA
    Section 146(b)(1) of the MIPPA amended the designation of rural 
areas for payment of air ambulance services. The statute specified that 
any area that was designated as a rural area for purposes of making 
payments under the ambulance fee schedule for air ambulance services 
furnished on December 31, 2006, shall continue to be

[[Page 40118]]

treated as a rural area for purposes of making payments under the 
ambulance fee schedule for air ambulance services furnished during the 
period July 1, 2008 through December 31, 2009. Sections 3105(b) and 
10311(b) of the ACA amend section 146(b)(1) of MIPPA to extend this 
provision for an additional year, through December 31, 2010. 
Accordingly, for areas that were designated as rural on December 31, 
2006, and were subsequently re-designated as urban, we have re-
established the ``rural'' indicator on the ZIP Code file for air 
ambulance services, effective January 1, 2010 through December 31, 
2010. We are revising Sec.  414.610(h) to conform the regulations to 
this statutory requirement. This statutory requirement is self-
implementing. A plain reading of the statute requires only a 
ministerial application of a rural indicator, and does not require any 
substantive exercise of discretion on the part of the Secretary. For 
further information regarding the extension of this MIPPA provision, 
please see Transmittal 706 (Change Request 6972) dated May 21, 2010.
3. Amendment to Section 1834(l)(12) of the Act
    Section 414 of the MMA added paragraph (12) to section 1834(l) of 
the Act, which specified that in the case of ground ambulance services 
furnished on or after July 1, 2004, and before January 1, 2010, for 
which transportation originates in a qualified rural area (as described 
in the statute), the Secretary shall provide for a percent increase in 
the base rate of the fee schedule for such transports. The statute 
requires this percent increase to be based on the Secretary's estimate 
of the average cost per trip for such services (not taking into account 
mileage) in the lowest quartile of all rural county populations as 
compared to the average cost per trip for such services (not taking 
into account mileage) in the highest quartile of rural county 
populations. Using the methodology specified in the July 1, 2004 
interim final rule (69 FR 40288), we determined that this percent 
increase was equal to 22.6 percent. As required by the MMA, this 
payment increase was applied to ground ambulance transports that 
originated in a ``qualified rural area''; that is, to transports that 
originated in a rural area included in those areas comprising the 
lowest 25th percentile of all rural populations arrayed by population 
density. For this purpose, rural areas included Goldsmith areas (a type 
of rural census tract). Sections 3105(c) and 10311(c) of the ACA amend 
section 1834(l)(12)(A) of the Act to extend this rural bonus for an 
additional year through December 31, 2010. Therefore, as directed by 
the ACA, we are continuing to apply the rural bonus described above (in 
the same manner as in previous years), to ground ambulance services 
with dates of service on or after January 1, 2010 and before January 1, 
2011 where transportation originates in a qualified rural area.
    We are revising Sec.  414.610(c)(5)(ii) to conform the regulations 
to this statutory requirement. This statutory requirement is self-
implementing. The statute requires a one-year extension of the rural 
bonus (which was previously established by the Secretary), and does not 
require any substantive exercise of discretion on the part of the 
Secretary. For further information regarding the extension of this 
rural bonus, please see Transmittal 706 (Change Request 6972) dated May 
21, 2010.

G. Section 3107: Extension of Physician Fee Schedule Mental Health Add-
On

    Section 3107 of the ACA amends section 138(a)(1) of the MIPPA to 
continue the 5 percent increase in Medicare payment for specified 
mental health services through December 31, 2010. This payment increase 
was originally authorized under section 138 of the MIPPA from July 1, 
2008 until December 31, 2009. Accordingly, payment for the 24 
psychiatry CPT codes in Table 33, representing ``specified services,'' 
remains increased by 5 percent until December 31, 2010.

 Table 33--Specified Mental Health Services Subject to the Five Percent
         Increase in Medicare Payment Through December 31, 2010
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                   Office or Other Outpatient Facility
  Insight Oriented, Behavior Modifying and/or Supportive Psychotherapy
------------------------------------------------------------------------
90804 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an office or outpatient facility, approximately
 20 to 30 minutes face-to-face with the patient).
90805 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an office or outpatient facility, approximately
 20 to 30 minutes face-to-face with the patient; with medical evaluation
 and management services).
90806 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an office or outpatient facility, approximately
 45 to 50 minutes face-to-face with the patient).
90807 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an office or outpatient facility, approximately
 45 to 50 minutes face-to-face with the patient; with medical evaluation
 and management services).
90808 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an office or outpatient facility, approximately
 75 to 80 minutes face-to-face with the patient).
90809 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an office or outpatient facility, approximately
 75 to 80 minutes face-to-face with the patient; with medical evaluation
 and management services).
------------------------------------------------------------------------
                        Interactive Psychotherapy
------------------------------------------------------------------------
90810 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an office or outpatient facility,
 approximately 20 to 30 minutes face-to-face with the patient).
90811 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an office or outpatient facility,
 approximately 20 to 30 minutes face-to-face with the patient; with
 medical evaluation and management services).
90812 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an office or outpatient facility,
 approximately 45 to 50 minutes face-to-face with the patient).
90813 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an office or outpatient facility,
 approximately 45 to 50 minutes face-to-face with the patient; with
 medical evaluation and management services).
90814 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an office or outpatient facility,
 approximately 75 to 80 minutes face-to-face with the patient).

[[Page 40119]]

 
90815 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an office or outpatient facility,
 approximately 75 to 80 minutes face-to-face with the patient; with
 medical evaluation and management services).
------------------------------------------------------------------------
    Inpatient Hospital, Partial Hospital or Residential Care Facility
  Insight Oriented, Behavior Modifying and/or Supportive Psychotherapy
------------------------------------------------------------------------
90816 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an inpatient hospital, partial hospital or
 residential care setting, approximately 20 to 30 minutes face-to-face
 with the patient).
90817 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an inpatient hospital, partial hospital or
 residential care setting, approximately 20 to 30 minutes face-to-face
 with the patient; with medical evaluation and management services).
90818 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an inpatient hospital, partial hospital or
 residential care setting, approximately 45 to 50 minutes face-to-face
 with the patient).
90819 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an inpatient hospital, partial hospital or
 residential care setting, approximately 45 to 50 minutes face-to-face
 with the patient; with medical evaluation and management services).
90821 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an inpatient hospital, partial hospital or
 residential care setting, approximately 75 to 80 minutes face-to-face
 with the patient).
90822 (Individual psychotherapy, insight oriented, behavior modifying
 and/or supportive, in an inpatient hospital, partial hospital or
 residential care setting, approximately 75 to 80 minutes face-to-face
 with the patient; with medical evaluation and management services).
------------------------------------------------------------------------
                        Interactive Psychotherapy
------------------------------------------------------------------------
90823 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an inpatient hospital, partial hospital or
 residential care setting, approximately 20 to 30 minutes face-to-face
 with the patient).
90824 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an inpatient hospital, partial hospital or
 residential care setting, approximately 20 to 30 minutes face-to-face
 with the patient; with medical evaluation and management services).
90826 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an inpatient hospital, partial hospital or
 residential care setting, approximately 45 to 50 minutes face-to-face
 with the patient).
90827 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an inpatient hospital, partial hospital or
 residential care setting, approximately 45 to 50 minutes face-to-face
 with the patient; with medical evaluation and management services).
90828 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an inpatient hospital, partial hospital or
 residential care setting, approximately 75 to 80 minutes face-to-face
 with the patient).
90829 (Individual psychotherapy, interactive, using play equipment,
 physical devices, language interpreter, or other mechanisms of non-
 verbal communication, in an inpatient hospital, partial hospital or
 residential care setting, approximately 75 to 80 minutes face-to-face
 with the patient; with medical evaluation and management services).
------------------------------------------------------------------------

H. Section 3108: Permitting Physician Assistants To Order Post-Hospital 
Extended Care Services

    The ACA included a self-implementing provision relating to SNFs. 
Section 3108 adds physician assistants (PAs) to the list of 
practitioners (that is, physicians, nurse practitioners (NPs), and 
clinical nurse specialists) that can perform the required initial 
certification and periodic recertifications under section 1814(a)(2)(B) 
of the Act with respect to the SNF level of care. Accordingly, we are 
proposing to make appropriate revisions to include PAs in Sec.  
424.20(e)(2), in which we refer to NPs, clinical nurse specialists, and 
PAs collectively as ``physician extenders.''

I. Section 3111: Payment for Bone Density Tests

    Section 1848(b) of the Act (as amended by section 3111 of the ACA) 
changes the payment calculation for dual-energy X-ray absorptiometry 
(DXA) services described by two specified DXA CPT codes for CYs 2010 
and 2011. This provision requires payment for these services at 70 
percent of the product of the CY 2006 RVUs for these DXA codes, the CY 
2006 conversion factor (CF), and the geographic adjustment for the 
relevant payment year.
    Effective January 1, 2007, the CPT codes for DXA services were 
revised. The former DXA CPT codes 76075 (Dual energy X-ray 
absorptiometry (DXA), bone density study, one or more sites; axial 
skeleton (e.g., hips, pelvis, spine)); 76076 (Dual energy X-ray 
absorptiometry (DXA), bone density study, one or more sites; 
appendicular skeleton (peripheral) (e.g., radius, wrist, heel)); and 
76077 (Dual energy X-ray absorptiometry (DXA), bone density study, one 
or more sites; vertebral fracture assessment) were deleted and replaced 
with new CPT codes 77080, 77081, and 77082 that have the same 
respective code descriptors as the predecessor codes. Section 1848(b) 
of the Act (as amended by section 3111 of the ACA) specifies that the 
revised payment applies to two of the predecessor codes (CPT codes 
76075 and 76077) and ``any succeeding codes,'' which are, in this case, 
CPT codes 77080 and 77082.
    Section 1848(b) (as amended by section 3111 of the ACA) revises the 
payment for CPT codes 77080 and 77082 during CY 2010 and CY 2011. We 
have provided payment in CY 2010 under the PFS for CPT codes 77080 and 
77082 at the specified rates. We note that the RVUs included in 
Addendum B to this proposed rule reflect the RVUs that result from 
application of this statutory provision and the proposed CY 2011 
conversion factor. Because the statute specifies a payment amount for 
these services as described previously, we imputed RVUs for CY 2011 to 
include in Addendum B that would provide the specified payment amount 
for these services when multiplied by the CY 2011 CF. Specifically, we 
divided the payment amount based on the statutory requirements by the 
CY

[[Page 40120]]

2011 CF for this proposed rule, and distributed the imputed total RVUs 
across the work, PE, and malpractice components proportionately to 
their CY 2006 distribution. Therefore, these imputed RVUs for CPT codes 
77080 and 77082 are displayed in Addendum B to this proposed rule.

J. Section 3114: Improved Access for Certified Nurse-Midwife Services

    Section 1833(a)(1)(K) of the Act (as amended by section 3114 of the 
ACA) increases the amount of Medicare payment made under the PFS for 
certified nurse-midwife (CNM) services. Currently, section 
1833(a)(1)(K) of the Act specifies that the payment amount for CNM 
services is 80 percent of the lesser of the actual charge or 65 percent 
of the PFS amount. Under section 1833(a)(1)(K) of the Act (as amended 
by section 3114 of the ACA), effective for services furnished on or 
after January 1, 2011, Medicare payment for CNM services is increased 
to 100 percent of the PFS amount (or 80 percent of the actual charge if 
that is less). We are proposing to revise our regulations at Sec.  
414.54 (Payment for certified nurse-midwives' services) accordingly to 
reflect the increased payment for CNM services effective for services 
furnished on or after January 1, 2011.
    Although CNMs are currently paid under Medicare Part B for their 
professional services, there is no mention of CNMs under the regulatory 
provision that lists the providers and suppliers of services to whom 
payment is made under the Medicare Part B program. Accordingly, we are 
proposing to make a technical revision to Sec.  410.150 (To whom 
payment is made) to specify that Medicare Part B pays CNMs for 
professional services in all settings, as well as services and supplies 
furnished incident to those services.
    CNMs are authorized under the statute to be paid directly for 
services that they are legally authorized to furnish under State law 
and that are of the type that would otherwise be covered if furnished 
by a physician or incident to a physician's services. Additionally, 
there is no requirement under the CNM benefit for physician oversight 
or supervision. Accordingly, CNMs are authorized to personally furnish 
diagnostic tests that fall under their State scope of practice without 
regard to the levels of physician supervision required under the 
diagnostic tests benefit. Therefore, we are amending Sec.  410.32(b)(2) 
(Exceptions to the levels of physician supervision required for 
diagnostic tests) to include CNMs who furnish diagnostic tests that 
fall within their State scope of practice.

K. Section 3122: Extension of Medicare Reasonable Costs Payments for 
Certain Clinical Diagnostic Laboratory Tests Furnished to Hospital 
Patients in Certain Rural Areas

    Section 416 of the MMA established a reasonable cost payment for 
outpatient clinical diagnostic laboratory tests furnished by hospitals 
with fewer than 50 beds that are located in qualified rural areas for 
cost reporting periods beginning during the 2-year period beginning on 
July 1, 2004.
    Section 105 of the Tax Relief and Health Care Act of 2006 (Pub. L. 
109-432) (TRHCA) extended the 2-year period in section 416(b) of the 
MMA for an additional cost-reporting year.
    Section 107 of the Medicare, Medicaid, and SCHIP Extension Act of 
2007 (Pub. L. 110-173) (MMSEA) extended the time period for cost 
reporting periods beginning on July 1, 2004, and ending on June 30, 
2008. For some hospitals with cost reports that began as late as June 
30, 2008, this extension affected services performed as late as June 
29, 2009, because this was the date those cost reports would have 
closed.
    Section 3122 of the ACA reinstitutes reasonable cost payment for 
clinical diagnostic laboratory tests performed by hospitals with fewer 
than 50 beds that are located in qualified rural areas as part of their 
outpatient services for cost reporting periods beginning on or after 
July 1, 2010, through June 30, 2011. For some hospitals with cost 
reports that begin as late as June 30, 2011, this reinstitution of 
reasonable cost payment could affect services performed as late as June 
29, 2012, because this is the date those cost reports will close.

L. Section 3134: Misvalued Codes Under the Physician Fee Schedule

    Section 1848(c)(2)(K) of the Act (as added by section 3134 of the 
ACA) requires the Secretary to periodically review and identify 
potentially misvalued codes and make appropriate adjustments to the 
relative values of those services identified as being potentially 
misvalued. Section 1848(c)(2)(K) of the Act (as added by section 3134 
of the ACA) further specifies that the Secretary may use existing 
processes to receive recommendations on the review and appropriate 
adjustment of potentially misvalued services, as well as conduct 
surveys or implement other data collection activities, studies, or 
other analyses as the Secretary determines to be appropriate to 
facilitate the review and appropriate adjustment of the relative values 
of potentially misvalued codes. Finally, section 1848(c)(2)(L) of the 
Act (as added by section 3134 of the ACA) provides that the Secretary 
shall establish a process to validate relative value units under the 
PFS.
    We note that over the past several years, we have been working with 
the AMA RUC to identify approaches to addressing the issue of 
potentially misvalued services. Our proposed CY 2011 approaches to 
categories of potentially misvalued codes are discussed in section 
II.C. of this proposed rule.

M. Section 3135: Modification of Equipment Utilization Factor for 
Advanced Imaging Services

1. Adjustment in Practice Expense To Reflect Higher Presumed 
Utilization
    Section 1848(b)(4)(C) of the Act (as added by section 3135(a) of 
the ACA) adjusts the utilization rate for expensive diagnostic imaging 
equipment to 75 percent in the methodology for establishing the PE of 
the associated procedures. As discussed further in section II.A.3.a. of 
this proposed rule, effective January 1, 2011, we are proposing to 
assign a 75 percent equipment utilization rate assumption to expensive 
diagnostic imaging equipment used in services described by the HCPCS 
codes displayed in Table 4.
    In the CY 2010 PFS final rule with comment period (74 FR 61755), we 
finalized a policy to increase the utilization rate to 90 percent for 
expensive diagnostic equipment priced at more than $1 million (CT and 
MRI scanners), providing for a 4-year transition to the 90 percent 
utilization rate from the CY 2009 utilization rate of 50 percent. 
Therefore, in CY 2010 we were transitioning to a 90 percent equipment 
utilization rate assumption, applying a 25/75 blend of the new and old 
PE RVUs, respectively, for the associated procedures. Section 
1848(b)(4)(C) of the Act (as added by section 3135(a) of the ACA) does 
not provide for any further transition and, therefore, we are assigning 
a 75 percent equipment utilization rate assumption to CT and MRI 
scanners, effective January 1, 2011. Under section 1848(b)(4) of the 
Act (as amended by section 3135(a) of the ACA), this change in the 
equipment utilization rate assumption from CY 2010 to CY 2011 is not 
budget neutral under the PFS. The equipment utilization rate assumption 
remains at 50 percent for all other equipment included in the PFS PE 
methodology.

[[Page 40121]]

2. Adjustment in Technical Component ``Discount'' on Single-Session 
Imaging to Consecutive Body Parts
    Section 1848(b)(4)(D) of the Act (as added by section 3135(a) of 
the ACA) increases the established PFS multiple procedure payment 
reduction (MPPR) for the technical component (TC) of certain single-
session imaging services to consecutive body areas from 25 to 50 
percent, effective July 1, 2010, and section 1848(c)(2)(B)(v)(VI) of 
the Act (as added by section 3135(b) of the ACA) exempts this change 
from the PFS budget neutrality provision. This policy is discussed in 
detail in section II.C.4 of this proposed rule.
    Effective January 1, 2006, we adopted an MPPR of 25 percent for the 
technical component (TC) of certain diagnostic imaging procedures, 
applied to the second and subsequent services when more than one 
service in one of 11 imaging families, defined by imaging modality and 
contiguous body area, is furnished in a single session (70 FR 70261 
through 70263). The established imaging MPPR applies to TC-only 
services and to the TC of global services. It does not apply to 
professional component (PC) services. Under this policy, full payment 
was made for the TC of the highest priced procedure, while payment was 
made at 75 percent of the TC for each additional procedure. As of July 
1, 2010, and continuing in CY 2011, payment is made at 50 percent of 
the TC for each additional procedure, consistent with the statutory 
provision.

N. Section 3136: Revision for Payment for Power-Driven Wheelchairs

1. Payment Rules for Power Wheelchairs
    Durable medical equipment (DME) is defined at section 1861(n) of 
the Act and includes wheelchairs necessary for use in the patient's 
home. Section 1861(n) provides that wheelchairs included in the 
definition of DME ``may include a power-operated vehicle that may be 
appropriately used as a wheelchair, but only where the use of such a 
vehicle is determined to be necessary on the basis of the individual's 
medical and physical condition.'' The general Medicare payment rules 
for DME are set forth in section 1834(a) of the Act and 42 CFR part 
414, subpart D of our regulations. Section 1834(a)(1) of the Act and 
Sec.  414.210(a) of our regulations establish that the Medicare payment 
for a DME item is generally equal to 80 percent of either the lower of 
the actual charge or the fee schedule amount for the item. The 
beneficiary coinsurance is generally equal to 20 percent of either the 
lower of the actual charge or the fee schedule amount for the item once 
the deductible is met.
    For Medicare payment purposes, power wheelchairs or power-driven 
wheelchairs are classified under various codes in the Healthcare Common 
Procedure Coding System (HCPCS) based on the level of performance and 
functional characteristics of each power wheelchair that accommodate 
the specific needs of patients. Power wheelchairs classified under 
performance Groups 1 through 3 are covered under Medicare for use in 
the patient's home. Power wheelchair groups were established in 2006 
with the release of the Power Mobility Device Coding Guidelines 
published by the Durable Medical Equipment Regional Carriers (DMERCs) 
currently called the Durable Medical Equipment Medicare Administrative 
Contractors (DME MACs). The DMEPOS quality standards define certain 
power wheelchairs falling as ``complex, rehabilitative'' power 
wheelchairs, and these ``complex, rehabilitative'' power wheelchairs 
are treated as a separate product category for the purpose of 
implementing the DMEPOS Competitive Bidding Program (CBP) mandated by 
section 1847(a) of the Act. In both the quality standards and the 
DMEPOS competitive bidding program, complex, rehabilitative power 
wheelchairs are defined or identified as power wheelchairs classified 
as Group 2 power wheelchairs with power options that can accommodate 
rehabilitative features (for example, tilt in space) or Group 3 power 
wheelchairs.
    With the exception of power wheelchairs furnished during calendar 
year 1990, power wheelchairs have been paid under the capped rental 
category of DME since January 1, 1989. The payment rules for capped 
rental DME are provided at section 1834(a)(7) of the Act and Sec.  
414.229 of our regulations. Payment for these items is generally on a 
monthly rental basis, with rental payments capped at 13 months. After a 
13-month period of continuous use during which rental payments are 
made, the statute and regulations require that the supplier transfer 
title to the wheelchair to the beneficiary. In addition, effective for 
power wheelchairs furnished on or after January 1, 1***, section 
1834(a)(7) of the Act, as amended by section 4152(c)(2) (D) of the 
Omnibus Budget Reconciliation Act of 1990 (Pub. L. 101-508), mandates 
that the supplier of the power wheelchair offer the patient the option 
to purchase rather than rent the item. Since 1991, over 95 percent of 
Medicare beneficiaries have exercised this lump-sum purchase option for 
power wheelchairs.
    Consistent with payment for other DMEPOS items, Sec.  414.210(f)(1) 
permits payment for replacement of capped rental DME if the item has 
been in continuous use for the equipment's reasonable useful lifetime 
or is lost, stolen, or irreparably damaged. Section 414.210(f)(1) 
states the reasonable useful lifetime for equipment is determined 
through program instructions. In the absence of CMS program 
instructions, the carrier may determine the reasonable useful lifetime 
for equipment, but in no case can it be less than 5 years. Computation 
is based on when the equipment is delivered to the beneficiary, not the 
age of the equipment. If the beneficiary elects to obtain a new capped 
rental item after the reasonable useful lifetime, a new 13-month rental 
payment period would begin for the new equipment in accordance with the 
requirements of Sec.  414.229.
    Section 1834(a)(7)(A) of the Act, Sec.  414.229(b) and (c) set 
forth the current fee schedule amounts for capped rental items. 
Pursuant to section 1834(a)(7)(A)(i)(II) of the Act and Sec.  
414.229(b), the current rental fee schedule amounts for months 1 thru 3 
of the 13-month capped rental period are calculated to pay 10 percent 
of the average of allowed purchase price for the item. The rental fee 
schedule amounts for months 4 thru 13 of the 13-month capped rental 
period are calculated to pay 7.5 percent of the average of allowed 
purchase price for the item. The purchase price is determined 
consistent with section 1834(a)(8) of the Act and Sec.  414.229(c) and 
Sec.  414.220(e) and (f) and is updated by the covered item update, as 
required by section 1834(a)(14) of the Act and Sec.  414.229(d). The 
current purchase price amount for power wheelchairs acquired on a lump 
sum purchase basis is 100 percent of the purchase price calculated for 
the item when rented, as discussed above.
2. Revision of Payment Amounts for Power Wheelchairs
    Section 3136(a) of the ACA made several changes to section 
1834(a)(7)(A) of the Act. Section 3136(a)(1) of the ACA amends section 
1834(a)(7)(A) of the Act by adding a new subclause (III) to section 
1834(a)(7)(A)(i) of the Act. Subclause (III) revises the capped rental 
fee schedule amounts for all power wheelchairs, modifying the current 
payment structure of 10 percent of the purchase price for months 1 thru 
3 and 7.5 percent of that purchase price for months 4 through 13 that 
was discussed above. The rental fee schedule amount for months 1 thru 3 
of the 13-month

[[Page 40122]]

capped rental period for power wheelchairs is revised to 15 percent of 
the purchase price for the item. The rental fee schedule amounts for 
months 4 thru 13 of the 13-month capped rental period for power 
wheelchairs is revised to 6 percent of the purchase price for the item. 
The statutory provision does not change the methodologies used to 
calculate and subsequently update of the purchase price of power 
wheelchairs. Therefore, the methodology described above for determining 
the purchase price amounts will continue to apply.
    Pursuant to section 3136(c) of the ACA, the changes made by section 
3136(a) of the ACA apply to power-driven wheelchairs furnished on or 
after January 1, 2011.
    Furthermore, as discussed above, section 3136(c)(2) of the ACA 
states that the changes made by section 3136(a), including the new 
payment structure for power wheelchairs, do not apply to payment made 
for items and services furnished pursuant to contracts entered into 
under section 1847 of the Act for the DMEPOS CBP prior to January 1, 
2011 which applies to the implementation of the first round of the 
DMEPOS CBP. As a result, contract suppliers furnishing power 
wheelchairs in competitive bidding areas (CBA) pursuant to contracts 
entered into prior to January 1, 2011 as part of Round 1 of the DMEPOS 
CBP will continue to be paid based under the current regulations using 
10 percent of the purchase price for months 1 through 3 and 7.5 percent 
for each of the remaining months. As a result, we are proposing to make 
changes to Sec. Sec.  414.202, 414.229 and 414.408 to reflect these 
statutory requirements.
3. Elimination of Lump Sum Payment for Standard Power Wheelchairs
    Section 3136(a)(2) of the ACA further amends section 
1834(a)(7)(A)(iii) by inserting the term ``complex rehabilitative'' 
before the term ``power-driven wheelchairs.'' As a result, section 
1834(a)(7)(A)(iii) of the Act now extends the lump sum purchase option 
only to complex rehabilitative power wheelchairs. As discussed above, 
``complex rehabilitative power wheelchairs are power wheelchairs that 
are classified as: (1) Group 2 power wheelchairs with power options 
that can accommodate rehabilitative features (for example, tilt in 
space), or (2) Group 3 power wheelchairs. We consider all other power 
wheelchairs to be standard power wheelchairs. Therefore, we propose to 
interpret the language ``complex rehabilitative'' in section 
1834(a)(7)(A) of the Act consistent with this longstanding 
classification. As a result, the changes made by section 3136 to 
section 1834(a)(7)(A)(iii) eliminate the lump sum purchase option for 
standard power wheelchairs.
    Pursuant to section 3136(c) of the ACA, the changes made to section 
1834(a)(7)(A)(iii) of the Act apply to power-driven wheelchairs 
furnished on or after January 1, 2011. The lump sum purchase payment 
option will no longer extend to standard power driven wheelchairs 
furnished on or after January 1, 2011.
    Furthermore, section 3136(c)(2) of the ACA states that the changes 
made by section 3136(a), including the limitation of the lump sum 
purchase payment option to complex, rehabilitative power wheelchairs, 
do not apply to payment made for items and services furnished pursuant 
to contracts entered into under section 1847 of the Act for the DMEPOS 
CBP prior to January 1, 2011 pursuant to the implementation of the 
first round of the DMEPOS CBP. As a result, contract suppliers 
furnishing power wheelchairs in CBAs pursuant to contracts entered into 
prior to January 1, 2011 as part of Round 1 of the DMEPOS CBP must 
continue to offer beneficiaries the lump sum purchase option for all 
power wheelchairs.
    We are proposing changes to Sec. Sec.  414.229 and 414.408 to 
reflect our interpretation of these statutory requirements.

O. Section 3139: Payment for Biosimilar Biological Products

    Section 3139 of the ACA amends section 1847A of the Act to provide 
for Medicare payment of biosimilar biological products using the 
average sale price (ASP) methodology.
    Section 1847A of the Act, as amended by the ACA, defines a 
biosimilar biological product as a biological product approved under an 
abbreviated application for a license of a biological product that 
relies in part on data or information in an application for another 
biological product licensed under section 351 of the Public Health 
Service Act (PHSA). The reference biological product for a biosimilar 
biological product is defined by the statute as the biological product 
licensed under such section 351 of the PHSA that is referred to in the 
application of the biosimilar biological product.
    The ACAct also amends section 1847A of the Act to specify that the 
payment amount for a biosimilar biological product will be the sum of 
the following two amounts: the ASP of all NDCs assigned to the 
biosimilar biological drug product determined using the methodology in 
section 1847A(b)(6) of the Act, and 6 percent of the payment amount 
determined using the methodology in section 1847A(b)(4) of the Act for 
the corresponding reference biological product. Sections 7001 to 7003 
of the ACA also established a licensing pathway for biosimilar 
biological products, and in accordance with the statute, the effective 
date for Medicare ASP statutory provisions is July 1, 2010. We are 
proposing conforming regulation text changes at Sec.  414.902 and Sec.  
414.904 and we welcome comments on these conforming changes.
    We anticipate that as biosimilar biological drug products are 
approved, we will receive ASP sales data through the ASP data 
submission process and publish national payment amounts in a manner 
that is consistent with our current approach to other drugs and 
biologicals that are paid under section 1847A of the Act and set forth 
in 42 CFR part 414 subpart J. Until we have collected sufficient sales 
data, as reported by manufacturers, payment limits will be determined 
in accordance with the provisions in section 1847A(c)(4) of the Act. If 
no manufacturer data is collected, prices will be determined by local 
contractors using any available pricing information, including provider 
invoices. More information about the ASP payment methodology and the 
data submission process may be found on the CMS Web site at http://www.cms.gov/McrPartBDrugAvgSalesPrice/01_overview.asp and in this 
rule, in the section VI.A.1. of this proposed rule, ``Carry Over'' ASP.

P. Section 3401: Revision of Certain Market Basket Updates and 
Incorporation of Productivity Improvements Into Market Basket Updates 
That Do Not Already Incorporate Such Improvements

1. ESRD Market Basket Discussion
    Section 3401(h) of the ACA amended section 1881(b)(14)(F) of the 
Act and directs the Secretary to annually increase payment amounts 
established under the ESRD market basket. Please see section VI.E. of 
this proposed rule for a detailed description of these provisions.
2. Productivity Adjustment Regarding Ambulatory Surgical Center, 
Ambulance, Clinical Laboratory and DMEPOS Fee Schedules
    Section 3401 of the ACA requires that the update factor under 
certain payment systems be annually adjusted by changes in economy-wide 
productivity.

[[Page 40123]]

The year that the productivity adjustment is effective varies by 
payment system. Specifically, section 3401 of the ACA requires that in 
CY 2011 (and in subsequent years) update factors under the ambulatory 
surgical center (ASC) payment system, the ambulance fee schedule (AFS), 
and the clinical laboratory fee schedule (CLFS) be adjusted by changes 
in economy-wide productivity. Section 3401(a) amends section 
1886(b)(3)(B) of the Act to add clause (xi)(II) which sets forth the 
definition of this productivity adjustment. The statute defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, year, cost reporting 
period, or other annual period) (the ``MFP adjustment''). Please see 
http://www.bls.gov/mfp for more information on MFP. This is the link to 
the Bureau of Labor Statistics (BLS) historical published data on the 
measure of MFP.
    The projection of MFP will be produced by an economic forecasting 
firm, currently HIS Global Insight (IGI). In order to generate a 
forecast of MFP, IGI would replicate the MFP measure calculated by the 
BLS using a series of proxy variables derived from the IGI US Macro-
economic models. These models take into account a very broad range of 
factors that influence the total US economy. IGI forecasts the 
underlying proxy components such as Gross Domestic Product (GDP), 
capital, and labor inputs required to estimate MFP, and will combine 
those projections according to the BLS methodology. For more 
information on the BLS measure of MFP, including technical notes, 
visit: http://www.bls.gov/mfp/. Table 34 lists the MFP component series 
employed by the BLS and the corresponding concepts estimated by IGI.

   Table 34--Multifactor Productivity Component Series Employed by the
            Bureau of Labor Statistics and HIS Global Insight
------------------------------------------------------------------------
               BLS Series                           IGI Series
------------------------------------------------------------------------
Real value-added output, constant 2000   Real gross non-farm value added
 dollars.                                 output, chained 2005 dollar
                                          billions.
Private non-farm business sector labor   Hours of all persons-private
 input; 2000=100.00.                      nonfarm business sector;
                                          1992=1.0.
Aggregate capital inputs; 2000=100.00..  Real effective capital stock
                                          used for full employment GDP,
                                          chained 2005 dollar billions.
------------------------------------------------------------------------

    To identify the appropriate proxy variables, IGI compared the 
historical growth rates of the BLS and IGI components listed above and 
found they were consistent across all series and therefore suitable 
proxies for calculating MFP. IGI would use the growth rates of the 
forecasted IGI concepts to project BLS' components of MFP, and derive 
the MFP adjustment that would be used under section 3401 to adjust the 
updates for the ASC payment system, the AFS, and the CLFS.
    As discussed below, for each of these payment systems, the update 
factor is the percentage increase (or percentage decrease for the CLFS) 
in the consumer price index for all urban consumers (CPI-U) (referred 
to as the ``CPI-U update factor'').
    The statute for all three payment systems generally states that the 
Secretary shall reduce the CPI-U adjustment by the MFP adjustment. In 
order to calculate the MFP-adjusted updates to these payment systems, 
the MFP percentage adjustment would be subtracted from the CPI-U update 
factor (for the most recent 12-month period beginning with July 1 of 
the previous year and ending with June 30 of the current year). For 
example, if the update factor (CPI-U) is 4.0 percent, and the projected 
MFP is 1.3 percent, the MFP-Adjusted update factor (or MFP-Adjusted 
CPI-U for these payment systems) would be a 2.7 percent increase.
    The period on which the CPI-U is calculated is for the most recent 
12-month period beginning with July 1 of the previous year and ending 
with June 30 of the current year, and we propose that the end of the 
10-year moving average of changes in the MFP should coincide with the 
end of this CPI-U timeframe. Since the CPI-U update factor is reduced 
by the MFP adjustment to determine the annual update for these payment 
systems, we believe it is appropriate for the numbers associated with 
both parts of the calculation to be projected as of the same end date 
(in this case, the end date of the time frame for both estimates would 
be June 30th of the year preceding the update year itself). In this 
way, changes in market conditions are aligned. We will round the final 
annual adjustment to the one-tenth of one percentage point level up or 
down as applicable according to conventional rounding rules (that is, 
if the number we are rounding is followed by 5, 6, 7, 8, or 9, we will 
round the number up; if the number we are rounding is followed by 0, 1, 
2, 3, or 4, we will round the number down).
    Below, we provide more information on the statutory requirements 
and proposals for each of the three payment systems. The statutory 
requirements for the ASC payment system will also be addressed in the 
CY 2011 OPPS/ASC proposed rule. We note that, in this proposed rule, we 
are describing the legislative provision and outlining the methodology 
we propose to use to calculate and apply the MFP adjustment to 
determine the annual updates for ASCs, the AFS, and the CLFS for CY 
2011 and each subsequent year. We will set forth the final MFP 
adjustment for CY 2011 in the CY 2011 PFS final rule. Once we finalize 
the methodology for determining and applying the MFP adjustment to the 
CPI-U update factors for these payment systems, for subsequent calendar 
years, as we have done in the past, we intend to notify the general 
public of the annual update to the AFS and CLFS via CMS instruction and 
on the CMS Web site. These notifications would set forth both the CPI-U 
percentage increase or decrease and the MFP adjustment for the 
applicable year. For ASCs, for subsequent calendar years, as we have 
done in the past, we would continue to notify the general public of the 
annual update to the ASC payment amount via OPPS/ASC rulemaking.
    We welcome comments on these proposals.
a. Ambulatory Surgical Centers (ASCs)
    Section 1833(i)(2)(C) of the Act requires that, if the Secretary 
has not updated the ASC payment amounts in a calendar year, the payment 
amounts shall be increased by the percentage increase in the CPI-U as 
estimated by the Secretary for the 12-month period ending with the 
midpoint of the year involved. Because the Secretary does update the 
ASC payment amounts annually, we adopted a policy, which we codified at 
Sec.  416.171(a)(2)(ii), to update the ASC conversion factor using the 
CPI-U for CY 2010 and subsequent calendar years. Therefore, the annual

[[Page 40124]]

update to the ASC payment system is the CPI-U (referred to as the CPI-U 
update factor). Section 3401(k) of the ACA amends section 1833(i)(2)(D) 
of the Act by adding a new clause (v) which requires that ``any annual 
update under [the ASC payment] system for the year * * * shall be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II)'' (which we refer to as the MFP adjustment) 
effective with the calendar year beginning January 1, 2011. Section 
3401(k) of the ACA states that application of the MFP adjustment to the 
ASC payment system may result in the update to the ASC payment system 
being less than zero for a year and may result in payment rates under 
the ASC payment system for a year being less than such payment rates 
for the preceding year.
    In accordance with section 1833(i)(2)(C)(i) of the Act, before 
applying the MFP adjustment, the Secretary first determines the 
``percentage increase'' in the CPI-U, which we interpret cannot be a 
negative number. Thus, in the instance where the percentage change in 
the CPI-U for a year is negative, we propose to hold the CPI-U update 
factor for the ASC payment system to zero. Section 1833(i)(2)(D)(v) of 
the Act, as added by section 3401(k) of the ACA, then requires that the 
Secretary reduce the CPI-U update factor (which would be held to zero 
if the CPI-U percentage change is negative) by the MFP adjustment, and 
states that application of the MFP adjustment may reduce this 
percentage change below zero. If the application of the MFP adjustment 
to the CPI-U percentage increase would result in a MFP-adjusted CPI-U 
update factor that is less than zero, then the annual update to the ASC 
payment rates would be negative and payments would decrease relative to 
the prior year.
    Table 35 provides illustrative examples of how the MFP would be 
applied to the ASC payment system. These examples show the implication 
of a positive CPI-U update factor with a smaller MFP, a positive CPI-U 
update factor with a large MFP, and a CPI-U update factor of 0. We 
discuss the application of the MFP to the CPI-U update factor for the 
ASC payment system under the OPPS/ASC CY 2001 proposed rule (1504-P), 
which will be published around the same time as this proposed rule. 
Comments on the specific mathematical calculation of the MFP should be 
made to this PFS proposed rule. Comments on the application of the MFP 
to the CPI-U update factor under the ASC payment system should be made 
to the OPPS/ASC CY 2011 proposed rule (1504-P).

Table 35--Multifactor Productivity Adjusted Payment Update: Illustrative
                                 Example
------------------------------------------------------------------------
                                                    MFP-Adjusted CPI-U
    CPI-U (percent)           MFP (percent)            update factor
                                                         (percent)
------------------------------------------------------------------------
              4.0                      1.3                     2.7
              4.0                      4.7                    -0.7
              0.0                      0.2                    -0.2
------------------------------------------------------------------------

b. Ambulance Fee Schedule (AFS)
    In accordance with section 1834(l)(3)(B) of the Act, the AFS is 
required to be increased each year by the percentage increase in the 
CPI-U (U.S. city average) for the 12-month period ending with June of 
the previous year. We refer to this update as the Ambulance Inflation 
Factor (AIF). Section 3401(j) of the ACA amends section 1834(l)(3) of 
the Act to add a new subparagraph (C) which states that, for CY 2011 
and each subsequent year, after determining the percentage increase 
under section 1834(l)(3)(B) (that is, the CPI-U percentage increase, or 
AIF), the Secretary shall reduce such percentage increase by the MFP 
adjustment described in section 1886(b)(3)(B)(xi)(II) (as discussed 
above). Section 3401(j) further amends section 1834(l)(3) to state that 
the application of subparagraph (C) (that is, the reduction of the CPI-
U percentage increase by the MFP adjustment) may result in that 
percentage increase being less than zero for a year, and may result in 
payment rates for a year being less than such payment rates for the 
preceding year.
    In accordance with section 1834(l)(3) of the Act as amended by 
section 3401(j) of the ACA, before applying the MFP adjustment, the 
Secretary first determines the ``percentage increase'' in the CPI-U, 
which we interpret cannot be a negative number. Thus, in the instance 
where the percentage change in the CPI-U for a year is negative, we 
propose to hold the AIF to zero. The statute then requires that the 
Secretary reduce the CPI-U percentage increase (which would be held to 
zero if the CPI-U percentage change is negative) by the MFP adjustment, 
and states that application of the MFP adjustment may reduce this 
percentage increase below zero. If the application of the MFP 
adjustment to the CPI-U percentage increase would result in an MFP-
adjusted AIF that is less than zero, then the annual update to the AFS 
would be negative and payments would decrease relative to the prior 
year.
    Table 36 provides illustrative examples of how the MFP would be 
applied to the AFS. Finally, we propose to revise Sec.  414.610(f) to 
require that the AIF be reduced by the MFP adjustment as required by 
the statute in determining the annual update under the ambulance fee 
schedule for CY 2011 and each subsequent year, and to revise Sec.  
414.620 to state that changes in payment rates resulting from the 
incorporation of the AIF and the MFP adjustment will be announced by 
CMS by instruction and on the CMS Web site, as we discussed above.

  Table 36--Examples of the Application of the Multifactor Productivity
                Adjustment to the Ambulance Fee Schedule
------------------------------------------------------------------------
        A                  B                  C                 D
CPI-UA                       AIF               MFP      Final update
                                                             rounded
------------------------------------------------------------------------
         2.0%               2.0%              1.3%              0.7%
         0.0%               0.0%              1.3%             -1.3%
        -2.0%               0.0%              1.3%             -1.3%
         1.0%               1.0%              1.3%             -0.3%
------------------------------------------------------------------------

c. Clinical Laboratory Fee Schedule
    Section 1833(h)(2)(A)(i) of the Act, as amended by section 3401(l) 
of the ACA, requires the Secretary to annually adjust the CLFS ``by a 
percentage increase or decrease equal to the percentage increase or 
decrease in the Consumer Price Index for All Urban Consumers (United 
States city average minus, for each of the years 2009 through 2010, 0.5 
percentage points.'' Therefore, the

[[Page 40125]]

adjustment to the fee schedule can be an increase or a decrease.
    Section 3401(l) of the ACA also adds new clause (iv) that applies 
in CY 2011 and each subsequent year. This clause requires the Secretary 
to reduce the adjustment in clause (i): (1) By the MFP adjustment 
described in section 1886(b)(3)(B)(xi)(II) for 2011 and each subsequent 
year and (2) by 1.75 percentage points for each of 2011 through 2015 
(the ``percentage adjustment''). However, section 3401(l) of the ACA 
states that the MFP adjustment will not apply in a year where the 
adjustment to the fee schedule determined under clause (i) is zero or a 
percentage decrease for a year. Further, the application of the MFP 
adjustment may not result in an adjustment to the fee schedule under 
clause (i) of less than zero for a year.
    Therefore, we are proposing to apply the MFP adjustment as follows:
     If the CPI-U update factor is positive, it would be 
reduced by the MFP. However, if application of the MFP would result in 
a negative update, the update would be held to zero.
     If the CPI-U update factor is zero or negative, the MFP 
adjustment would not be applied.
    Section 3401(l) of the ACA also states that the application of the 
percentage adjustment may result in an adjustment to the fee schedule 
under clause (i) being less than zero for a year and may result in 
payment rates for a year being less than such payment rates for the 
preceding year. Therefore, we are proposing to apply the percentage 
reduction of 1.75 percentage points to any adjustment to the fee 
schedule under the CLFS as directed by Section 3401(l) of the ACA.
    Table 37 provides illustrative examples of how these adjustments 
would be applied to fees under the CLFS.

    Table 37--Examples of the Application of the Multifactor Productivity Adjustment to the Clinical Lab Fee
                                                    Schedule
----------------------------------------------------------------------------------------------------------------
                                              Productivity adjusted                          Resultant change to
                                                      update                                        CLFS
        CPI-U                   MFP          -----------------------  (-1.75%) Percentage  ---------------------
                                                Greater of 0.0% or      point reduction
                                                 (Col.A)-(Col.B)                                 Col.C-Col.D
A                                      B                       C                     D                      E
----------------------------------------------------------------------------------------------------------------
             2.0%                   1.3%                   0.7%                 -1.75%                 -1.05%
             0.0%                    N/A                   0.0%                 -1.75%                 -1.75%
            -2.0%                    N/A                   0.0%                 -1.75%                 -1.75%
----------------------------------------------------------------------------------------------------------------

d. DMEPOS Fee Schedule
    Sections 1834(a)(14), 1834(h)(4), and 1842(s)(1) of the Act mandate 
annual updates to the fee schedule amounts established in accordance 
with these respective sections for covered items of durable medical 
equipment defined in section 1834(a)(13) of the Act, prosthetic 
devices, orthotics, and prosthetics defined in section 1834(h)(4)(B) 
and (C) of the Act, and parenteral and enteral nutrients, equipment, 
and supplies described in section 1842(s)(2)(D) of the Act. The annual 
updates for 2011 for these sections are based on the percentage 
increase in the CPI-U for the 12-month period ending with June 2010. 
The annual updates for years subsequent to 2011 are based on the 
percentage increase in the CPI-U for the 12-month period ending with 
June of the previous year (that is, June 2011 for 2012, June 2011 for 
2013, etc.). Since 1990 for durable medical equipment, prosthetic 
devices, orthotics, and prosthetics and 2003 for parenteral and enteral 
nutrients, equipment, and supplies, these annual fee schedule updates 
have been implemented on an annual basis through program instructions.
    Section 3401(m) of the ACA amends section 1834(a)(14) of the Act to 
add a new subparagraph (L) which provides that, for CY 2011 and each 
subsequent year, the fee schedule update factor based on the CPI-U for 
the 12-month period ending with June of the previous year is to be 
reduced by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (as discussed above). Section 3401(m) 
of the ACA further amends section 1834(a)(14) of the Act to state that 
the application of subparagraph (L) (that is, the reduction of the CPI-
U percentage increase by the MFP adjustment) may result in that 
percentage increase being less than zero for a year, and may result in 
payment rates for a year being less than such payment rates for the 
preceding year.
    Section 3401(n) of ACA amends section 1834(h)(4)(A) of the Act to 
add a new clause (xi) which provides that, for CY 2011 and each 
subsequent year, the fee schedule update factor based on the CPI-U for 
the 12-month period ending with June of the previous year is to be 
reduced by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act (as discussed above). Section 3401(n) 
of the ACA further amends section 1834(h)(4) of the Act to state that 
the application of subparagraph (A)(xi) (that is, the reduction of the 
CPI-U percentage increase by the MFP adjustment) may result in that 
percentage increase being less than zero for a year, and may result in 
payment rates for a year being less than such payment rates for the 
preceding year.
    Section 3401(o) of ACA amends section 1842(s)(1) of the Act to add 
a new subparagraph (B) and clause (ii) which provides that, for CY 2011 
and each subsequent year, the fee schedule update factor based on the 
CPI-U for the 12-month period ending with June of the previous year is 
to be reduced by the MFP adjustment described in section 
1886(b)(3)(B)(xi)(II) (as discussed above). Section 3401(o) further 
amends section 1842(s)(1) to state that the application of subparagraph 
(B)(ii) (that is, the reduction of the CPI-U percentage increase by the 
MFP adjustment) may result in that percentage increase being less than 
zero for a year, and may result in payment rates for a year being less 
than such payment rates for the preceding year.
    The MFP adjustments to the CPI-U percentage increases used in 
calculating the fee schedule adjustment factors for these DMEPOS items 
and services as mandated by sections 3401(m), (n), and (o) of ACA are 
simple mathematical calculations and are ministerial in nature. 
Therefore, we plan to implement these adjustments for 2011 and 
subsequent years as part of the annual program instructions related to 
the DMEPOS fees schedule updates.

[[Page 40126]]

Q. Section 4103: Medicare Coverage of Annual Wellness Visit Providing a 
Personalized Prevention Plan

1. Background
a. Medicare Coverage of Preventive Physical Examinations and Routine 
Checkups
    Section 1862(a)(7) of the Act explicitly prohibits Medicare payment 
for routine physical checkups with certain exceptions. One exception is 
for the Initial Preventive Physical Exam (also referred to as the 
``Welcome to Medicare'' exam) established for new beneficiaries 
effective for services furnished on or after January 1, 2005. Section 
4103 of the ACA has provided another exception to section 1862(a)(7). 
Congress has expanded Medicare coverage under part B to include an 
Annual Wellness Visit Providing Personalized Prevention Plan Services 
(hereinafter referred to as the annual wellness visit) in sections 
1861(s)(2)(FF) and 1861(hhh) of the Act. This expanded benefit will be 
effective on January 1, 2011. Preventive care has become an increasing 
focus of the Medicare program. For instance, section 101 of the MIPPA 
expanded Medicare's authority to establish coverage for preventive 
services that meet specified criteria. Among other things, the annual 
wellness visit will encourage beneficiaries to obtain the preventive 
services already covered by Medicare, and that are appropriate for each 
individual beneficiary.
b. Requirements for Coverage of an Annual Wellness Visit
    Section 4103 of the ACA provides for coverage of an annual wellness 
visit, which includes and/or takes into account a health risk 
assessment (HRA), and creates a personalized prevention plan for 
beneficiaries, subject to certain eligibility and other limitations. 
Section 4103 of the ACA also requires the identification of elements 
that must be provided to a beneficiary as part of the first visit for 
personalized prevention plan services and requires the establishment of 
a yearly schedule for appropriate provision of such elements 
thereafter.
    The Affordable Care Act specifies elements that may be included in 
a personalized prevention plan, including establishment of, or update 
to, the individual's medical and family history, a list of the 
individual's current providers and suppliers and medications prescribed 
for the individual; measurement of height, weight, body-mass index 
(BMI) or waist circumference, and blood pressure; detection of any 
cognitive impairment; establishment or update of an appropriate 
screening schedule for the next 5 to 10 years; establishment or update 
of a list of risk factors and conditions (including any mental health 
conditions) for which interventions are recommended or underway; and 
furnishing of personalized health advice and referral, as appropriate, 
to health education or preventive counseling services or programs. The 
Affordable Care Act also permits the Secretary to add other elements to 
the annual wellness visit determined to be appropriate.
2. Proposed Revisions
a. Proposed Revisions to Sec.  411.15, Particular Services Excluded 
From Coverage
    To conform the regulations to the statutory requirements of the 
ACA, we are proposing to revise Sec.  411.15 by specifying an exception 
to the routine physical checkups exclusion from coverage in Sec.  
411.15(a)(1) and modifying Sec.  411.15(k)(15). We would add a 
provision to permit coverage of annual wellness visits that meet the 
eligibility limitation and the conditions for coverage we are 
specifying in Sec.  410.15 (Annual Wellness Visit Providing 
Personalized Prevention Plan Services). Coverage of the annual wellness 
visit is furnished under Medicare Part B only. As provided in the 
statute, this new coverage allows payment for an annual wellness visit 
if provided after January 1, 2011 for an individual who is no longer 
within 12 months after the effective date of his or her first Medicare 
Part B coverage period, and has not received either an IPPE or an 
annual wellness visit within the past 12 months.
b. Proposed Revisions to Part 410, Subpart B--Medical and Other Health 
Services
    We propose to add Sec.  410.15(a), Condition for Coverage of Annual 
Wellness Visits Providing Personalized Prevention Plan Services, and 
Sec.  410.15(b), Limitation on Coverage of Annual Wellness Visits 
Providing Personalized Prevention Plan Services, to codify the coverage 
of the annual wellness visit providing personalized prevention plan 
services.
    We are proposing to define several terms in Sec.  410.15. These 
include the following terms: (1) Detection of any cognitive impairment; 
(2) Review of the individual's functional ability and level of safety; 
(3) Health professional; (4) Establishment of, or update to the 
individual's medical and family history; (5) Eligible beneficiary; (6) 
First annual wellness visit providing personalized prevention plan 
services; and (7) Subsequent annual wellness visit providing 
personalized prevention plan services.
    Further, the ACA allows the addition of any other element 
determined appropriate by the Secretary for inclusion in an annual 
wellness visit. We reviewed the relevant medical literature, current 
clinical practice guidelines, and the recommendations of the United 
States Preventive Services Task Force (USPSTF). Pursuant to that 
review, we propose to add depression screening and functional status 
screening as elements of the first annual wellness visit only. In their 
December 2009 Recommendation Statement, the U.S. Preventive Services 
Task Force (USPSTF) recommends screening adults for depression when 
staff-assisted depression care supports are in place to assure accurate 
diagnosis, effective treatment and follow-up (Grade: B recommendation). 
That is, the USPSTF recommends the service; and there is high certainty 
that the net benefit is moderate or there is moderate certainty that 
the net benefit is moderate to substantial.
    The USPSTF is currently updating its 1996 recommendation regarding 
screening for hearing impairment in older adults as well as its 
recommendation on falls in the elderly. Until those recommendations can 
be published, functional status screening (including assessment of 
hearing impairment, ability to successfully perform activities of daily 
living, fall risk and home safety) appears supportable by evidence only 
for the first annual wellness visit.
    We also are proposing that the definition of the term 
``Establishment of, or an update to the individual's medical and family 
history'' include more than a list of all of an individual's prescribed 
medications as provided in the statute, but also supplements such as 
vitamins and calcium that an individual may use or be exposed to. 
Supplements such as these are commonly used by many beneficiaries and 
the medical literature supports that their use be closely monitored by 
health professionals because they can interact with prescribed 
medications and may result in unintended medical problems in individual 
cases. The statute expressly permits the Secretary to add other 
elements such as this to the annual wellness visits.
(1) Definitions
    We are proposing to add the following definitions to Sec.  410.15:

[[Page 40127]]

     Detection of any cognitive impairment, for purposes of 
this section, means assessment of an individual's cognitive function by 
direct observation, with due consideration of information obtained by 
way of patient report, concerns raised by family members, friends, 
caretakers, or others.
     Review of the individual's functional ability and level of 
safety, for purposes of this section includes, at a minimum, assessment 
of the following topics:

++ Hearing impairment;
++ Ability to successfully perform activities of daily living;
++ Fall risk;
++ Home safety.

     Health professional, for purposes of this section means:
++ A physician who is a doctor of medicine or osteopathy (as defined in 
section 1861(r)(1) of the Act); or
++ A practitioner as described in clause (i) of section 1842(b)(18)(C) 
of the Act, that is, a physician assistant, nurse practitioner, or 
clinical nurse specialist (as defined in section 1861(aa)(5) of the 
Social Security Act); or
++ A medical professional (including a health educator, registered 
dietitian, or nutritionist) or a team of medical professionals, who are 
working under the supervision of a physician as defined in this 
definition.

     Establishment of, or an update to the individual's medical 
and family history, for purposes of this section, means at a minimum 
the collection and documentation of the following:

++ Past medical and surgical history, including experiences with 
illnesses, hospital stays, operations, allergies, injuries, and 
treatments.
++ Use or exposure to medications and supplements, including calcium 
and vitamins.
++ Medical events experienced by the beneficiary's parents and any 
siblings and children, including diseases that may be hereditary or 
place the individual at increased risk.

     Eligible beneficiary, for purposes of this section, means 
an individual who is no longer within 12 months after the effective 
date of his or her first Medicare Part B coverage period, and has not 
received either an initial preventive physical examination or an annual 
wellness visit providing a personalized prevention plan within the past 
12 months.
(2) Requirements of the First Visit for Personalized Prevention Plan 
Services
    We are proposing that the first annual wellness visit for purposes 
of this benefit include the following:
     Establishment of the individual's medical and family 
history;
     Establishment of a list of current providers and suppliers 
that are regularly involved in providing medical care to the 
individual;
     Measurement of the individual's height, weight, body mass 
index (or waist circumference, if appropriate), blood pressure, and 
other routine measurements as deemed appropriate, based on the 
individual's medical and family history;
     Detection of any cognitive impairment that the individual 
may have;
     Review of the individual's potential (risk factors) for 
depression, including current or past experiences with depression or 
other mood disorders, based on the use of an appropriate screening 
instrument for persons without a current diagnosis of depression, which 
the health professional as defined in this section may select from 
various available screening questions or standardized questionnaires 
designed for this purpose and recognized by national professional 
medical organizations;
     Review of the individual's functional ability and level of 
safety, based on direct observation or the use of appropriate screening 
questions or a screening questionnaire, which the health professional 
as defined in this section may select from various available screening 
questions or standardized questionnaires designed for this purpose and 
recognized by national professional medical organizations;
     Establishment of the following:

++ A written screening schedule, such as a checklist, for the next 5 to 
10 years as appropriate, based on recommendations of the USPSTF and the 
Advisory Committee on Immunization Practices, and the individual's 
health status, screening history, and age-appropriate preventive 
services covered by Medicare; and
++ A list of risk factors and conditions for which primary, secondary 
or tertiary interventions are recommended or are underway, including 
any mental health conditions or any such risk factors or conditions 
that have been identified through an initial preventive physical 
examination (as described under Sec.  410.16), and a list of treatment 
options and their associated risks and benefits;

     Furnishing of personalized health advice and a referral, 
as appropriate, to health education or preventive counseling services 
or programs aimed at reducing identified risk factors and improving 
self management, or community-based lifestyle interventions to reduce 
health risks and promote self-management and wellness, including weight 
loss, physical activity, smoking cessation, fall prevention, and 
nutrition; and
     Any other element determined appropriate by the Secretary 
through the National Coverage Determination process.
(3) Requirements of Subsequent Visits for Personalized Prevention Plan 
Services
    We are proposing that subsequent annual wellness visits providing 
personalized prevention plan services for purposes of this benefit 
include the following:
     An update of the individual's medical and family history;
     An update of the list of current providers and suppliers 
that are regularly involved in providing medical care to the 
individual, as that list was developed for the first annual wellness 
visit providing personalized prevention plan services;
     Measurement of an individual's weight, blood pressure, and 
other routine measurements as deemed appropriate, based on the 
individual's medical and family history;
     Detection of any cognitive impairment, as that term is 
defined in this section, that the individual may have;
     An update to the following:

++ The written screening schedule for the individual as that schedule 
was developed at the first annual wellness visit providing personalized 
prevention plan services; and
++ The list of risk factors and conditions for which primary, secondary 
or tertiary interventions are recommended or are underway for the 
individual as that list was developed at the first annual wellness 
visit providing personalized prevention plan services;

     Furnishing of personalized health advice to the individual 
and a referral, as appropriate, to health education or preventive 
counseling services or programs as that advice and related services are 
defined in paragraph (a) of this section;
     Any other element determined appropriate by the Secretary 
through the National Coverage Determination process. Body-mass index 
(BMI) should be calculated at the first annual wellness visit and may 
be recalculated at subsequent visits, if indicated. Given

[[Page 40128]]

the general stability of adult height, we would not expect the BMI to 
meaningfully change in the absence of significant weight change. We 
have not in the definition of the subsequent annual visit required 
measurement of the individual's height.
    We are proposing to add two distinct elements to the definition of 
the first annual wellness visit only: depression screening and 
functional status assessment. Our review of the medical literature and 
the USPSTF recommendations indicates that the optimum frequency for 
those services is unknown. Thus we believe it would be premature and 
beyond the current evidence to require that they be included in the 
definition of subsequent visits, but they may be performed at these 
visits, if indicated.
    In addition, to facilitate future consideration of coverage of 
additional elements in the definitions of the first and subsequent 
annual wellness visits in Sec.  410.15(a), we are proposing that the 
determination of other required elements for those purposes will be 
made through the National Coverage Determination (NCD) process. The NCD 
process is evidence based, transparent and furnishes the opportunity 
for public comment, and is described in sections 1862(l) of the Act.
    While section 4103 of the ACA ultimately requires that an HRA be 
included in the new annual wellness visit benefit beginning January 1, 
2011, the HRA guidelines (with standards for interactive telephonic and 
web-based HRAs) and the model HRA tool also required by section 4103 
are not yet available. As a result, we have not included requirements 
related to the HRA in this proposed rule. When HRA guidelines and 
standards have been established, and a model HRA instrument is 
available and determined by the Secretary to be appropriate for the 
Medicare population, we will revise these regulations to include the 
HRA as an element in the definition of the annual wellness visit.
    We are requesting public comments on the components of both the 
first and subsequent annual wellness visits, as well as the definitions 
of related terms in the document. We ask that commenters making 
specific recommendations on this or any related issue provide 
documentation from the medical literature, current clinical practice 
guidelines, or the USPSTF or Advisory Committee on Immunization 
Practices recommendations.
3. Payment for the Annual Wellness Visit Providing Personalized 
Prevention Plan Services (PPPS)
    Section 4103 of the ACA created a new benefit for the ``annual 
wellness visit'' with personalized prevention plan services. The 
Affordable Care Act amends section 1861(s)(2) of the Act by adding a 
new subsection (FF) to provide for coverage of the annual wellness 
visit beginning January 1, 2011. Section 4103 also adds new subsection 
(hhh) to section 1861 of the Act to define ``personalized prevention 
plan services'' and to specify who may furnish these services. Finally, 
section 4103 amends section 1848(j)(3) of the Act to provide for 
payment of annual wellness visits under the PFS, and specifically 
excludes the annual wellness visit from the hospital outpatient 
prospective payment system (OPPS). Therefore, a single payment under 
the PFS will be made when an annual wellness visit is furnished by a 
physician, physician assistant, nurse practitioner, or clinical nurse 
specialist, or by a medical professional or team of medical 
professionals, as determined appropriate by the Secretary, under the 
supervision of a physician.
    To allow for Medicare reporting and payment of the annual wellness 
visit, we are proposing to create two new HCPCS G-codes for reporting 
the first wellness visit and creation of the PPPS and the subsequent 
visits available to the beneficiary every 12 months. Specifically, we 
are proposing to establish the following two new HCPCS codes for CY 
2011: GXXXA (Annual wellness visit; includes a personalized prevention 
plan of service (PPPS), first visit) and GXXXB (Annual wellness visit; 
includes a personalized prevention plan of service (PPPS), subsequent 
visit). A beneficiary's first annual wellness visit to a practitioner 
would be reported to Medicare under HCPCS code GXXXA, even if the 
beneficiary had previously received an initial preventive physical 
examination (IPPE) that was covered by Medicare. Beneficiaries, in 
their first 12 months of Part B coverage, will continue to be eligible 
only for an IPPE. After the first 12 months of Part B coverage, on and 
after January 1, 2011, beneficiaries will be eligible for an annual 
wellness visit described by HCPCS code GXXXA or GXXXB, provided that 
the beneficiary has not received an IPPE or annual wellness visit 
within the preceding 12-month period.
    A beneficiary would be eligible for one initial annual wellness 
visit covered by Medicare that must include all of the required 
elements that we are proposing for the first visit as described in the 
preceding section. All other annual wellness visits that would include 
the required elements for those visits would be reported as subsequent 
visits, even if a different practitioner furnished the subsequent 
annual wellness visit. We would expect there to be continuity and 
communication among the practitioners caring for beneficiaries over 
time with respect to the PPPS, and that would include the case where a 
different practitioner furnishing a subsequent annual wellness visit 
would update the information in the patient's medical record based on 
the patient's interval history since the previous annual wellness 
visit.
    The first wellness visit described by HCPCS code GXXXA is similar 
to the IPPE that is currently reported with HCPCS code G0402 (Initial 
preventive physical examination; face-to-face visit, services limited 
to new beneficiary during the first 12 months of Medicare enrollment). 
We believe that the physician work and nonfacility PE of the IPPE and 
the first annual wellness visit are very similar, given that both 
represent an initial beneficiary visit focused on prevention. In the CY 
2010 PFS final rule with comment period discussion of payment for the 
IPPE (74 FR 61767), we noted that in the context of physician work and 
intensity, HCPCS code G0402 was most equivalent to CPT code 99204 
(Level 4 new patient office or other outpatient visit). Therefore, for 
CY 2011, we are proposing to crosswalk the same physician work RVUs of 
2.43 from CPT code 99204 to HCPCS codes G0402 and GXXXA. Similarly, we 
believe the direct PE inputs for all of these services are similar and, 
therefore, we are proposing to assign the same direct PE inputs to 
HCPCS codes G0402 and GXXXA as are included for CPT code 99204. We note 
that currently, the direct PE inputs for HCPCS code G0402 also include 
preventive assessment forms, and we are proposing to add this supply to 
the PE for HCPCS code GXXXA as well because we believe it would be used 
in the first wellness visit. The proposed CY 2011 PE and malpractice 
RVUs for HCPCS code GXXXA are displayed in Addendum B to this proposed 
rule. We also note that we are proposing no facility PE RVUs for HCPCS 
code GXXXA because only a single payment will be made under the PFS 
when this service is furnished. There is no separate facility payment 
for GXXXA when a practitioner furnishes this service in the facility 
setting.
    Moreover, we believe that a subsequent annual wellness visit 
described by HCPCS code GXXXB is most similar, from the perspectives of

[[Page 40129]]

physician work and PE, to CPT code 99214 (Level 4 established patient 
office or other outpatient visit). The subsequent annual wellness visit 
is a patient visit for PPPS that includes certain required elements, 
such as updating information regarding the patient's history, risk 
factors, and regular medical care providers and suppliers since the 
prior annual visit, and obtaining routine measurements. We believe the 
physician work and direct PE of a subsequent annual wellness visit are 
similar, in terms of evaluation and management (E/M) visit level, to 
the first wellness visit, which we are proposing to value like a level 
4 new patient office or other outpatient visit, as we have previously 
valued the IPPE. However, the subsequent annual wellness visit would 
typically be for an established patient and, as described earlier in 
this section, we are proposing that certain wellness visit elements 
only must be furnished in the first wellness visit. As a result, we 
believe it would be most appropriate to value the subsequent annual 
wellness visit based upon an E/M visit for an established patient. 
Therefore, for CY 2011 we are proposing to crosswalk the same physician 
work RVUs of 1.50 from CPT code 99214 to HCPCS code GXXXB. Furthermore, 
we believe the direct PE inputs for these two services are also similar 
and, therefore, we are proposing to assign the same direct PE inputs to 
HCPCS code GXXXB as are assigned to CPT code 99214. We note that we are 
also proposing to add the same preventive assessment forms to the PE 
for HCPCS code GXXXB as we are proposing to add for HCPCS code GXXXA 
because we believe this supply would be used in both the first and 
subsequent annual wellness visits. The proposed CY 2011 PE and 
malpractice RVUs for HCPCS code GXXXB are displayed in Addendum B to 
this proposed rule. Similar to our treatment of HCPCS code GXXXA for 
the first wellness visit, we are proposing no facility PE RVUs for 
HCPCS code GXXXB as only a single payment will be made under the PFS 
when this service is furnished. There is no separate facility payment 
for GXXXB when a practitioner furnishes this service in the facility 
setting.
    While we believe there could be overlap in the direct PE, 
malpractice expense, and physician work in both history taking and 
examination of the patient in the context of the initial or subsequent 
wellness visit and another E/M service, we are not proposing to limit 
the level of a medically necessary E/M visit when furnished and billed 
with a wellness visit. As we stated in the CY 2005 PFS final rule with 
comment period with respect to the IPPE (69 FR 66289 through 66290), we 
do not want to prohibit the reporting of an appropriate level of 
service when it is necessary to evaluate and treat the beneficiary for 
acute and chronic conditions. However, at the same time, we believe the 
practitioner is better able to discuss health promotion, disease 
prevention, and the educational opportunities available with 
beneficiaries when their health status has been stabilized and the 
beneficiary is physically receptive. Therefore, depending on the 
clinical circumstances, a CPT code for a medically necessary E/M visit 
may be reported and appended with CPT modifier -25 (significant, 
separately identifiable evaluation and management service by the same 
physician on the same day of the procedure or other service) to 
designate the E/M visit as a separately identifiable service from the 
initial or subsequent wellness visit. However, we believe this scenario 
would be uncommon, and we expect that no components of an encounter 
attributable to the annual wellness visit would be used in determining 
the level of a separate E/M visit that would also be reported.
    With respect to beneficiary cost-sharing, section 4103(c) of the 
ACA amends section 1833(a)(1) of the Act by adding subparagraph (X), 
referring to the PPPS to state that the amount paid shall be 100 
percent of the lesser of the actual charge for the services or the 
amount determined under the payment basis determined under section 1848 
of the Act, thereby eliminating coinsurance for the annual wellness 
visit. Finally, section 4103(b)(4) of the ACA amends section 1833(b) of 
the Act to specify that the Part B deductible does not apply to the 
annual wellness visit. We expect that practitioners will work to ensure 
that this valuable new Medicare benefit is furnished to the 
beneficiaries that they care for in their practices, effective January 
1, 2011.

R. Section 4104: Removal of Barriers to Preventive Services in Medicare

1. Definition of ``Preventive Services''
    Section 4104 of the ACA revises section 1861(ddd) of the Act to add 
paragraph (3), which defines the term ``preventive services'' as 
follows:
     The specific services currently listed in section 
1861(ww)(2) of the Act with the explicit exclusion of 
electrocardiograms (as specified in section 1861(ww)(2)(M) of the Act);
     The initial preventive physical examination (IPPE) 
established by section 611 of the MMA and defined in section 
1861(ww)(1) of the Act; and
     The annual wellness visit, as specified by section 
1861(hhh) of the Act as added by section 4103 of the ACA. We refer 
readers to section V.Q. of this proposed rule for the proposed 
provisions related to the coverage of and payment for the annual 
wellness visit. The regulations regarding coverage of the IPPE are 
specified in Sec.  410.16 and remain unchanged by the ACA.
    The specific preventive services included in the definition of 
``preventive services'' in section 1861(ddd)(3)(A) of the Act as cross-
referenced to section 1861(ww)(2) of the Act, excluding 
electrocardiograms, include the following:
     Pneumococcal, influenza, and hepatitis B vaccine and 
administration.
     Screening mammography.
     Screening pap smear and screening pelvic exam.
     Prostate cancer screening tests.
     Colorectal cancer screening tests.
     Outpatient diabetes self-management training (DSMT).
     Bone mass measurement.
     Screening for glaucoma.
     Medical nutrition therapy (MNT) services.
     Cardiovascular screening blood tests.
     Diabetes screening tests.
     Ultrasound screening for abdominal aortic aneurysm (AAA).
     Additional preventive services identified for coverage 
through the national coverage determination (NCD) process.
    We note that currently the only additional preventive service 
identified for coverage through the NCD process is HIV testing. A 
proposed NCD for smoking cessation services for asymptomatic patients 
was released in May 2010 on the CMS Web site at: http://www.cms.gov/mcd/index_list.asp?list_type=nca. We will address the applicability 
of section 1861(ddd)(3)(A) of the Act (as added by section 4104 of the 
ACA) to these services if an NCD establishing them as additional 
preventive services is finalized.
    We are proposing to add the definition of ``preventive services'' 
in Sec.  410.2 to implement the provisions of section 1861(ddd)(3) of 
the Act (as amended by section 4104 of the ACA).
2. Deductible and Coinsurance for Preventive Services
    Section 4104(b)(4) of the ACA amends section 1833(a)(1) of the Act 
by requiring 100 percent Medicare

[[Page 40130]]

payment for the IPPE and for those preventive services recommended by 
the United States Preventive Services Task Force (USPSTF) with a grade 
of A or B for any indication or population and that are appropriate for 
the individual. This provision waives any coinsurance that would 
otherwise be applicable under section 1833(a)(1) of the Act for those 
items and services listed in section 1861(ww)(2) of the Act (excluding 
electrocardiograms) to which the USPSTF has given a grade of A or B. In 
addition, section 4103(c)(1) of the ACA amends section 1833(c)(1) of 
the Act to waive the coinsurance for the annual wellness visit. The 
coinsurance represents the beneficiary's share of the payment to the 
provider or supplier for furnished services. Coinsurance generally 
refers to a percentage (for example, 20 percent) of the Medicare 
payment rate for which the beneficiary is liable and is applicable 
under the PFS, while copayment generally refers to an established 
amount that the beneficiary must pay that is not necessarily related to 
a particular percentage of the Medicare payment, and is applicable 
under the hospital Outpatient Prospective Payment System (OPPS). We 
refer readers to the CY 2011 OPPS/ASC proposed rule for proposed 
provisions related to payment for preventive services, including waiver 
of the deductible and copayment, under the OPPS.
    Section 4104(c) of the ACA amends section 1833(b)(1) of the Act to 
waive the Part B deductible for preventive services described in 
subparagraph (A) of section 1861(ddd)(3) of the Act that have a grade 
of A or B from the USPSTF. In addition, section 1833(b)(1) of the Act 
(as amended by section 4103(c)(4) of the ACA) waives the Part B 
deductible for the annual wellness visit. These provisions are 
effective for services furnished on and after January 1, 2011. Section 
101(b)(2) of the MIPPA amended section 1833(b) of the Act to waive the 
deductible for the IPPE effective January 1, 2009.
    Not all preventive services described in subparagraph (A) of 
section 1861(ddd)(3) are recommended by the USPSTF with a grade of A or 
B and, therefore, some of the preventive services do not meet the 
criteria in sections 1833(a)(1) and (b)(1) of the Act for the waiver of 
the deductible and coinsurance. However, with certain exceptions noted 
below, the changes made by section 4104 of the ACA do not affect most 
of the preexisting specific provisions in sections 1833(a) and 1833(b) 
of the Act (that are codified in regulations in Sec.  410.160(b) and 
Sec.  410.152) that waive the deductible and coinsurance for specific 
services. For example, section 1833(a)(1)(D) of the Act already waives 
the coinsurance and section 1833(b)(3) of the Act waives the deductible 
for clinical laboratory tests (including tests furnished for screening 
purposes). Section 4104 of the ACA does not change this provision and, 
therefore, the waiver of both the deductible and coinsurance remains in 
place for all laboratory tests, regardless of whether the particular 
clinical laboratory test meets the USPSTF grading criteria specified in 
sections 1833(a)(1) and 1833(b)(1) of the Act (as amended by section 
4104 of the ACA) for waiver of the deductible and coinsurance as a 
preventive service.
    The following preventive services listed in section 1833(ddd)(3)(A) 
of the Act are not recommended by the USPSTF with a grade of A or B for 
any indication or population: digital rectal examination furnished as a 
prostate cancer screening service; glaucoma screening; DSMT services; 
and barium enema furnished as a colorectal cancer screening service.
    Specifically, HCPCS code G0102 (Prostate cancer screening; digital 
rectal exam), which does not have a grade of A or B from the USPSTF for 
any indication or population, will continue to be subject to the 
deductible and coinsurance as there is no statutory provision to the 
contrary. However, the deductible and coinsurance for HCPCS code G0103 
(Prostate cancer screening; prostate specific antigen test (PSA)) will 
continue to be waived in accordance with section 1833(a)(1)(D) of the 
Act, even though this service also does not have a grade of A or B from 
the USPSTF.
    Glaucoma screening services, described by HCPCS codes G0117 
(Glaucoma screening for high risk patients furnished by an optometrist 
or ophthalmologist) and G0118 (Glaucoma screening for high risk patient 
furnished under the direct supervision of an optometrist or 
ophthalmologist), will continue to be subject to the deductible and 
coinsurance because these services are not recommended with a grade of 
A or B by the USPSTF for any indication or population and there is no 
other statutory provision to except them. Similarly, DSMT services are 
currently not rated by the USPSTF, and there is no other statutory 
provision to except them from applicability of the deductible and 
coinsurance. Therefore the deductible and coinsurance requirements will 
continue to apply.
    Barium enemas furnished as colorectal cancer screening tests, 
described by HCPCS codes G0106 (Colorectal cancer screening; 
alternative to G0104, screening sigmoidoscopy, barium enema) and G0120 
(Colorectal cancer screening; alternative to G0105, screening 
colonoscopy, barium enema), do not have a grade of A or B from the 
USPSTF for any indication or population. However, the deductible does 
not apply to barium enemas furnished as colorectal cancer screening 
tests, because colorectal cancer screening tests are explicitly 
excluded from the deductible in section 1833(b)(8) of the Act. However, 
there is no specific exclusion of barium enemas from the coinsurance 
requirement in section 1833(b)(1) of the Act and, therefore, this 
requirement, as applicable, continues to apply to barium enemas. We 
note that the USPSTF has given a grade of A to screening colonoscopy, 
screening flexible sigmoidoscopy, and fecal occult blood screening 
tests, and that, as a result, these colorectal cancer screening tests 
are subject to the statutory waiver of both the deductible and 
coinsurance.
    We note also that the USPSTF ceased to make recommendations with 
regard to vaccines and vaccine administration after CY 1996, so as not 
to conflict with the recommendations of the Centers for Disease Control 
and Prevention's Advisory Committee on Immunization Practices. However, 
the USPSTF's most recent vaccine recommendations gave a grade of B to 
influenza and pneumococcal vaccines and their administration and a 
grade of A to hepatitis B vaccine and its administration. While 
sections 1833(a)(1) and 1833(b)(1) of the Act require that the 
preventive services receive a grade of A or B from the USPSTF for the 
coinsurance and deductible to be waived, the statute does not specify 
that the recommended grade must be furnished by the USPSTF within any 
given timeframe. The USPSTF grades for these preventive services are 
the most current USPSTF grade and have never been withdrawn. Therefore, 
we believe that these preventive services meet the requirements of the 
statute for the waiver of the deductible and coinsurance. We also note 
that the Centers for Disease Control and Prevention's Advisory 
Committee on Immunization Practices currently recommends influenza, 
pneumococcal, and hepatitis B vaccines.
    We are proposing to update Sec.  410.160(b), which lists the 
services for which expenses incurred are not subject to the Part B 
annual deductible and do not count toward meeting that deductible. 
Specifically, we are proposing to revise Sec.  410.160(b)(2) to include 
influenza and hepatitis B

[[Page 40131]]

vaccines and their administration, in addition to pneumococcal vaccine 
and its administration. In addition, in Sec.  410.160(b), we are also 
proposing to add exceptions for bone mass measurement, MNT services, 
and the annual wellness visit.
    In Sec.  410.152, we are proposing to revise paragraph (l) to 
establish the amount of payment under the applicable payment system for 
providers and suppliers of the services listed in the paragraph and 
displayed in Table 38. Table 38 displays the HCPCS codes that we are 
proposing as ``preventive services'' under section 1861(ddd)(3)(A) of 
the Act and identifies the HCPCS codes for the IPPE and the annual 
wellness visit. Table 38 also indicates the most recent USPSTF grade, 
if any, that is the basis for our proposed policy with regard to waiver 
of the deductible and coinsurance, as applicable, and the Medicare 
payment system under which the HCPCS code would be paid when furnished 
outside of the facility setting. We note that the changes made by 
section 4104 of the ACA with respect to the deductible and coinsurance 
apply in all settings in which the services are furnished.
    In developing recommendations regarding preventive services, we 
recognize that the USPSTF may make recommendations that are specific to 
an indication or population, at times including characteristics such as 
gender and age in its recommendations. While we are proposing to waive 
the deductible and coinsurance for any Medicare covered preventive 
service recommended with a grade of A or B for any indication or 
population, with no limits on the indication or population as long as 
the USPSTF has recommended the preventive service for at least one 
indication and/or population with a grade of A or B, we note that all 
existing Medicare coverage policies for such services, including any 
limitations based on indication or population, continue to apply. In 
some cases, national coverage policies may currently limit Medicare 
coverage based on the indication or population, consistent with the 
USPSTF recommendations with a grade of A or B for the indication or 
population. In other cases where Medicare does not explicitly noncover 
preventive services for a specific population or indication, we would 
expect that, particularly in those cases where the USPSTF 
recommendation grade is a D (that is, the USPSTF recommends against the 
service because there is moderate or high certainty that the service 
has no net benefit or that the harms outweigh the benefits), 
practitioners would only order those preventive services that are 
clinically appropriate for the beneficiary. If we have concerns in the 
future about the appropriateness of preventive services for an 
indication or population in light of the USPSTF's recommendations, we 
may consider using our authority under section 1834(n)(1) of the Act 
(as added by section 4105 of the ACA) to modify Medicare coverage of 
any preventive service to be consistent with the recommendations of the 
USPSTF.
    Section 10501(i)(2) of the ACA amended the definition of Federally 
Qualified Health Center (FQHC) services as defined in section 
1861(aa)(3)(A) of the Act by replacing the specific references to 
services provided under section 1861(qq) and (vv) of the Act (diabetes 
outpatient self-management training services and medical nutrition 
therapy services, respectively) with preventive services as defined in 
section 1861(ddd)(3) of the Act, as established by section 4014(a)(3) 
of the ACA. These changes are effective for services provided on or 
after January 1, 2011. Accordingly, we are proposing to conform the 
regulations to the new statutory requirement by adding a new section 
Sec.  405.2449 which would add the new preventive services definition 
to the definition of FQHC services effective for services provided on 
or after January 1, 2011.
    Section 1861(ddd)(3) of the Act defines ``preventive services'' as 
consisting of the following three components:
     Screening and preventive services described in section 
1861(ww)(2) of the Act (other than electrocardiograms described in 
subparagraph (M) of that same subsection).
     An initial preventive physical examination, as defined in 
section 1861(ww) of the Act.
     Personalized prevention plan services as defined in 
section 1861(hhh)(1) of the Act.
    We are proposing to add each of these three components into the new 
Medicare FQHC preventive services definition in a new Sec.  405.2449.
    Section 4104(b)(1) of the ACA, as amended by section 10406 of the 
same Act, waives coinsurance for preventive services by adding section 
1833(a)(1)(Y) to the Act to require, essentially, waiver of coinsurance 
for preventive services that are recommended with a grade of A or B by 
the USPSTF for any indication or population. This provision is 
specifically designed to remove barriers to affording and obtaining 
such preventive services under Medicare.
    In addition, section 10501(i)(3)(B)(ii) of the ACA added section 
1833(a)(1)(Z) to the Act to require a 20-percent copay on all FQHC 
services after implementation of the FQHC prospective payment system. 
We believe we can give both section 1833(a)(1)(Y) and (Z) of the Act, 
and the definition of FQHC services (revised to include the broader 
scope of preventive services) their best effect by permitting a 100 
percent reimbursement rate for preventive services as defined at 
section 1861 (ddd)(3) of Act, effective January 1, 2011.
    Section 1833(b)(4) of the Act stipulates that the Medicare Part B 
deductible shall not apply to Federally qualified health center 
services. The ACA makes no change to this provision, therefore Medicare 
shall continue to waive the Part B deductible for all federally 
qualified health center services, including preventive services added 
by the ACA.

 Table 38--Proposed CY 2011 Deductible and Coinsurance for Preventive Services Under Section 1861(ddd(3)(A) of the Act (Includes the IPPE and the Annual
                                                                     Wellness Visit)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    CPT/
       Preventive service          HCPCS             Long descriptor             USPSTF rating    Payment method     CY 2010 coins./    CY 2011 coins./
                                    Code                                              \1\                              deductible          deductible
--------------------------------------------------------------------------------------------------------------------------------------------------------
Initial Preventive Physical          G0402  Initial preventive physical        * Not Rated.....  PFS.............  Coins. applies and  WAIVED.
 Examination, IPPE.                          examination; face to face                                              ded. is waived.
                                             visits, services limited to new
                                             beneficiary during the first 12
                                             months of Medicare enrollment.
                                     G0403  Electrocardiogram, routine ECG     ................  PFS.............  Not Waived........  Not Waived.
                                             with 12 leads; performed as a
                                             screening for the initial
                                             preventive physical examination
                                             with interpretation and report.

[[Page 40132]]

 
                                     G0404  Electrocardiogram, routine ECG     ................  PFS.............  Not Waived........  Not Waived.
                                             with 12 leads; tracing only,
                                             without interpretation and
                                             report, performed as a screening
                                             for the initial preventive
                                             physical examination.
                                     G0405  Electrocardiogram, routine ECG     ................  PFS.............  Not Waived........  Not Waived.
                                             with 12 leads; interpretation
                                             and report only, performed as a
                                             screening for the initial
                                             preventive physical examination.
Ultrasound Screening for             G0389  Ultrasound, B-scan and/or real     B...............  PFS.............  Coins. applies and  WAIVED.
 Abdominal Aortic Aneurysm                   time with image documentation;                                         ded. is waived.
 (AAA).                                      for abdominal aortic aneurysm
                                             (AAA) ultrasound screening.
Cardiovascular Disease               80061  Lipid panel......................  A...............  CLFS............  WAIVED............  WAIVED.
 Screening.
                                     82465  Cholesterol, serum or whole        ................  CLFS............  WAIVED............  WAIVED.
                                             blood, total.
                                     83718  Lipoprotein, direct measurement;   ................  CLFS............  WAIVED............  WAIVED.
                                             high density cholesterol (hdl
                                             cholesterol).
                                     84478  Triglycerides....................  ................  CLFS............  WAIVED............  WAIVED.
Diabetes Screening Tests.......      82947  Glucose; quantitative, blood       B...............  CLFS............  WAIVED............  WAIVED.
                                             (except reagent strip).
                                     82950  Glucose; post glucose dose         ................  CLFS............  WAIVED............  WAIVED.
                                             (includes glucose).
                                     82951  Glucose; tolerance test (gtt),     * Not Rated.....  CLFS............  WAIVED............  WAIVED.
                                             three specimens (includes
                                             glucose).
Diabetes Self-Management             G0108  Diabetes outpatient self-          * Not Rated.....  PFS.............  Not Waived........  Not Waived.
 Training Services.                          management training services,
(DSMT).........................              individual, per 30 minutes.
                                     G0109  Diabetes outpatient self-          ................  PFS.............  Not Waived........  Not Waived.
                                             management training services,
                                             group session (2 or more), per
                                             30 minutes.
Medical Nutrition Therapy (MNT)      97802  Medical nutrition therapy;         B...............  PFS.............  Not Waived........  WAIVED.
 Services.                                   initial assessment and
                                             intervention, individual, face-
                                             to-face with the patient, each
                                             15 minutes.
                                     97803  Medical nutrition therapy; re-     ................  PFS.............  Not Waived........  WAIVED.
                                             assessment and intervention,
                                             individual, face-to-face with
                                             the patient, each 15 minutes.
                                     97804  Medical nutrition therapy; group   ................  PFS.............  Not Waived........  WAIVED.
                                             (2 or more individual(s)), each
                                             30 minutes.
                                     G0270  Medical nutrition therapy;         B...............  PFS.............  Not Waived........  WAIVED.
                                             reassessment and subsequent
                                             intervention(s) following second
                                             referral in same year for change
                                             in diagnosis, medical condition
                                             or treatment regimen (including
                                             additional hours needed for
                                             renal disease), individual, face
                                             to face with the patient, each
                                             15 minutes.
                                     G0271  Medical nutrition therapy,         ................  PFS.............  Not Waived........  WAIVED.
                                             reassessment and subsequent
                                             intervention(s) following second
                                             referral in same year for change
                                             in diagnosis, medical condition,
                                             or treatment regimen (including
                                             additional hours needed for
                                             renal disease), group (2 or more
                                             individuals), each 30 minutes.

[[Page 40133]]

 
Screening Pap Test.............      G0123  Screening cytopathology, cervical  A...............  CLFS............  WAIVED............  WAIVED.
                                             or vaginal (any reporting
                                             system), collected in
                                             preservative fluid, automated
                                             thin layer preparation,
                                             screening by cytotechnologist
                                             under physician supervision.
                                     G0124  Screening cytopathology, cervical  ................  PFS.............  Coins. applies and  WAIVED.
                                             or vaginal (any reporting                                              ded. is waived.
                                             system), collected in
                                             preservative fluid, automated
                                             thin layer preparation,
                                             requiring interpretation by
                                             physician.
                                     G0141  Screening cytopathology smears,    A...............  PFS.............  Coins. applies and  WAIVED.
                                             cervical or vaginal, performed                                         ded. is waived.
                                             by automated system, with manual
                                             rescreening, requiring
                                             interpretation by physician.
                                     G0143  Screening cytopathology, cervical  A...............  CLFS............  WAIVED............  WAIVED.
                                             or vaginal (any reporting
                                             system), collected in
                                             preservative fluid, automated
                                             thin layer preparation, with
                                             manual screening and rescreening
                                             by cytotechnologist under
                                             physician supervision.
                                     G0144  Screening cytopathology, cervical  A...............  CLFS............  WAIVED............  WAIVED.
                                             or vaginal (any reporting
                                             system), collected in
                                             preservative fluid, automated
                                             thin layer preparation, with
                                             screening by automated system,
                                             under physician supervision.
                                     G0145  Screening cytopathology, cervical  A...............  CLFS............  WAIVED............  WAIVED.
                                             or vaginal (any reporting
                                             system), collected in
                                             preservative fluid, automated
                                             thin layer preparation, with
                                             screening by automated system
                                             and manual rescreening under
                                             physician supervision.
                                     G0147  Screening cytopathology smears,    A...............  CLFS............  WAIVED............  WAIVED.
                                             cervical or vaginal, performed
                                             by automated system under
                                             physician supervision.
                                     G0148  Screening cytopathology smears,    A...............  CLFS............  WAIVED............  WAIVED.
                                             cervical or vaginal, performed
                                             by automated system with manual
                                             rescreening.
                                     P3000  Screening papanicolaou smear,      ................  CLFS............  WAIVED............  WAIVED.
                                             cervical or vaginal, up to three
                                             smears, by technician under
                                             physician supervision.
                                     P3001  Screening papanicolaou smear,      ................  PFS.............  Coins. applies &    WAIVED.
                                             cervical or vaginal, up to three                                       ded. is waived.
                                             smears, requiring interpretation
                                             by physician.
                                     Q0091  Screening papanicolaou smear;      ................  PFS.............  Coins. applies &    WAIVED.
                                             obtaining, preparing and                                               ded. is waived.
                                             conveyance of cervical or
                                             vaginal smear to laboratory.
Screening Pelvic Exam..........      G0101  Cervical or vaginal cancer         A...............  PFS.............  Coins. applies and  WAIVED.
                                             screening; pelvic and clinical                                         ded. is waived.
                                             breast examination.
Screening Mammography..........      77052  Computer-aided detection           B...............  PFS.............  Coins. applies and  WAIVED.
                                             (computer algorithm analysis of                                        ded. is waived.
                                             digital image data for lesion
                                             detection) with further
                                             physician review for
                                             interpretation, with or without
                                             digitization of film
                                             radiographic images; screening
                                             mammography (list separately in
                                             addition to code for primary
                                             procedure).
                                     77057  Screening mammography, bilateral   B...............  PFS.............  Coins. applies and  WAIVED.
                                             (2-view film study of each                                             ded. is waived.
                                             breast).
                                     G0202  Screening mammography, producing   ................  PFS.............  Coins. applies &    WAIVED.
                                             direct digital image, bilateral,                                       ded. is waived.
                                             all views.
Bone Mass Measurement..........      G0130  Single energy x-ray                B...............  PFS.............  Not Waived........  WAIVED.
                                             absorptiometry (sexa) bone
                                             density study, one or more
                                             sites; appendicular skeleton
                                             (peripheral) (e.g., radius,
                                             wrist, heel).

[[Page 40134]]

 
                                     77078  Computed tomography, bone mineral  ................  PFS.............  Not Waived........  WAIVED.
                                             density study, 1 or more sites;
                                             axial skeleton (e.g., hips,
                                             pelvis, spine).
                                     77079  Computed tomography, bone mineral  ................  PFS.............  Not Waived........  WAIVED.
                                             density study, 1 or more sites;
                                             appendicular skeleton
                                             (peripheral) (e.g., radius,
                                             wrist, heel).
                                     77080  Dual-energy x-ray absorptiometry   ................  PFS.............  Not Waived........  WAIVED.
                                             (dxa), bone density study, 1 or
                                             more sites; axial skeleton
                                             (e.g., hips, pelvis, spine).
                                     77081  Dual-energy x-ray absorptiometry   ................  PFS.............  Not Waived........  WAIVED.
                                             (dxa), bone density study, 1 or
                                             more sites; appendicular
                                             skeleton (peripheral) (e.g.,
                                             radius, wrist, heel).
                                     77083  Radiographic absorptiometry        ................  PFS.............  Not Waived........  WAIVED.
                                             (e.g., photodensitometry,
                                             radiogrammetry), 1 or more sites.
                                     76977  Ultrasound bone density            B...............  PFS.............  Not Waived........  WAIVED.
                                             measurement and interpretation,
                                             peripheral site(s), any method.
Colorectal Cancer Screening....      G0104  Colorectal cancer screening;       A...............  PFS.............  Coins. applies and  WAIVED.
                                             flexible sigmoidoscopy.                                                ded. is waived.
                                     G0105  Colorectal cancer screening;       ................  PFS.............  Coins. applies      WAIVED.
                                             colonoscopy on individual at                                           and; ded. is
                                             high risk.                                                             waived.
                                     G0106  Colorectal cancer screening;       * Not Rated.....  PFS.............  Coins. applies and  Coins. applies
                                             alternative to G0104, screening                                        ded. is waived.     and ded. is
                                             sigmoidoscopy, barium enema.                                                               waived.
                                     G0120  Colorectal cancer screening;       ................  PFS.............  Coins. applies and  Coins. applies
                                             alternative to G0105, screening                                        ded. is waived.     and ded. is
                                             colonoscopy, barium enema..                                                                waived.
                                     G0121  Colorectal cancer screening;       A...............  PFS.............  Coins. applies and  WAIVED.
                                             colonoscopy on individual not                                          ded. is waived.
                                             meeting criteria for high risk.
                                     82270  Blood, occult, by peroxidase       ................  CLFS............  WAIVED............  WAIVED.
                                             activity (e.g., guaiac),
                                             qualitative; feces, consecutive.
                                     G0328  Colorectal cancer screening;       ................  CLFS............  Coins. applies and  WAIVED.
                                             fecal occult blood test,                                               ded. is waived.
                                             immunoassay, 1-3 simultaneous.
Prostate Cancer Screening......      G0102  Prostate cancer screening;         D...............  PFS.............  Not Waived........  Not Waived.
                                             digital rectal examination.
                                     G0103  Prostate cancer screening;         ................  CLFS............  WAIVED............  WAIVED.
                                             prostate specific antigen test
                                             (PSA).
Glaucoma Screening.............      G0117  Glaucoma screening for high risk   I...............  PFS.............  Not Waived........  Not Waived.
                                             patients furnished by an
                                             optometrist or ophthalmologist.
                                     G0118  Glaucoma screening for high risk   ................  PFS.............  Not Waived........  Not Waived.
                                             patient furnished under the
                                             direct supervision of an
                                             optometrist or ophthalmologist.
Influenza Virus Vaccine........      90655  Influenza virus vaccine, split     B...............  Drug Pricing      WAIVED............  WAIVED.
                                             virus, preservative free, when                       File.
                                             administered to children 6-35
                                             months of age, for intramuscular
                                             use.
                                     90656  Influenza virus vaccine, split     ................  Drug Pricing      WAIVED............  WAIVED.
                                             virus, preservative free, when                       File.
                                             administered to individuals 3
                                             years and older, for
                                             intramuscular use.
                                     90657  Influenza virus vaccine, split     ................  Drug Pricing      WAIVED............  WAIVED.
                                             virus, when administered to                          File.
                                             children 6-35 months of age, for
                                             intramuscular use.
                                     90658  Influenza virus vaccine, split     ................  Drug Pricing      WAIVED............  WAIVED.
                                             virus, when administered to                          File.
                                             individuals 3 years of age and
                                             older, for intramuscular use.
                                     90660  Influenza virus vaccine, live,     ................  Drug Pricing      WAIVED............  WAIVED.
                                             for intranasal use.                                  File.

[[Page 40135]]

 
                                     90662  Influenza virus vaccine, split     ................  Drug Pricing      WAIVED............  WAIVED.
                                             virus, preservative free,                            File.
                                             enhanced immunogenicity via
                                             increased antigen content, for
                                             intramuscular use.
                                     G0008  Administration of influenza virus  ................  PFS.............  WAIVED............  WAIVED.
                                             vaccine.
                                     G9141  Influenza A (H1N1) immunization    ................  PFS.............  WAIVED............  WAIVED.
                                             administration (includes the
                                             physician counseling the patient/
                                             family).
                                     G9142  Influenza A (H1N1) vaccine, any    ................  Drug Pricing      WAIVED............  WAIVED.
                                             route of administration.                             File (if not
                                                                                                  supplied at no
                                                                                                  cost).
Pneumococcal Vaccine...........      90669  Pneumococcal conjugate vaccine,    B...............  Drug Pricing      WAIVED............  WAIVED.
                                             polyvalent, when administered to                     File.
                                             children younger than 5 years,
                                             for intramuscular use.
                                     90670  Pneumococcal conjugate vaccine,    ................  Drug Pricing      WAIVED............  WAIVED.
                                             13 valent, for intramuscular                         File.
                                             use..
                                     90732  Pneumococcal polysaccharide        ................  Drug Pricing      WAIVED............  WAIVED.
                                             vaccine, 23-valent, adult or                         File.
                                             immunosuppressed patient dosage,
                                             when administered to individuals
                                             2 years or older, for
                                             subcutaneous or intramuscular
                                             use.
                                     G0009  Administration of pneumococcal     ................  PFS.............  WAIVED............  WAIVED.
                                             vaccine.
Hepatitis B Vaccine............      90740  Hepatitis B vaccine, dialysis or   A...............  Drug Pricing      Not Waived........  WAIVED.
                                             immunosuppressed patient dosage                      File.
                                             (3 dose schedule), for
                                             intramuscular use.
                                     90743  Hepatitis B vaccine, adolescent    ................  Drug Pricing      Not Waived........  WAIVED.
                                             (2 dose schedule), for                               File.
                                             intramuscular use.
                                     90744  Hepatitis B vaccine, pediatric/    ................  Drug Pricing      Not Waived........  WAIVED.
                                             adolescent dosage (3 dose                            File.
                                             schedule), for intramuscular use.
                                     90746  Hepatitis B vaccine, adult         ................  Drug Pricing      Not Waived........  WAIVED.
                                             dosage, for intramuscular use.                       File.
                                     90747  Hepatitis B vaccine, dialysis or   ................  Drug Pricing      Not Waived........  WAIVED.
                                             immunosuppressed patient dosage                      File.
                                             (4 dose schedule), for
                                             intramuscular use.
                                     G0010  Administration of hepatitis B      A...............  PFS.............  Not Waived........  WAIVED.
                                             vaccine.
HIV Screening..................      86689  HTLV or HIV antibody,              A...............  CLFS............  WAIVED............  WAIVED.
                                             confirmatory test (e.g., Western
                                             Blot).
                                     G0432  Infectious agent antigen           ................  CLFS............  WAIVED............  WAIVED.
                                             detection by enzyme immunoassay
                                             (EIA) technique, qualitative or
                                             semi-qualitative, multiple-step
                                             method, HIV-1 or HIV-2,
                                             screening.
                                     G0433  Infectious agent antigen           ................  CLFS............  WAIVED............  WAIVED.
                                             detection by enzyme-linked
                                             immunosorbent assay (ELISA)
                                             technique, antibody, HIV-1 or
                                             HIV-2, screening.
                                     G0435  Infectious agent antigen           ................  CLFS............  WAIVED............  WAIVED.
                                             detection by rapid antibody test
                                             of oral mucosa transudate, HIV-1
                                             or HIV-2, screening.
Annual Wellness Visit..........      GXXXA  Annual wellness visit, including   * Not Rated.....  PFS.............  N/A...............  WAIVED.
                                             PPPS, first visit.
                                     GXXXB  Annual wellness visit, including   ................  PFS.............  N/A...............  WAIVED.
                                             PPPS, subsequent visit.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ U.S. Preventive Services Task Force Recommendations.
A--The USPSTF strongly recommends that clinicians routinely provide [the service] to eligible patients. (The USPSTF found good evidence that [the
  service] improves important health outcomes and concludes that benefits substantially outweigh harms.)
B--The USPSTF recommends that clinicians routinely provide [the service] to eligible patients. (The USPSTF found at least fair evidence that [the
  service] improves important health outcomes and concludes that benefits outweigh harms.)
C--The USPSTF makes no recommendation for or against routine provision of [the service]. (The USPSTF found at least fair evidence that [the service] can
  improve health outcomes but concludes that the balance of benefits and harms is too close to justify a general recommendation.)
D--The USPSTF recommends against routinely providing [the service] to asymptomatic patients. (The USPSTF found at least fair evidence that [the service]
  is ineffective or that harms outweigh benefits.)

[[Page 40136]]

 
I--The USPSTF concludes that the evidence is insufficient to recommend for or against routinely providing [the service]. (Evidence that [the service] is
  effective is lacking, of poor quality, or conflicting and the balance of benefits and harms cannot be determined.)

4. Extension of Waiver of Deductible to Services Furnished in 
Connection With or in Relation to a Colorectal Cancer Screening Test 
That Becomes Diagnostic or Therapeutic
    Section 4104(c) of the ACA amends section 1833(b) of the Act to 
waive the Part B deductible for colorectal cancer screening tests that 
become diagnostic. Specifically, section 1833(b)(1) of the Act (as 
amended by section 4104(c)(2) of the ACA) waives the deductible with 
respect to a colorectal cancer screening test regardless of the code 
that is billed for the establishment of a diagnosis as a result of the 
test, or for the removal of tissue or other matter or other procedure 
that is furnished in connection with, as a result of, and in the same 
clinical encounter as a screening test. We are proposing that all 
surgical services furnished on the same date as a planned screening 
colonoscopy, planned flexible sigmoidoscopy, or barium enema be 
considered to be furnished in connection with, as a result of, and in 
the same clinical encounter as the screening test. In the event of a 
legislative change to this policy (for example, a statutory change that 
would waive the coinsurance for these related services in addition to 
the deductible), we would reassess the appropriateness of this proposed 
definition of services that are furnished in connection with, as a 
result of, and in the same clinical encounter as the colorectal cancer 
screening test that becomes diagnostic. We also note that the 
beneficiary's annual deductible would likely be met when any surgical 
procedure (related or not) is furnished on the same day as the 
scheduled screening test.
    We are proposing to implement this provision by creating a HCPCS 
modifier that providers and practitioners would append to the 
diagnostic procedure code that is reported instead of the screening 
colonoscopy or screening flexible sigmoidoscopy HCPCS code or as a 
result of the barium enema when the screening test becomes a diagnostic 
service. The claims processing system would respond to the modifier by 
waiving the deductible for all surgical services on the same date as 
the diagnostic test. Coinsurance would continue to apply to the 
diagnostic test and to other services furnished in connection with, as 
a result of, and in the same clinical encounter as the screening test.

S. Section 5501: Expanding Access to Primary Care Services and General 
Surgery Services

1. Section 5501(a): Incentive Payment Program for Primary Care Services
a. Background
    Section 5501(a) of the ACA revises section 1833 of the Act by 
adding a new paragraph (x), ``Incentive Payments for Primary Care 
Services.'' Section 1833(x) of the Act states that in the case of 
primary care services furnished on or after January 1, 2011 and before 
January 1, 2016 by a primary care practitioner, there shall also be 
paid on a monthly or quarterly basis an amount equal to 10 percent of 
the payment amount for such services under Part B.
    Section 1833(x)(2)(A) of the Act (as added by section 5501(a) of 
the ACA) defines a primary care practitioner as: (1) A physician, as 
described in section 1861(r)(1) of the Act, who has a primary specialty 
designation of family medicine, internal medicine, geriatric medicine, 
or pediatric medicine; or (2) a nurse practitioner, clinical nurse 
specialist, or physician assistant as defined in section 1861(aa)(5) of 
the Act, and in all cases, for whom primary care services accounted for 
at least 60 percent of the allowed charges under Part B for the 
practitioner in a prior period as determined appropriate by the 
Secretary.
    Section 1833(x)(2)(B) (as added by section 5501(a)(2)(B) of the 
ACA) defines primary care services as those services identified by the 
following HCPCS codes as of January 1, 2009 (and as subsequently 
modified by the Secretary, as applicable):
     99201 through 99215 for new and established patient office 
or other outpatient evaluation and management (E/M) visits;
     99304 through 99340 for initial, subsequent, discharge, 
and other nursing facility E/M services; new and established patient 
domiciliary, rest home (e.g., boarding home), or custodial care E/M 
services; and domiciliary, rest home (e.g., assisted living facility), 
or home care plan oversight services; and
     99341 through 99350 for new and established patient home 
E/M visits.
    These codes are displayed in Table 39. All of these codes remain 
active in CY 2010 and there are no other codes used to describe these 
services.

   Table 39--Primary Care Services Eligible for Primary Care Incentive
                           Payments in CY 2011
------------------------------------------------------------------------
        CPT codes                           Description
------------------------------------------------------------------------
99201....................  Level 1 new patient office or other
                            outpatient visit.
99202....................  Level 2 new patient office or other
                            outpatient visit.
99203....................  Level 3 new patient office or other
                            outpatient visit.
99204....................  Level 4 new patient office or other
                            outpatient visit.
99205....................  Level 5 new patient office or other
                            outpatient visit.
99211....................  Level 1 established patient office or other
                            outpatient visit.
99212....................  Level 2 established patient office or other
                            outpatient visit.
99214....................  Level 4 established patient office or other
                            outpatient visit.
99215....................  Level 5 established patient office or other
                            outpatient visit.
99304....................  Level 1 initial nursing facility care.
99305....................  Level 2 initial nursing facility care.
99306....................  Level 3 initial nursing facility care.
99307....................  Level 1 subsequent nursing facility care.
99308....................  Level 2 subsequent nursing facility care.
99309....................  Level 3 subsequent nursing facility care.
99310....................  Level 4 subsequent nursing facility care.
99315....................  Nursing facility discharge day management;.
                            30 minutes.
99316....................  Nursing facility discharge day management;
                            more than 30 minutes.
99318....................  Other nursing facility services; evaluation
                            and management of a patient involving an
                            annual nursing facility assessment.
99324....................  Level 1 new patient domiciliary, rest home,
                            or custodial care visit.

[[Page 40137]]

 
99325....................  Level 2 new patient domiciliary, rest home,
                            or custodial care visit.
99326....................  Level 3 new patient domiciliary, rest home,
                            or custodial care visit.
99327....................  Level 4 new patient domiciliary, rest home,
                            or custodial care visit.
99328....................  Level 5 new patient domiciliary, rest home,
                            or custodial care visit.
99334....................  Level 1 established patient domiciliary, rest
                            home, or custodial care visit.
99335....................  Level 2 established patient domiciliary, rest
                            home, or custodial care visit.
99336....................  Level 3 established patient domiciliary, rest
                            home, or custodial care visit.
99337....................  Level 4 established patient domiciliary, rest
                            home, or custodial care visit.
99339....................  Individual physician supervision of a patient
                            in home, domiciliary or rest home recurring
                            complex and multidisciplinary care
                            modalities; 30 minutes.
99340....................  Individual physician supervision of a patient
                            in home, domiciliary or rest home recurring
                            complex and multidisciplinary care
                            modalities; 30 minutes or more.
99341....................  Level 1 new patient home visit.
99342....................  Level 2 new patient home visit.
99343....................  Level 3 new patient home visit.
99344....................  Level 4 new patient home visit.
99345....................  Level 5 new patient home visit.
99347....................  Level 1 established patient home visit.
99348....................  Level 2 established patient home visit.
99349....................  Level 3 established patient home visit.
99350....................  Level 4 established patient home visit.
------------------------------------------------------------------------

b. Proposed Primary Care Incentive Payment Program (PCIP)
    For primary care services furnished on or after January 1, 2011 and 
before January 1, 2016, we are proposing to provide a 10 percent 
incentive payment to primary care practitioners, identified as the 
following: (1) In the case of physicians, enrolled in Medicare with a 
primary specialty designation of 08--family practice, 11--internal 
medicine, 37--pediatrics, or 38--geriatrics; or (2) in the case of 
nonphysician practitioners (NPPs), enrolled in Medicare with a primary 
care specialty designation of 50--nurse practitioner, 89--certified 
clinical nurse specialist, or 97--physician assistant; and (3) for whom 
the primary care services displayed in Table 39 accounted for at least 
60 percent of the allowed charges under Part B for such practitioner 
during the time period that is specified by the Secretary, and proposed 
in this section.
    We are proposing to use the most current full year of claims data 
to identify primary care practitioners eligible for the PCIP for a CY 
based on the practitioner's primary specialty (as identified on claims) 
and the practitioner's percentage of all allowed charges for the 
primary care services displayed in Table 39. We commonly use the most 
recent full year of claims data for purposes of establishing annual 
payment amounts under a number of Medicare's fee-for-service programs. 
A practitioner with a primary care specialty designation would be 
eligible for the PCIP in a CY if the percentage of his or her allowed 
charges for primary care services (identified in Table 39) on claims 
where the practitioner is identified as one of the primary care 
specialties described above meets or exceeds the 60 percent threshold. 
We note that the practitioner's specialty is applied to the claim by 
the claims processing system and reflects the physician's primary 
specialty designation for purposes of Medicare enrollment on the date 
the claim is processed, which would usually be close to the date on 
which the service was actually furnished to the beneficiary. We would 
identify primary care practitioners eligible for the PCIP for a year by 
the individual physician/practitioner national provider identifier 
(NPI) number using the most current full year of claims data available.
    Therefore, for determining PCIP practitioner eligibility for CY 
2011, we would use CY 2009 PFS claims data, processed through June 30, 
2010. This would ensure analysis of about 99 percent of CY 2009 claims 
to determine practitioner eligibility for PCIP payment beginning 
January 2011. We note that the MMA changed the requirements for 
critical access hospital (CAH) billing for practitioners' professional 
services and, therefore, modifications were made to the Medicare claims 
processing system to require CAHs to identify the practitioner 
furnishing a service on the CAH claim for that professional service. 
However, because the rendering practitioner has only been identified on 
CAH claims since July 1, 2009, for the first year of the PCIP we are 
proposing to identify eligible practitioners using only 6 months of CAH 
data for those CAHs paid under the optional method. Thereafter, we 
would update the list of practitioners eligible for the PCIP annually 
based on the most recent available full year of PFS and CAH claims 
data.
    To the extent practitioners were paid under the PFS during the 
historical claims data year for some primary services and, for other 
services, CAHs were paid under the optional method for those same 
practitioners' professional services, we would aggregate the historical 
claims data from all settings by the practitioner's NPI in order to 
determine whether the practitioner is eligible for PCIP payments. We 
note that for all practitioners (both practitioners paid under the PFS 
and practitioners for whose professional services CAHs are paid under 
the optional method), the period of claims data used for the annual 
determination of the primary care service percentage of allowed charges 
with a practitioner specialty of primary care would lag the PCIP 
payment year by 2 years (for example, CY 2010 claims data would be used 
for the CY 2012 PCIP). This 2-year lag is consistent with other areas 
of the Medicare program where we rely on information from claims data 
to inform payment in a future year, such as the use of CY 2009 PFS 
utilization data in the establishment of certain aspects of CY 2011 PFS 
payment rates.
    Under the proposed PCIP eligibility determination method, it would 
be necessary to revise the list of eligible practitioners based on 
updated claims data regarding primary specialty designation and the 
percentage of a practitioner's allowed charges for primary care 
services each year. The

[[Page 40138]]

revised list of practitioners developed prior to the beginning of the 
next CY would establish a practitioner's eligibility for PCIP payments 
for the full next CY. That is, once eligible for the PCIP for a given 
CY, the practitioner would receive PCIP payments for primary care 
services furnished throughout that full CY until we reassess the 
practitioner's PCIP eligibility for the next year's payments. As a 
result, a practitioner newly enrolling in Medicare during a CY would 
not be eligible for the PCIP until Medicare claims data reflecting the 
practitioner's primary care specialty and a percentage of allowed 
charges for primary care services that equals or exceeds the 60 percent 
threshold were available to establish the practitioner's eligibility 
for the next PCIP year. Similarly, an enrolled practitioner's change in 
primary specialty designation (either to or from a primary care 
specialty) would not affect that practitioner's eligibility for the 
PCIP until the practitioner's claims reflecting the change were 
available for analysis in preparation for the next applicable CY PCIP. 
Given the statutory requirement that a practitioner's primary care 
services account for at least 60 percent of the allowed charges under 
Part B for the practitioner in a prior period as determined by the 
Secretary, we see no clear alternative methodologies that would allow 
PCIP payments to be made to those practitioners newly enrolling in 
Medicare without the 2-year lag in eligibility determination that was 
described previously. However, given our general interest in supporting 
primary care practitioners and entry into primary care practice by new 
physicians and NPPs in order to ensure that Medicare beneficiaries have 
access to these important services, we are seeking public comments on 
alternative approaches for establishing PCIP eligibility for newly 
enrolled practitioners that would be consistent with the statutory 
requirement.
    We plan to monitor changes in the primary specialties of enrolled 
practitioners over time and would expect not to see significant changes 
in the specialties of currently enrolled practitioners as a result of 
the PCIP payments. We would expect that physicians changing their 
primary specialty to one of the primary care specialties of family 
medicine, internal medicine, geriatric medicine, or pediatric medicine 
and who would be newly eligible for the PCIP would be furnishing 
primary care services to the patients in their practices. Consistent 
with our past policies, we would expect that physicians changing their 
primary specialty designation under Medicare would make such changes 
only so that their primary specialty designation is fully consistent 
with the specific or unique type of medicine they practice. If we find 
that physicians are changing their specialty designations (for example, 
cardiologists who designate their primary specialty as internal 
medicine, although they practice cardiology) in order to take advantage 
of the PCIP payments, we would considering making future revisions to 
eliminate such an outcome.
    Consistent with the established Medicare HPSA physician bonus 
program (Medicare Claims Processing Manual, Pub. 100-04, Chapter 12, 
Section 90.4.4) and the proposed Health Professional Shortage Area 
Surgical Incentive Payment Program (HSIP) described in section III.S.2. 
of this proposed rule, we are proposing that PCIP payments would be 
calculated by the Medicare contractors and made quarterly on behalf of 
the eligible primary care practitioner for the primary care services 
furnished by the practitioner in that quarter. The primary care 
practitioners' professional services may be paid under the PFS based on 
a claim for professional services or, where the practitioner has 
reassigned his or her benefits to a CAH paid under the optional method, 
to the CAH based on an institutional claim.
    As discussed above, eligible primary care practitioners would be 
identified on a claim based on the NPI of the rendering practitioner. 
If the claim is submitted by a practitioner's group practice or a CAH, 
the rendering practitioner's NPI must be included on the line-item for 
the primary care service (identified in Table 39 above) in order for a 
determination to be made regarding whether or not the service is 
eligible for payment of the PCIP. We note that, in order to be eligible 
for the PCIP, physician assistants, clinical nurse specialists, and 
nurse practitioners must be billing for their services under their own 
NPI and not furnishing services incident to physicians' services. 
Regardless of the specialty area in which they may be practicing, these 
specific NPPs would be eligible for the PCIP based on their specialty 
if their historical percentage of allowed charges for primary care 
services equals or exceeds the 60 percent threshold.
    We note that section 1833(x)(4) of the Act (as added by section 
5501(a) of the ACA) specifies ``there shall be no administrative or 
judicial review under section 1869, 1878, or otherwise, respecting the 
identification of primary care practitioners.'' We believe that the 
inclusion of this language is intended to provide a means for the 
practical implementation of this provision. That is, because we must 
develop a process and identify primary care practitioners before we can 
make payment under the PCIP to the eligible primary care practitioners, 
the statute gives CMS the authority to make final determinations of 
eligible primary care practitioners that are not subject to appeal 
through the various channels normally available to practitioners, in 
order for the timely payments under the PCIP to occur. In contrast, if 
the determinations that CMS must make under this provision were subject 
to appeal, the timely implementation of this provision could be 
jeopardized and payments under the PCIP could be significantly delayed. 
However, we do not believe that the ``no administrative or judicial 
review'' clause precludes CMS from correcting errors resulting from 
clerical or mathematical mistakes. Therefore, we note that 
practitioners would have the opportunity to notify CMS of clerical or 
mathematical errors that may have occurred during the process of 
identifying eligible primary care practitioners for PCIP payment, and 
which could result in a mistaken eligibility determination for the 
PCIP.
    In summary, under the PCIP beginning in CY 2011, we are proposing 
to identify primary care practitioners based on their primary specialty 
and percentage of allowed charges for primary care services that equals 
or exceeds the 60 percent threshold based upon the most current full 
year of Medicare claims data, which would be the claims data for 2 
years prior to the incentive payment year (for example, CY 2009 claims 
data processed through June 2010 would be used to identify primary care 
practitioners for the CY 2011 PCIP). Practitioners identified as 
eligible for the PCIP immediately prior to the PCIP payment year would 
then receive quarterly incentive payments during the PCIP year equal to 
10 percent of the payment amount for their primary care services under 
Part B, in addition to the amount the primary care practitioner would 
otherwise be paid for their professional services under Part B for 
furnishing the primary care services. For example, primary care 
practitioners identified in late CY 2010 for the CY 2011 PCIP would 
receive quarterly PCIP payments in CY 2011 that equal 10 percent of the 
Part B payment for the primary care services those practitioners 
furnish during CY 2011.
    We further note that section 1833(x)(3) of the Act (as added by 
section 5501(a) of the ACA) authorizes

[[Page 40139]]

payment under the PCIP as an additional payment amount for specified 
primary care services without regard to any additional payment for the 
service under section 1833(m) of the Act. Therefore, an eligible 
primary care physician furnishing a primary care service in a HPSA may 
receive both a HPSA physician bonus payment under the established 
program and a PCIP payment under the new program beginning in CY 2011, 
but the PCIP payment is made without regarding to the HPSA physician 
bonus payment amount. In addition, payments for outpatient CAH services 
under section 1834(g)(2)(B) of the Act (as amended by section 5501(a) 
of the ACA) are not affected by the PCIP payment amounts made to the 
CAH on behalf of the primary care practitioner.
    Accordingly, for CY 2011, we are proposing to add a new Sec.  
414.80 to our regulations to specify the requirements of the PCIP. 
Proposed Sec.  414.80(a) would define primary care practitioners and 
primary care services. Proposed Sec.  414.80(b) would provide eligible 
primary care practitioners a 10 percent incentive payment with respect 
to primary care services, in addition to the amount that would 
otherwise be paid for their professional services under Part B. 
Quarterly PCIP payments would be made to eligible practitioners or to 
CAHs paid under the optional method that are billing on behalf of 
practitioners for their professional services for identified primary 
care services.
2. Section 5501(b): Incentive Payment Program for Major Surgical 
Procedures Furnished in Health Professional Shortage Areas
a. Background
    Section 1833(m) of the Act provides for an additional 10 percent 
incentive payment for physicians' services furnished to a covered 
individual in an area that is designated as a geographic Health 
Professional Shortage Area (HPSA) as identified by the Secretary prior 
to the beginning of such year. Section 5501(b) of the ACA revises 
section 1833 of the Act by adding the new subparagraph (y), ``Incentive 
Payments for Major Surgical Procedures Furnished in Health Professional 
Shortage Areas.''
    In the case of major surgical procedures furnished by a general 
surgeon on or after January 1, 2011 and before January 1, 2016, in an 
area designated under section 332(a)(1)(A) of the Public Health Service 
Act as a geographic HPSA, there shall be paid on a monthly or quarterly 
basis, an amount equal to 10 percent of the payment amount for eligible 
services under Part B. Section 1833(y)(2)(A) of the Act (as added by 
section 5501(b) of the ACA) defines a general surgeon as a physician 
who is described in section 1861(r)(1) of the Act and who has 
designated a CMS specialty code of 02--General Surgery as his or her 
primary specialty code in the physician enrollment under section 
1866(j) of the Act.
    Section 1833(y)(2)(B) of the Act (as added by section 5501(b) of 
the ACA) defines major surgical procedures as surgical procedures for 
which a 10-day or 90-day global period is used for payment under the 
PFS in section 1848(b) of the Act. In Addendum B to the CY 2010 PFS 
final rule with comment period (74 FR 62017 through 62143), as 
corrected in the correction notice (74 FR 65455 through 65457), we 
identified 489 10-day global procedure codes and 3,796 90-day global 
procedure codes for a total of 4,285 surgical procedure codes that 
would have met the surgical procedure criteria for the incentive 
payment if it were applicable in CY 2010.
b. Proposed HPSA Surgical Incentive Payment Program (HSIP)
    For services furnished on or after January 1, 2011 and before 
January 1, 2016, we are proposing to provide a 10 percent incentive 
payment to general surgeons, identified by their enrollment in Medicare 
with a primary specialty code of 02--general surgery, in addition to 
the amount they would otherwise be paid for their professional services 
under Part B, when they furnish a major surgical procedure in a 
location that was defined by the Secretary as of December 31 of the 
prior year as a geographic HPSA. As with the PCIP described above, we 
do not believe that surgeons will change their Medicare specialty 
designation in order to take advantage of the HSIP payments. However, 
we will monitor the specialty designations of enrolled physicians, and 
if we find that surgeons are changing their primary specialty 
designation to general surgery in order to take advantage of the HSIP 
payments, we would consider making future revisions to eliminate such 
an outcome.
    Consistent with the established Medicare HPSA physician bonus 
program, we are proposing that these HSIP payments would be calculated 
by the Medicare contractors based on the criteria for payment that we 
have established as discussed earlier in this section, and payments 
would be made quarterly on behalf of the qualifying general surgeon for 
the qualifying major surgical procedures. The surgeons' professional 
services may be paid under the PFS based on a claim for professional 
services or, where the physician has reassigned his or her benefits to 
a critical access hospital (CAH) paid under the optional method, to the 
CAH based on an institutional claim.
    Qualifying general surgeons would be identified on a claim for a 
major surgical procedure based on the primary specialty of the 
rendering physician, identified by his or her NPI, of 02--general 
surgery. If the claim is submitted by a physician's group practice or a 
CAH, the rendering physician's NPI must be included on the line-item 
for the major surgical procedure in order for a determination to be 
made regarding whether or not the procedure is eligible for payment 
under the HSIP.
    For HSIP payment to be applicable, the major surgical procedure 
must be furnished in an area designated by the Secretary as of December 
31 of the prior year as a geographic HPSA. We would provide HSIP 
payments for major surgical procedures furnished by general surgeons in 
the same HPSAs as we currently recognize for purposes of payment of all 
physicians under the established Medicare HPSA physician bonus program 
under section 1833(m) of the Act.
    Each year, we publish a list of zip codes eligible for automatic 
payment of the HPSA physician bonus payment at: http://www.cms.gov/hpsapsaphysicianbonuses/01_overview.asp. We are proposing to use the 
same list of zip codes for automatic payment of the bonus for eligible 
services furnished by general surgeons. We are also proposing to create 
a new HCPCS code modifier to identify circumstances when general 
surgeons furnish services in areas that are designated as HPSAs as of 
December 31 of the prior year, but that are not on the list of zip 
codes eligible for automatic payment. The new modifier would be 
appended to the major surgical procedure on claims submitted for 
payment, similar to the current process for payment of the Medicare 
HPSA physician bonus when the geographic HPSA is not a HPSA identified 
for automatic payment.
    Consistent with the statutory requirement, we are proposing to 
define major surgical procedures as those for which a 10-day or 90-day 
global period is used for payment under the PFS. For CY 2011, 
approximately 4,300 10-day and 90-day global surgical procedures codes 
are identified in Addendum B to this proposed rule under the far right 
column labeled ``Global'' and designated with ``010'' or ``090,'' 
respectively.

[[Page 40140]]

    We further note that section 1833(y)(3) of the Act (as added by 
section 5501(b)(1) of the ACA) authorizes payment under the HSIP as an 
additional payment amount for specified surgical services without 
regard to any additional payment for the service under section 1833(m) 
of the Act. Therefore, a general surgeon may receive both a HPSA 
physician bonus payment under the established Medicare HPSA physician 
bonus program and an HSIP payment under the new program beginning in CY 
2011, but the HSIP payment is made without regarding to the HPSA 
physician bonus payment amount. In addition, payments for outpatient 
CAH services under section 1834(g)(2)(B) of the Act (as amended by 
section 5501(b) of the ACA) are not affected by the HSIP payment 
amounts made to the CAH on behalf of the general surgeon.
    Accordingly, for CY 2011, we are proposing to amend Sec.  414.2 by 
adding the definitions of ``HPSA'' and ``major surgical procedure.'' We 
are also proposing to revise Sec.  414.67 to move the existing 
provisions to paragraph (a) to be grouped as the ``Health Professional 
Shortage Area (HPSA) physician bonus program'' and adding a new 
paragraph (b) for the ``HPSA surgical incentive payment program'' 
provisions. Proposed Sec.  414.67(b) would state that general surgeons 
who furnish identified 10-day and 90-day global period surgical 
procedures in an area designated by the Secretary as of December 31 of 
the prior year as a geographic HPSA that is recognized by Medicare for 
the HPSA physician bonus program as specified under renumbered Sec.  
414.67(a)(1) would receive a 10 percent incentive payment in addition 
to the amount that would otherwise be paid for their professional 
services under Part B. Physicians furnishing services in areas that are 
designated as geographic HPSAs prior to the beginning of the year but 
not included on the published list of zip codes for which automated 
HPSA surgical bonus payments are made should report a specified HCPCS 
code modifier to receive the HSIP payment. Quarterly incentive payments 
would be made to physicians or to CAHs paid under the optional method 
that are billing on behalf of physicians for their professional 
services.
3. Sections 5501(a) and (b) of the ACA and Payment for Critical Access 
Hospital Professional Services Under the Optional Method
    Section 1834(g) of the Act establishes the payment rules for 
outpatient services furnished by a CAH. In 1999, section 403(d) of the 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA) amended 
section 1834(g) of the Act to provide for two methods of payment for 
outpatient services furnished by a CAH. Specifically, section 
1834(g)(1) of the Act, as amended by the BBRA, specifies that the 
amount of payment for outpatient services furnished by a CAH is equal 
to the reasonable costs of the CAH in furnishing such services. (The 
physician or other practitioner furnishing the professional service 
receives payment under the PFS.) In the alternative, the CAH may make 
an election, under section 1834(g)(2) of the Act, to receive amounts 
that are equal to ``the reasonable costs'' of the CAH for facility 
services plus, with respect to the professional services, the amount 
otherwise paid for professional services under Medicare, less the 
applicable Medicare deductible and coinsurance amount. The election 
made under section 1834(g)(2) of the Act is sometimes referred to as 
``method II'' or ``the optional method.'' Throughout this section of 
this preamble, we refer to this election as ``the optional method.''
    In 2000, section 202 of the Medicare, Medicaid and SCHIP Benefits 
Improvement and Protection Act of 2000) (Pub. L. 106-554) (BIPA) 
amended section 1834(g)(2)(B) of the Act to increase the payment for 
professional services under the optional method to 115 percent of the 
amount otherwise paid for professional services under Medicare. In 
addition, in 2003 section 405(a)(1) of the MMA amended section 
1834(g)(l) of the Act by inserting the phrase ``equal to 101 percent 
of'' before the phrase ``the reasonable costs.'' However, section 405 
of the MMA did not make a corresponding change to section 1834(g)(2)(A) 
of the Act regarding the amount of payment for facility services under 
the optional method. In 2010, Section 3128 of the ACA amended section 
1834(g)(2)(A) of the Act by inserting the phrase ``101 percent of'' 
before ``the reasonable costs.''
    Section 5501(a) of the ACA amends section 1833 of the Act by adding 
a new paragraph (x), ``Incentive Payments for Primary Care Services,'' 
that authorizes additional Part B payments to primary care 
practitioners for primary care services. Section 5501(b) of the ACA 
further amends section 1833 of the Act by adding new paragraph (y), 
``Incentive Payments for Major Surgical Procedures Furnished in Health 
Professional Shortage Areas,'' that authorizes additional Part B 
payments for major surgical procedures furnished by general surgeons in 
HPSAs. Sections 5501(a)(3) and 5501(b)(3) of the ACA make conforming 
amendments to section 1834(g)(2)(B) of the Act, which refers to payment 
to the CAH for professional services under the optional method, by 
adding at the end of section 1834(g)(2)(B) the following phrase, 
``Subsections (x) and (y) of 1833 shall not be taken into account in 
determining the amounts that would otherwise be paid pursuant to the 
preceding sentence.'' As such, section 1834(g)(2)(B) of the Act (as 
amended by sections 5501(a)(2) and 5501(b)(2) of the ACA) requires that 
under the optional method, the 115 percent adjustment payment to the 
CAH for professional services is calculated without considering the 
incentive payments for primary care services furnished by primary care 
practitioners and major surgical procedures furnished by general 
surgeons in HPSAs as these terms are defined under sections 1833(x) and 
(y) of the Act.
    The regulations implementing section 1834(g)(2)(B) of the Act, 
payment to the CAH for professional services under the optional method, 
are in Sec.  413.70(b)(3)(ii)(B). In order to implement the amendments 
to section 1834(g)(2)(B) of the Act as specified by sections 5501(a)(2) 
and 5501(b)(2) of the ACA, we are proposing to amend the regulations in 
Sec.  413.70(b)(3)(ii)(B) to state that, effective for primary care 
services furnished by primary care practitioners and major surgical 
procedures furnished by general surgeons in HPSAs on or after January 
1, 2011 and before January 1, 2016, the additional incentive payment 
amounts as specified in Sec.  414.67 and Sec.  414.80 are not included 
in the determination of the payment for professional services made to 
the CAH under the optional method. Accordingly, we are proposing that 
payment for professional services to the CAH at 115 percent of the PFS 
amount under the optional method would not take into account the 
additional Part B incentive payments for primary services furnished by 
primary care practitioners and major surgical procedures furnished by 
general surgeons in HPSAs as provided in Sec.  414.67 and Sec.  414.80.

T. Section 6003: Disclosure Requirements for In-Office Ancillary 
Services Exception to the Prohibition on Physician Self-Referral for 
Certain Imaging Services

1. Background
    Section 1877 of the Act also known as the physician self-referral 
law: (1) Prohibits a physician from making referrals for certain 
``designated health services'' (DHS) payable by Medicare to an entity 
with which he or she (or an immediate family member) has a

[[Page 40141]]

financial relationship (ownership or compensation), unless an exception 
applies; and (2) prohibits the entity from filing claims with Medicare 
(or billing another individual, entity, or third party payer) for those 
DHS rendered as a result of a prohibited referral. The statute 
establishes a number of specific exceptions and grants the Secretary 
the authority to create regulatory exceptions that pose no risk of 
program or patient abuse.
    Section 1877(b)(2) of the Act, entitled ``In-office Ancillary 
Services'' sets forth the exception that permits a physician in a solo 
or group practice to order and provide designated health services 
(DHS), other than most durable medical equipment and pretrial and 
enteral nutrients, in the office of the physician or group practice, 
provided that certain specific criteria are met. Under this exception, 
the statute limits who can furnish the service, designates where the 
service must be performed, and limits who can bill for the service. As 
explained at the end of the statutory exception, the service may also 
be subject to ``such other requirements as the Secretary may impose by 
regulation as needed to protect against program or patient abuse.'' The 
in-office ancillary services exception is interpreted at Sec.  
411.355(b).
    Section 6003 of the ACA amends section 1877(b)(2) of the Act by 
creating a new disclosure requirement for the in-office ancillary 
services exception to the prohibition on physician self-referral. 
Specifically, section 6003 provides that, with respect to referrals for 
magnetic resonance imaging (MRI), computed topography (CT), positron 
emission topography (PET), and any other DHS specified under section 
1877(h)(6)(D) that the Secretary determines appropriate, we must 
promulgate a requirement that the referring physician inform a patient 
in writing at the time of the referral that the patient may obtain the 
service from a person other than the referring physician or someone in 
the physician's group practice and provide the patient with a list of 
suppliers who furnish the service in the area in which the patient 
resides.
2. Proposed Disclosure Requirement
    We are proposing to implement section 6003 of the ACA by amending 
Sec.  411.355(b) to add new paragraph (b)(7). We describe below our 
proposal for the new disclosure requirement.
a. Services That Trigger the Disclosure Requirement
    Section 6003(a) of the ACA requires that the new disclosure 
requirement apply to MRI, CT, and PET services as well as such other 
radiology or imaging services included in the DHS category specified in 
section 1877(h)(6)(D) of the Act that the Secretary determines 
appropriate. We are considering whether to expand this disclosure 
requirement to other radiology and imaging services. We are not 
inclined to expand the disclosure requirement but we solicit comments 
regarding whether other radiology or imaging services that fall under 
section 1877(h)(6)(D) of the Act should be included in this 
requirement, and if so, which services, and the purpose served by 
extending the disclosure requirement to additional radiology or imaging 
services.
b. General Disclosure Requirements
    In Sec.  411.355(b)(7), we are proposing that the disclosure notice 
should be written in a manner sufficient to be reasonably understood by 
all patients and must, as the ACA requires, be given to the patient at 
the time of the referral. This notice must indicate to the patient that 
the services may be obtained from a person other than the referring 
physician or his or her group practice and include a list of other 
suppliers who provide the service being referred (MRI, CT, or PET).
    We believe one purpose of the disclosure requirement is to inform a 
patient's decision-making regarding his or her own care. The list of 
suppliers provided to the patient by the physician is meant to serve as 
a resource for the patient. Nothing on the disclosure notice or list of 
suppliers may indicate to the patient that he or she must receive 
imaging from a supplier on the list if not receiving the service from 
the referring physician. The patient may receive the imaging service 
from the referring physician, from a supplier identified on the notice, 
or from another supplier of the patient's choice. The patient is free 
to choose the supplier of the service.
c. List of Alternate Suppliers
    Section 6003(a) of the ACA specifies that the referring physician 
must provide a written list of ``suppliers (as defined in section 
1861(d)).'' Section 1861(d) of the Act defines supplier as ``a 
physician or other practitioner, a facility, or other entity (other 
than a provider of services) that furnishes items or services under 
this title.'' We are proposing that only suppliers be included on the 
written list. We are not proposing to permit or require the list to 
include ``providers of services'', which is defined in section 1861(u) 
of the Act to include hospitals and critical access hospitals, among 
other facilities. We are soliciting comments regarding whether 
inclusion of providers of services on the written notice would benefit 
patients in choosing an alternate entity for an imaging service by 
providing more, and varied, options.
    Section 6003(a) of the ACA also requires that the alternate 
suppliers specified in the notice provided to the patient must furnish 
the relevant services ``in the area in which [the patient] resides.'' 
We are aware that a patient may travel outside the area in which he or 
she resides in order to receive medical care. We believe that requiring 
an original written notice for each patient based upon a certain 
distance from the patient's residence could place a significant 
administrative burden on physicians practicing in a solo or group 
practice. It would be impractical for a physician to prepare a separate 
list for every area in which his or her patients reside. Additionally, 
we believe that if a patient has traveled to see the referring 
physician, the physician is located in an area convenient to the 
patient and therefore, a referral within a certain distance of this 
location would also be convenient for the patient.
    In order to ease the administrative burden of creating multiple 
lists while still implementing the requirements of the statute, we are 
proposing that the suppliers included in this notice should be located 
within a 25-mile radius of the physician's office location at the time 
of the referral. We believe that a 25-mile radius is large enough in 
most areas to generate a list of suppliers that will be useful to 
patients. We note that we have used a 25-mile radius in other physician 
self-referral exceptions, including the intra-family rural referrals 
exception (Sec.  411.355(j)) and the physician recruitment exception 
(Sec.  411.357(e)). Even if a patient resides more than 25 miles away, 
we are proposing that it will be sufficient to provide a list of 
suppliers located within a 25-mile radius of the physician's office 
location at the time the referral is made. As discussed above, we 
believe that measuring the distance from the physician's office 
location will better serve patients who have perhaps traveled from long 
distances to receive specialized treatment.
    We are soliciting comments regarding the proposed 25-mile radius 
requirement. In attempting to minimize confusion and burden related to 
implementing this provision, we have proposed the same standard for 
both urban and rural areas. We realize that in some areas 25 miles may 
be too small to generate a sufficient list of other suppliers. We are 
interested in hearing whether an alternative distance may be

[[Page 40142]]

more effective for urban or rural areas as well as what other criteria 
should be considered in finalizing regulations for physicians in both 
urban and rural areas.
    In order to help a patient make an informed decision regarding 
other options for the recommended imaging services, we propose that the 
written notice include no fewer than 10 other suppliers. We considered 
proposing that the list include the 10 closest suppliers, but we want 
to allow physicians some flexibility in drafting the list of suppliers. 
On the other hand, we are concerned that physicians located in large 
metropolitan areas will draft a list that includes suppliers located 
mostly at the edges of the 25-mile radius, thereby increasing the 
chances that the patient will choose to receive imaging services from 
the referring physician's practice. We are soliciting comments 
regarding whether providing a list of 10 suppliers is sufficient or too 
burdensome or susceptible to abuse and whether there are alternate 
criteria we should use that would result in an adequate list of 
convenient suppliers that does not impose an undue burden on physician 
practices or a risk of abuse.
    We recognize that there may be fewer than 10 other suppliers within 
a 25-mile radius of the referring physician's office location. We 
propose that, under these circumstances, the physician shall list all 
of the other suppliers of the particular imaging service that are 
present within a 25-mile radius of the referring physician's office 
location, including up to 10 suppliers as required by these 
regulations. If no other suppliers of the imaging services ordered 
exist within the 25-mile radius of the physician's office location, the 
physician need not provide a list of alternative suppliers, but must 
still disclose to his or her patients that the patients may receive the 
imaging services from another supplier. In this last situation, simply 
providing this disclosure statement will satisfy the disclosure 
requirement of this provision even though alternative suppliers are not 
listed. The physician must maintain documentation of the disclosure.
    We are proposing that the written notice be required to include 
certain information about the listed suppliers in order to satisfy this 
disclosure requirement. The list must include the name, address, phone 
number, and distance from the physician's office location at the time 
of the referral. We propose to require inclusion of the distance from 
the physician's location to the other suppliers in order to emphasize 
to the patient the relative convenience of the listed suppliers.
    We are not proposing an exception to the disclosure requirement for 
MRI, CT, or PET services furnished on an emergency or time-sensitive 
basis. We are soliciting comments related to whether there are other 
procedures or circumstances in which it may be difficult or impractical 
to provide the written disclosure prior to provision of the imaging 
services.
    This proposal sets forth criteria that apply to the disclosure 
requirement and list of alternative suppliers. These criteria are 
intended to provide clear guidance as to how physicians may comply with 
the new requirement of the in-office ancillary services exception. We 
understand that there may be alternative ways to implement these 
statutory requirements. One possible alternative is to only require a 
``reasonable'' list of other suppliers with general requirements for 
the disclosure to patients, while providing that if the physician meets 
the more specific requirements set forth in this proposal, he or she 
will be deemed to have a ``reasonable'' disclosure. We seek comments on 
this specific alternative and any other alternative methods of 
compliance that still satisfy the statutory requirements.
d. Documentation of Disclosure
    In order to document that this disclosure requirement has been 
satisfied, we propose that a record of the patient's signature on the 
disclosure notification must be maintained as an element of the 
patient's medical record. We are soliciting comments regarding the 
burden of this recordkeeping requirement. We are also interested in 
comments that suggest alternative means of recording that the 
disclosure was made to the patient at the time of referral.
e. Effective Date
    As discussed above, section 6003(a) of the ACA amends section 
1877(b)(2) of the Act by instructing that the new disclosure 
requirement be added as one of the additional requirements of the in-
office ancillary services exception. The last sentence of the statutory 
exception preceding this amendment authorizes the Secretary to impose 
``such other requirements * * * by regulation as needed to protect 
against program or patient abuse'' (emphasis added). The amendment 
specifies that ``[s]uch requirements shall * * * include a [disclosure] 
requirement * * *'' In reading the last sentence of section 1877(b)(2) 
together with the amendment, we do not believe that the amendment is 
self-effectuating. Instead, the new disclosure requirement of section 
6003 must be promulgated by regulation. Therefore, we believe that a 
correct reading of section 6003(a) is that this amendment shall not be 
effective until the Secretary promulgates a final regulation 
implementing this new requirement and the regulation becomes effective.
    We considered whether, pursuant to section 6003 of the ACA, the 
final rule setting forth the disclosure requirement should apply 
retroactively to all services furnished on or after January 1, 2010. 
Given the structure of the amended in-office ancillary services 
exception and the statute as a whole, however, we believe that 
retroactive rulemaking is not required. Therefore, we are proposing 
that the new disclosure requirement shall apply only to services 
furnished on or after the effective date of the final regulation 
implementing section 6003 of the ACA. We are proposing an effective 
date of January 1, 2011 for the regulation implementing this provision.

U. Section 6404: Maximum Period for Submission of Medicare Claims 
Reduced to Not More Than 12 Months

1. Background
    Sections 1814(a)(1), 1835(a), and 1842(b)(3)(B) of the Act 
establish time limits for filing Medicare Part A and B claims. Prior to 
the enactment of the ACA, under sections 1814(a)(1) and 1835(a) of the 
Act, providers could file for Part A and Part B claims, respectively, 
``* * * no later than the close of the period of 3 calendar years 
following the year in which such services are furnished (deeming any 
services furnished in the last 3 calendar months of any calendar year 
to have been furnished in the succeeding calendar year) except that, 
where the Secretary deems that efficient administration so requires, 
such period may be reduced to not less than 1 calendar year * * *''. 
Prior to the enactment of the ACA, CMS was authorized to establish a 
minimum time limit for provider-submitted Part A and Part B claims of 
at least 1 calendar year from the date of service, and a maximum time 
limit not to exceed 4 years and 3 months after the date of service.
    Additionally, prior to the enactment of the ACA, under section 
1842(b)(3)(B) of the Act, Part B claims for physician and other 
supplier services could be filed with Medicare ``* * * no later than 
the close of the calendar year following the year in which such service 
is furnished (deeming any service furnished in the last 3 months of any 
calendar year to have been furnished in

[[Page 40143]]

the succeeding calendar year) * * *''. Therefore, prior to the 
enactment of the ACA, CMS was authorized to establish a minimum time 
limit for filing Part B claims of 15 months and a potential maximum of 
27 months after the service was furnished, depending on what month of 
the year the service was furnished.
    Section 424.44 implements sections 1814(a)(1), 1835(a), and 
1842(b)(3)(B) of the Act. In order to effectively administer the 
Medicare Program, CMS, through regulations, modified the potential 
minimum and maximum time periods for filing Part A claims so that Part 
A claims would have the same time limits as Part B claims. At Sec.  
424.44(a), CMS adopted the minimum time limit of 15 months and 
potential maximum of 27 months after the service was furnished that was 
permitted under section 1842(b)(3)(B) of the Act for Part B claims and 
uniformly applied that 15 to 27 month time limit to both Part A and B 
claims. Also, under Sec.  424.44(b), CMS allowed providers and 
suppliers the opportunity to file claims after the 15 to 27 month 
deadline for filing claims expired when the failure to file ``* * * was 
caused by error or misrepresentation of an employee, intermediary, 
carrier, or agent of the Department that was performing Medicare 
functions and acting within the scope of its authority.''
2. Provisions of the ACA
    Section 6404 of the ACA amended sections 1814(a)(1), 1835(a), and 
1842(b)(3)(B) of the Act regarding Medicare fee-for-service (FFS) 
claims for services furnished on or after January 1, 2010. Under 
section 6404(b)(1) of the ACA, all claims for services furnished on or 
after January 1, 2010 must be filed within 1 calendar year after the 
date of service. The provisions of the ACA did not amend these sections 
of the Act for services furnished before January 1, 2010. However, 
section 6404(b)(2) of the ACA created a new requirement that claims for 
services furnished before January 1, 2010 must be filed on or before 
December 31, 2010. Thus, the statutory provisions prior to the 
enactment of the ACA remain in effect for pre-2010 services, subject to 
this new requirement. The practical effect of this change is that any 
claims for services furnished before October 1, 2009 will follow the 
current existing regulations. But for any services furnished during the 
last three months of 2009, those claims must be filed no later than 
December 31, 2010. For services furnished between October 1, 2009 and 
December 31, 2009, providers and suppliers will only have 12-15 months 
to file a claim, whereas before the ACA amendments, they would have had 
an additional year to file their claims, or 24 to 27 months. Therefore, 
in order to effectuate the changes made by the ACA, we are proposing to 
amend Sec.  424.44 so that it is consistent with the amended statutory 
provisions.
    We are proposing to amend Sec.  424.44(a) by replacing the current 
text with the requirement that claims for services provided on or after 
January 1, 2010 must be submitted no later than the close of the period 
ending 1 calendar year after the date of service. As noted above, any 
services furnished before January 1, 2010 will still be subject to the 
pre-existing statutory provisions. Therefore, we are proposing that for 
pre-2010 services, the pre-existing regulatory structure will continue 
to apply. For those services furnished before January 1, 2010, claims 
must be filed on or before December 31 of the following year for 
services that were furnished during the first 9 months of a calendar 
year, and on or before December 31st of the second following year for 
services that were furnished during the last 3 months of the calendar 
year. However, for those services provided in the last three months of 
2009, we propose that all claims for those services must be filed no 
later than December 31, 2010.
    Section 6404 of the ACA also gives the Secretary authority to 
create exceptions to the 1 year timely filing period. In addition to 
the existing exception to the timely filing requirement due to error or 
misrepresentation by CMS, our contractors or agents, we propose to 
create two new exceptions. First, we are proposing to create an 
exception for those situations where a beneficiary becomes 
retroactively entitled to Medicare benefits, but was not entitled at 
the time the services were furnished. Second, we are proposing to 
permit providers and suppliers to file claims after the time limit for 
filing claims has expired in limited dual eligible Medicare/Medicaid 
beneficiary situations.
    The first new proposed exception at Sec.  424.44(b)(2) will permit 
providers and suppliers to file claims after the time limit for filing 
claims expires when CMS or our contractors determines that the 
following conditions have been met:
     At the time the service was furnished the beneficiary was 
not entitled to Medicare; and
     The beneficiary subsequently received notification of 
Medicare entitlement effective retroactively to or before the date of 
the furnished service.
    In these situations, if CMS or one of our contractors determines 
that both of the conditions in Sec.  424.44(b)(2) are met, then the 
time to file a claim will be extended through the last day of the 6th 
calendar month following the month in which the beneficiary received 
notification of Medicare entitlement effective retroactively to or 
before the date of the furnished service. Therefore, instead of the 
beneficiary having to pay out of his or her own pocket for the service 
or instead of the beneficiary's other insurance or some other payer 
that is secondary to Medicare having to pay primary for the service, 
Medicare may pay primary (or secondary or tertiary) for the service 
since the beneficiary was entitled to Medicare (although retroactively) 
at the time the service was furnished. All of Medicare's payment rules 
including Medicare's Secondary Payer rules still apply in these 
retroactive entitlement situations.
    The second proposed new exception at Sec.  424.44(b)(3) will permit 
providers and suppliers to file claims for dually-eligible 
beneficiaries after the time limit for filing claims expires when CMS 
or our contractors determine that all of the following conditions have 
been met:
     At the time the service was furnished the beneficiary was 
not entitled to Medicare;
     The beneficiary subsequently received notification of 
Medicare entitlement effective retroactively to or before the date of 
the furnished service; and
     A State Medicaid agency recovered the Medicaid payment for 
the furnished service from the provider or supplier 11 months or more 
after the date of service.
    This proposed exception applies to situations where a provider or 
supplier bills (and receives payment from) Medicaid for the services 
that a dual eligible Medicare/Medicaid beneficiary receives from the 
provider or supplier. However, at the time the services were furnished, 
the patient was not a dual eligible Medicare/Medicaid beneficiary yet 
because Medicare entitlement was granted to the individual 
retroactively after the service was actually furnished to the 
individual. In addition, after the State Medicaid Program discovers 
that the individual was granted Medicare entitlement retroactively, the 
State Medicaid Program recovers its payments from the provider or 
supplier for that individual's services instructing the provider or 
supplier that Medicare should be billed for the services (not 
Medicaid). If all three of the conditions outlined above occur within 
11 months of the date the service was furnished, then the provider or 
supplier will have enough time to bill Medicare for the

[[Page 40144]]

service. However, if Medicaid recovers their incorrect payment 11 
months or more after the date the service was furnished, then the 
provider or supplier will not have enough time to file a claim with 
Medicare for the covered services because the time limit for filing 
claims expires 1 calendar year after the date of service. In these 
situations, if CMS or one of our contractors determines that all of the 
conditions at Sec.  424.44(b)(3) are met, then the time to file a claim 
will be extended through the last day of the 6th calendar month 
following the month in which the State Medicaid agency recovered the 
Medicaid payment for the furnished service from the provider or 
supplier. Therefore, we are proposing that this exception along with 
the aforementioned retroactive entitlement exception be added to Sec.  
424.44.
    We are proposing that for the one existing exception due to error 
or misrepresentation by CMS, our contractors or agents (see Sec.  
424.44(b)(1)) that no extension of time will be granted beyond 4 years 
from the date of service. Limiting the exception for this timely filing 
extension is consistent with current CMS policy. Moreover, we believe 
that limiting this exception to 4 years after the date of service 
strikes an appropriate balance between fairness and equity for 
providers, suppliers, and beneficiaries and administrative finality for 
the Medicare program. We recognize that limiting the exceptions process 
could have potential impacts on those that wish to avail themselves of 
this exception. Therefore, we are soliciting comments on how this 
proposed four year limitation on the exception at Sec.  424.44(b)(1) 
will impact providers, suppliers and beneficiaries and the frequency of 
such occurrences. In addition, we are soliciting comments on whether 
the proposed four year limitation for this particular exception is 
appropriate, or what changes, if any, should be made to the limitation 
on the exceptions process, including a rationale or justification for 
an alternative time limitation.
    CMS is not proposing a definition of the term ``date of service'' 
in this regulation. Yet we recognize that the definition of this term 
is very important to providers, suppliers, and beneficiaries because 
the ``date of service'' will ultimately determine when the claim has to 
be filed in order to meet the new 1 calendar year requirement. In most 
cases the ``date of service'' will be the date that the item or service 
is actually furnished to the beneficiary; however, we recognize that 
for many Part A and B services it is difficult to craft a uniform rule 
that will apply a consistent date of service standard. It is our 
intention to provide sub-regulatory guidance on what constitutes the 
date of service for different Part A and B services. We are soliciting 
comments regarding whether CMS should provide a regulatory definition 
of ``date of service'' and, if so, how should it define this term.
    We are also clarifying the exception that appears at Sec.  
424.44(e). We are making clear that this regulation does not supersede 
the restriction on retrospective billing that appears in Sec. Sec.  
424.520 and 424.521. Under these provisions certain newly-enrolled 
suppliers, such as physicians, non-physician practitioners, physician 
or non-physician practitioner organizations and IDTFs, have only a 
limited ability to submit claims for items or services furnished prior 
to the effective date of their Medicare billing privileges even if 
these claims would otherwise be considered timely. In addition, we want 
to make clear that the one calendar year timely filing limit in section 
424.44(a) does apply to any retrospective claims permitted by sections 
424.520 and 424.521 and to claims for items or services furnished after 
the effective date of the supplier's billing privileges.

V. Section 6410 and MIPPA: Adjustments to the Metropolitan Statistical 
Areas (MSA) for Medicare Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies Competitive Acquisition Program

    We are proposing a number of revisions to the DMEPOS CBP as a 
result of changes to the statute made by both the Medicare Improvements 
for Patients and Provider Act of 2008 (MIPPA) and the ACA. Since both 
MIPPA and the ACA specify requirements for MSA selection for round 2 
and beyond we are outlining our proposals for implementing the 
statutory requirements related to MSA selection in both MIPPA and the 
ACA in this section. First, we propose to use the authority provided by 
the statute at section 1847(a)(1)(D)(ii) of the Act, as amended by 
MIPPA to subdivide Metropolitan Statistical Areas (MSAs) with 
populations of greater than 8,000,000 under Round 2 of the DMEPOS CBP. 
Second, we propose to exclude certain areas from competitive bidding 
after round 2 as mandated by section 1847(a)(1)(D)(iii) of the Act, as 
amended by MIPPA. Third, we propose to implement the requirement of 
section 6410 of the ACA to expand Round 2 of the program by adding 21 
of the largest MSAs based on total population to the original 70 
already selected for round 2.
1. Background
    Section VI.H of this proposed rule provides background on the 
DMEPOS CBP, including a description of many of the changes made to the 
program by section 154 of MIPPA. In this section, we provide additional 
information regarding changes made by both MIPPA and Section 6410 of 
the ACA. In addition to the changes discussed previously in this 
proposed rule, MIPPA also added subparagraph (D) to section 1847(a)(1) 
of the Act. Section 1847(a)(1)(D)(ii), as added by MIPPA, addresses 
Round 2 of the DMEPOS CBP, and section 1847(a)(1)(D)(iii) addresses 
subsequent rounds of the Program.
    Section 1847(a)(1)(D)(ii)(II) of the Act specifies that the 
Secretary shall implement DMEPOS competitive bidding in the areas 
previously selected for round 2 of the program and also allows the 
Secretary, in implementing round 2 of the program, to subdivide 
metropolitan statistical areas (MSAs) with populations of greater than 
8,000,000 into separate CBAs. Previously, we believe the statute could 
have been interpreted to allow CMS to subdivide large MSAs but MIPPA 
gave CMS the explicit authority to subdivide large MSAs. Section 
1847(a)(1)(D)(iii) imposes new requirements on the Secretary for 
competitions occurring before 2015 in subsequent rounds of the program. 
For such competitions (other than national mail order), the following 
areas are to be excluded from the program: (I) Rural areas; (II) MSAs 
not selected under Round 1 or 2 with a population of less than 250,000; 
and (III) certain areas with low population density within a selected 
MSA. These requirements do not apply to a national mail order program.
    Finally, MIPPA required that we implement Round 2 of the DMEPOS CBP 
in the same MSAs that were designated as of June 1, 2008. In 2010, 
section 6410(a) of the ACA amended sections 1847(a)(1)(B)(i)(II) and 
(D)(ii) of the Act to expand Round 2 of the program from 70 MSAs to 91 
MSAs by adding the next 21 largest MSAs by total population not already 
selected for Rounds 1 or 2.
2. Subdividing Large MSAs Under Round 2
    We have selected MSAs for Round 1 and for Round 2 consistent with 
MIPPA's requirement. For round 1 CBAs generally were comparable to 
MSAs, however, for round 2 we are proposing to subdivide MSAs of 
8,000,000 or more in population. The authority to subdivide MSAs into 
separate areas for competitive bidding

[[Page 40145]]

purposes is set forth in section 1847(a)(1)(D)(ii)(II) of the Act which 
states, ``[t]he Secretary may subdivide metropolitan statistical areas 
with populations (based upon the most recent data from the Census 
Bureau) of at least 8,000,000 into separate areas for competitive 
acquisition purposes.'' We have identified three MSAs which, based on 
the 2009 estimate from the Census Bureau data, could be subdivided 
under section 1847(a)(1)(D)(ii)(II): (1) Chicago-Naperville-Joliet, 
Illinois-Indiana-Wisconsin (IL-IN-WI) MSA with a population of 
9,569,624; (2) Los Angeles-Long Beach-Santa Ana, California (CA) MSA 
with a population of 12,872,808; and (2) New York-Northern New Jersey-
Long Island, New York-New Jersey-Pennsylvania (NY-NJ-PA) MSA with a 
population of 19,006,798. We are proposing to divide these MSAs into 
separate CBAs because we believe this approach would create more 
manageable CBAs for contract suppliers to serve and allow more small 
suppliers to be considered for participation in the program.
    We considered certain factors when considering whether to propose 
subdividing the MSAs with populations of at least 8,000,000. We 
considered the geographic, social, and economic integration of each of 
the MSAs. We apply all of these factors when grouping counties into 
CBAs considered at a county level in each MSA and we believe it is also 
appropriate to use these factors to determine: (1) Whether or not to 
subdivide an MSA into separate CBAs, and (2) once the decision is made 
to subdivide the MSA, how to subdivide the MSA. We considered the 
following factors, generally in the order in which they are listed:
     Geographic size of the MSA and the location of the 
counties within each MSA compared to neighboring counties;
     The driving distances from north to south and east to west 
within each MSA and county;
     The total population and the population of FFS Medicare 
beneficiaries using DMEPOS items subject to competitive bidding;
     The DMPOS allowed charges for items subject to competitive 
bidding;
     Comparably sized Round 1 and Round 2 MSAs based on 
beneficiary counts and allowed charges for competitive bid items;
     The interstate highway infrastructures of the MSAs; and
     The current service patterns of suppliers in each county 
of the MSA.
    We used each of the factors to the extent practical to develop 
initial proposals for reasonable and workable subdivisions of these 
highly and densely populated MSAs. We believe consideration of these 
factors will help us meet our goal of subdividing large and densely 
populated MSAs and creating CBAs that are attractive to suppliers and 
incentivize them to bid competitively for a contract. With this goal in 
mind, we are trying to establish CBAs that provide for a good volume of 
DMEPOS business for winning bidders, avoid obvious geographic 
obstacles, mimic existing supplier service patterns, and, to the extent 
possible, do not cross State lines. We believe the factors we have 
selected will achieve those objectives.
    We found that counties clearly delineate areas within a MSA, and as 
we have done for Round 1 by identifying CBAs by counties and zip codes, 
we are proposing to subdivide the MSAs at a county level. Since the 
Office of Management and Budget (OMB) defines the MSAs by counties and 
county-based subdivisions are stable, we use counties to subdivide 
CBAs. When subdividing an MSA into counties, we consider counties that 
share social, economic and geographic integration. The Chicago-
Naperville-Joliet IL-IN-WI MSA comprises 14 counties within 3 States: 
Illinois, Indiana, and Wisconsin. This MSA has 207,106 beneficiaries 
and $218,161,562 of DMEPOS allowed charges subject to the DMEPOS CBP. 
Using the factors that we indentified, we would subdivide the Chicago-
Naperville-Joliet, IL-IN-WI MSA into four separate CBAs: Indiana-
Chicago Metro CBA; South-West-Chicago-Metro CBA; Central-Chicago Metro 
CBA; and Northern-Chicago Metro CBA. The counties, DMEPOS allowed 
charges, and the number of beneficiaries subject to competitive 
bidding, and the general population that comprise each of these 
proposed CBAs are shown in Table 40.

                                  Table 40--Chicago-Naperville-Joliet, IL-IN-WI
----------------------------------------------------------------------------------------------------------------
                                                                                DMEPOS
                                                                           beneficiary count
                   CBA name/County                      DMEPOS  allowed       subject to            General
                                                           Charles*           competitive        population **
                                                                               bidding*
----------------------------------------------------------------------------------------------------------------
Indiana-Chicago Metro CBA:
    Lake, IN........................................         $18,600,917              16,637             493,800
    Jasper, IN......................................           1,238,119               1,191              32,544
    Newton, IN......................................             580,842                 393              13,933
    Porter, IN......................................           4,856,838               4,526             162,181
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          25,276,716              22,747             702,458
----------------------------------------------------------------------------------------------------------------
South-West-Chicago-Metro CBA:
    Will, IL........................................          13,523,185              12,522             681,097
    Grundy, IL......................................           1,417,511               1,405              47,958
    Kendall, IL.....................................             978,215               1,052             103,460
    DeKalb, IL......................................           2,358,319               2,323             106,321
    Kane, IL........................................           9,273,504               9,082             507,579
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          27,550,734              26,384           1,446,415
----------------------------------------------------------------------------------------------------------------
Central-Chicago Metro CBA:
    Cook, IL........................................         124,854,279             116,360           5,294,664
    DuPage, IL......................................          16,945,135              18,492             930,528
                                                     -----------------------------------------------------------
        CBA TOTAL...................................         141,799,414             134,852           6,225,192
----------------------------------------------------------------------------------------------------------------
Northern-Chicago Metro CBA:

[[Page 40146]]

 
    Lake, IL........................................          12,352,802              12,482             712,453
    McHenry, IL.....................................           7,020,768               6,852             318,641
    Kenosha, WI.....................................           4,161,128               3,789             164,465
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          23,534,698              23,123           1,195,559
                                                     -----------------------------------------------------------
        MSA TOTAL...................................         218,161,562             207,106           9,569,624
----------------------------------------------------------------------------------------------------------------
* Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
** Source: U.S. Census Bureau 2009 population estimates.

    Figure 1 shows the boundaries of each proposed CBA.

BILLING CODE 4120-01-P

[[Page 40147]]

[GRAPHIC] [TIFF OMITTED] TP13JY10.452


BILLING CODE 4120-01-C


[[Page 40148]]


    The Indiana-Chicago Metro CBA would include all four of the Indiana 
counties that are part of the MSA. The other CBAs in the MSA would be 
as follows:
     The South-West-Chicago Metro CBA would include counties in 
Illinois located to the south and west of the Central-Chicago Metro 
CBA.
     The Central-Chicago Metro CBA would include the city of 
Chicago covering both Cook and DuPage counties.
     The Northern-Chicago Metro CBA which is north of the 
Central-Chicago Metro CBA subdivision that encompasses the city of 
Chicago.
    The Los Angeles-Long Beach-Santa Ana, CA MSA comprises two 
counties: Los Angeles County and Orange County. The MSA has 173,631 
fee-for-service beneficiaries receiving DMEPOS subject to competitive 
bidding and $244,523,957 in DMEPOS allowed charges subject to the 
DMEPOS CBP. We propose to subdivide the Los Angeles-Long Beach-Santa 
Ana, CA MSA into two CBAs: Los Angeles County CBA and Orange County 
CBA. The DMEPOS allowed amount and beneficiary count subject to 
competitive bidding, and the general population that comprises these 
two proposed CBAs are shown in Table 41.

                                 Table 41--Los Angeles-Long Beach-Santa Ana, CA
----------------------------------------------------------------------------------------------------------------
                                                                                   DMEPOS
                         CBA name                            DMEPOS allowed      beneficiary         General
                                                                amount *           count *        population **
----------------------------------------------------------------------------------------------------------------
Los Angeles County CBA....................................      $201,244,121           137,408         9,862,049
                                                           -----------------------------------------------------
    CBA Total.............................................       201,244,121           137,408       * 9,862,049
----------------------------------------------------------------------------------------------------------------
Orange County CBA.........................................        43,279,836            36,223         3,010,759
                                                           -----------------------------------------------------
    CBA Total.............................................        43,279,836            36,223         3,010,759
                                                           -----------------------------------------------------
        MSA Total.........................................       244,523,957           173,631        12,872,808
----------------------------------------------------------------------------------------------------------------
*Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
**Source: U.S. Census Bureau 2009 population estimates.

    Figure 2 shows the boundaries of each proposed CBA.

[[Page 40149]]

[GRAPHIC] [TIFF OMITTED] TP13JY10.002

    As mentioned earlier, we propose to subdivide MSAs using counties, 
and since the Los Angeles-Long Beach-Santa Ana, CA MSA only has two 
counties, it offers only one subdivision along the county lines. Hence, 
we have proposed to divide the MSA by the two counties creating two 
CBAs.
    We also propose to use the authority in section 1847(a)(3)(A) of 
the Act to exclude certain areas within the Los Angeles-Long Beach-
Santa Ana, CA MSA. We believe these areas meet the requirement of 
section 1847(a)(3)(A); they are rural areas with a low population 
density within an urban area that are not competitive. In the final 
rule CMS-1270 F Sec.  414.410(c) published in April 2007, we defined 
the factors we consider when determining an area is considered a low 
population density area or an area that would not be competitive. Based 
on our review of the County Subdivision Population from the 2000 Census 
from the U.S. Census Bureau, and using the factors set forth in the 
April 2007 proposed rule, we propose to exclude the area of Los Angeles 
County north of the San Gabriel mountains. This large geographic area 
has a population of about 357,000, which is only 4 percent of the total 
population of Los Angeles County, and is separated from the rest of the 
county by the San Gabriel Mountains. The area north of the San Gabriel 
Mountains has one major road and many terrains which make this area 
remote. The majority of the population in LA County lives south of the 
San Gabriel Mountains.
    We believe that excluding this area will create a more manageable 
CBA that still provides sufficient volume of DMEPOS items while 
avoiding the geographic obstacle of the mountains. We believe including 
this area in the DMEPOS CBP would result in fewer small suppliers being 
considered for participation under the program, because we would not 
expect small suppliers to have the resources to serve these more remote 
areas. As a result, we expect that if this proposal is finalized it 
will increase the number of bids submitted for the CBAs within the Los 
Angeles-Long Beach-Santa Ana, CA MSA.
    The Los Angeles County includes the two islands of Santa Catalina 
and San Clemente off the west coast. We are proposing that the two 
islands be included as a part of the Los Angeles County CBA in order to 
ensure that

[[Page 40150]]

beneficiaries presently residing on these islands or who move to these 
islands in the future are ensured access to competitively bid items by 
contract suppliers. San Clemente Island is a military base with a 
current population of zero, and therefore, the inclusion of this area 
in the CBA would not result in an increase in the supplier service area 
at this time.
    We also propose to subdivide the New York-Northern New Jersey-Long 
Island, NY-NJ-PA MSA into five CBAs. This MSA comprises 23 counties in 
three States: New York, New Jersey and Pennsylvania. The MSA has 
344,879 FFS beneficiaries receiving DMEPOS subject to the DMEPOS CBP 
and $350,449,795 in allowed charges for DMEPOS items subject to 
competitive bidding. The counties, DMEPOS allowed amount and 
beneficiary count subject to competitive bidding and the general 
populations that comprise each of these proposed CBAs are shown in 
Table 42.

                          Table 42--New York-Northern New Jersey-Long Island, NY-NJ-PA
----------------------------------------------------------------------------------------------------------------
                                                                                DMEPOS
                   CBA name/County                      DMEPOS  allowed    beneficiary count        General
                                                           amount *                *             population **
----------------------------------------------------------------------------------------------------------------
Nassau-Brooklyn-Queens County Metro CBA:
    Nassau, NY......................................         $30,888,889              29,857           1,351,625
    Kings, NY.......................................          47,044,915              44,893           2,556,598
    Queens, NY......................................          33,406,236              32,798           2,293,007
                                                     -----------------------------------------------------------
        CBA TOTAL...................................         111,340,040             107,548           6,201,230
----------------------------------------------------------------------------------------------------------------
Suffolk County CBA:
    Suffolk, NY.....................................          31,950,806              31,476           1,512,224
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          31,950,806              31,476           1,512,224
----------------------------------------------------------------------------------------------------------------
Bronx-Manhattan NY CBA:
    Bronx, NY.......................................          19,791,646              17,002           1,391,903
    New York, NY....................................          26,483,792              26,414           1,634,795
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          46,275,438              43,416           3,026,698
----------------------------------------------------------------------------------------------------------------
North-West NY Metro CBA:
    Hudson, NJ......................................          13,622,910              12,644             595,419
    Bergen, NJ......................................          19,948,837              20,278             894,840
    Passaic, NJ.....................................          10,266,137              10,233             490,948
    Putnam, NY......................................           1,997,668               1,876              99,244
    Rockland, NY....................................           6,421,317               6,265             298,545
    Essex, NJ.......................................           1,392,770               1,379             770,675
    Morris, NJ......................................           9,094,758               9,830             487,548
    Sussex, NJ......................................           2,905,240               2,819             150,909
    Pike, PA........................................           1,393,003               1,475              59,664
    Westchester, NY.................................          16,971,210              17,220             953,943
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          84,013,850              84,019           4,801,735
----------------------------------------------------------------------------------------------------------------
Southern NY Metro CBA:
    Hunterdon, NJ...................................           2,709,880               2,356             129,031
    Richmond, NY....................................           7,054,863               6,626             487,407
    Union, NJ.......................................          10,466,838              10,654             523,249
    Middlesex, NJ...................................          15,803,473              16,649             789,102
    Monmouth. NJ....................................          14,979,747              15,110             642,448
    Ocean, NJ.......................................          20,913,022              21,600             569,111
    Somerset, NJ....................................           4,941,838               5,425             324,563
                                                     -----------------------------------------------------------
        CBA TOTAL...................................          76,869,661              78,420           3,464,911
                                                     -----------------------------------------------------------
        MSA TOTAL...................................         350,449,795             344,879          19,006,798
----------------------------------------------------------------------------------------------------------------
* Source: Medicare claims from 10/1/08 to 9/30/09 for items subject to competitive bidding.
** Source: U.S. Census Bureau 2009 population estimates.

    Figure 3 shows the boundaries of each proposed CBA.

[[Page 40151]]

[GRAPHIC] [TIFF OMITTED] TP13JY10.003

    The Nassau-Brooklyn-Queens CBA would be contiguous to Suffolk 
County and would consist of the western part of Long Island and extend 
to the eastern part of New York City. The Suffolk County CBA would 
consist of the eastern part of Long Island and would encompass most of 
Long Island. The Bronx-Manhattan NY CBA would include the entire area 
of Manhattan and the Bronx. The North-West NY Metro CBA would be 
situated north and west of New York City and would extend into New 
Jersey and Pennsylvania. The Southern NY Metro CBA would include Staten 
Island and would extend south to Ocean County, New Jersey.
    At the March 17, 2010 meeting of the Program Advisory and Oversight 
Committee (PAOC), we presented these proposals for subdividing these 
three large MSAs. Various members of the PAOC had the following 
suggestions for subdividing these MSAs:
     Draw the boundaries of CBAs using the interstate highways 
rather than the divisions by County;
     Determine the current servicing areas of suppliers by MSA 
and product category by using a scatter plot;
     Use the Hudson River to divide the CBAs for the New York 
MSA;
     Carve out Pike and Putnam Counties from the New York MSA 
due to their location and their low population density;
     Include Manhattan as a separate CBA, due to its unique 
nature as a self contained area;
     Consider State licensure requirements when we divide the 
MSAs into CBAs;
     In the LA County CBA, exclude the area north of the San 
Gabriel Mountains from the CBA; and
     Consider traffic patterns when dividing the Los Angeles 
MSAs into CBAs.
    We are considering the PAOC's advice and recommendations and invite 
further comments on the proposed subdivisions and PAOC's advice of 
these three MSAs.
3. Exclusions of Certain Areas After Round 2 and Prior to 2015
    The MIPPA amended the statute by requiring that competition under 
Round 2 takes place in 2011 and by adding section 1847(a)(1)(D)(iii) 
that requires CMS to exclude the following areas from the competitive 
bid program for competitions after Round 2 of the program and before 
2015:
     Rural Areas;
     Metropolitan Statistical Areas not selected under Round 1 
or Round 2 with a population of less than 250,000; and
     Areas with a low population density within a MSA that is 
otherwise selected consistent with section 1847(a)(3)(A).
    We propose to incorporate these requirements and timeframes in 
proposed Sec.  414.410(c).
4. Expansion of Round 2
    Section 6410(a) of the ACA expanded the areas to be included in 
Round 2 of the program. As amended by section 6410(a) of the ACA, 
section 1847(a)(1)(B)(i)(II) requires that the competition for Round 2 
of the program occur in 91 of the largest MSAs in 2011. Prior to this 
change, Round 2 was to include 70 MSAs. Section 1847(a)(1)(D)(ii)(II), 
as added by section 6410(a), specifies that the additional 21 MSAs to 
be included in Round 2 ``include the next 21 largest metropolitan 
statistical areas by total population'' (after those already selected 
Round 2). The 2009 annual population estimates from the U.S. Census 
Bureau

[[Page 40152]]

are the most recent estimates of population that will be available 
prior to the Round 2 competition mandated to take place in 2011. We 
therefore propose to use these estimates to determine the additional 21 
MSAs to be included in Round 2 of the program. Table 43 is a list of 
the additional 21 MSAs added to Round 2.

              Table 43--Additional 21 MSAs Added to Round 2
------------------------------------------------------------------------
                                                            2009 Total
                   21 Additional MSAs                       population
------------------------------------------------------------------------
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD.............       5,968,252
Washington-Arlington-Alexandria, DC-VA-MD-WV............       5,476,241
Boston-Cambridge-Quincy, MA-NH..........................       4,588,680
Phoenix-Mesa-Scottsdale, AZ.............................       4,364,094
Seattle-Tacoma-Bellevue, WA.............................       3,407,848
St. Louis, MO-IL........................................       2,828,990
Baltimore-Towson, MD....................................       2,690,886
Portland-Vancouver-Beaverton, OR-WA.....................       2,241,841
Providence-New Bedford-Fall River, RI-MA................       1,600,642
Buffalo-Niagara Falls, NY...............................       1,123,804
Rochester, NY...........................................       1,035,566
Tucson, AZ..............................................       1,020,200
Honolulu, HI............................................         907,574
Albany-Schenectady-Troy, NY.............................         857,592
Worcester, MA...........................................         803,701
Oxnard-Thousand Oaks-Ventura, CA........................         802,983
Springfield, MA.........................................         698,903
Bradenton-Sarasota-Venice, FL...........................         688,126
Poughkeepsie-Newburgh-Middletown, NY....................         677,094
Stockton, CA............................................         674,860
Boise City-Nampa, ID....................................         606,376
------------------------------------------------------------------------

W. Section 10501(i)(3)--Proposed Collection of HCPCS Data for 
Development and Implementation of a Prospective Payment System for the 
Medicare Federally Qualified Health Center Program

    The Omnibus Budget Reconciliation Act (OBRA) of 1989 amended the 
Social Security Act by creating new FQHC benefit programs under both 
Medicare and Medicaid. The Medicare FQHC benefit provides coverage for 
a full range of primary care services, including physician and certain 
nonphysician services (PAs, NPs), clinical social worker, psychologist 
services, and preventive services. FQHCs are ``safety net'' providers 
(for example, community health centers and programs serving migrants, 
the homeless, public housing centers, and tribal groups). The main 
purpose of the FQHC program is to enhance the provision of primary care 
services in underserved urban and rural communities. FQHCs typically 
enhance the availability of care to vulnerable populations, including 
Medicare, Medicaid, SCHIP, and the uninsured. Most of these health 
centers receive HRSA grants for services to the uninsured.
    Medicare pays FQHCs on the basis of reasonable cost, subject to an 
upper payment limit on the reasonableness of incurred cost. Actual 
Medicare reasonable cost is determined based upon a Medicare cost 
report filed by the FQHC after the end of its fiscal year. Prior to the 
start of the year, an interim all-inclusive per-visit payment amount, 
based upon an estimate of Medicare reasonable costs, is calculated for 
each Medicare FQHC. During the year, this interim all-inclusive per-
visit payment amount is paid for each covered visit between a Medicare 
beneficiary and an FQHC health professional. After the end of the 
Medicare FQHC's cost reporting year, interim per-visit payments are 
reconciled to actual Medicare reasonable costs based upon the Medicare 
cost report filed by the FQHC. Section 10501(i)(3) of the ACA now 
amends this current Medicare FQHC payment policy with an entirely 
different payment system, effective with cost reporting periods 
beginning on or after October 1, 2014.
    Section 10501(i)(3)(A) of the ACA amended section 1834 of the Act 
by adding a new subsection (o), Development and Implementation of 
Prospective Payment System. This subsection provides the statutory 
framework for development and implementation of a prospective payment 
system for Medicare FQHCs. Section 1834(o)(1)(B) of the Act, as 
established by the ACA, addresses collection of data necessary to 
develop and implement the new Medicare FQHC prospective payment system. 
Specifically, section 1834(o)(1)(B) of the Act, Collection of Data and 
Evaluation, grants the Secretary of HHS the authority to require FQHCs 
to submit such information as may be required in order to develop and 
implement the Medicare FQHC prospective payment system, including the 
reporting of services using HCPCS codes. Section 1834(o)(1)(B) of the 
Act requires that the Secretary impose this data collection submission 
requirement no later than January 1, 2011. Accordingly, we are 
proposing to add a new paragraph (d) to Sec.  405.2470 to require 
Medicare FQHCs to begin reporting all services furnished and using 
HCPCS codes for these services starting January 1, 2011. Beginning 
January 1, 2011, the Medicare FQHC would be required to report on 
Medicare FQHC claims all pertinent service(s) provided for each 
Medicare FQHC visit (defined in Sec.  405.2463). This additional 
reporting would include the information needed to develop and implement 
a PPS for FQHCs. For example, corresponding HCPCS code(s) would be 
required to be reported along with the presently required Medicare 
revenue code(s) for the Medicare FQHC visit(s). CMS' Medicare FQHC 
claims processing system would be revised to accept the addition of the 
new reporting requirements effective January 1, 2011. The proposed new 
data collection effort would be for informational and data gathering 
purposes only, and would not be utilized to determine Medicare payment 
to the FQHC. Until the FQHC prospective payment system is implemented 
in 2014 and the Medicare claims processing system is revised to reflect 
such a system, Medicare FQHC

[[Page 40153]]

payment would continue in the current manner (utilizing revenue codes 
and the interim per-visit payment rate methodology).
    We further note that Medicare FQHCs would be required to adhere to 
the information collection requirements in accordance with the content 
and terms of their Medicare agreement as stipulated at Sec.  405.2434. 
Failure to do so could result in the termination of the FQHC's Medicare 
agreement in accordance with Sec.  405.2436 of the Medicare FQHC 
regulations.
    At this time, we do not foresee additional claims or other 
information collection needs beyond collection of HCPCS codes. 
Accordingly, we are not proposing additional information collection 
requirements at this time. However, we invite public comment on any 
additional information FQHCs believe may be necessary in order to 
develop and implement a prospective payment system for Medicare FQHCs.

VI. Other Provisions of the Proposed Regulation

A. Part B Drug Payment: Average Sales Price (ASP) Issues

1. ``Carry Over'' ASP
    The ASP payment methodology is authorized under section 303(c) of 
the MMA which amends Title XVIII of the Act by adding section 1847A of 
the Act. This section establishes the use of the ASP methodology for 
payment for drugs and biologicals described in section 1842(o)(1)(C) of 
the Act furnished on or after January 1, 2005. For purposes of this 
part, the term ``drugs'' will hereafter refer to both drugs and 
biologicals. The ASP methodology applies to most drugs furnished 
incident to a physician's service, drugs furnished under the durable 
medical equipment (DME) benefit, certain oral anti-cancer drugs, and 
oral immunosuppressive drugs.
    Sections 1847A and 1927(b) of the Act specify quarterly ASP data 
reporting requirements for manufacturers. Specific ASP reporting 
requirements are set forth in section 1927(b) of the Act. Although 
delays in reporting have been uncommon, they create a risk that: (1) 
Could result in the publication of payment limits which do not reflect 
prices for drug products, and (2) could result in inaccurate payments, 
the need for correction of files and unintentional ASP payment limit 
variability.
    As a result of these concerns, we are seeking to establish a 
process for addressing situations where manufacturers fail to report 
manufacturer ASP data in a timely fashion. This proposal is intended to 
allow us to calculate and report ASP payment limits for a given quarter 
within the existing timelines and does not affect the CMS or OIG's 
authority to assess civil monetary penalties associated with untimely 
or false ASP reporting. Manufacturers who misrepresent or fail to 
report manufacturer ASP data will remain subject to civil monetary 
penalties, as applicable and described in sections 1847A and 1927(b) of 
the Act.
    For the purposes of reporting under section 1847A of the Act, the 
term manufacturer is defined in section 1927(k)(5) of the Act and means 
any entity engaged in the following: production, preparation, 
propagation, compounding, conversion or processing of prescription drug 
product, either directly or indirectly by extraction from substances of 
natural origin, or independently by means of chemical synthesis, or by 
a combination of extraction and chemical synthesis; or packaging, 
repackaging, labeling, relabeling, or distribution of prescription drug 
products. The term manufacturer does not include a wholesale 
distributor of drugs or a retail pharmacy licensed under State law. 
However, manufacturers that also engage in certain wholesaler 
activities are required to report ASP data for those drugs that they 
manufacture. Note that the definition of manufacturers for the purposes 
of ASP data reporting includes repackagers.
    In accordance with section 1847A of the Act, manufacturers are 
required to report data on the NDC level, which include the following 
elements: the manufacturer ASP for drugs; the Wholesale Acquisition 
Cost (WAC) in effect on the last day of the reporting period; the 
number of ASP units sold; and the NDC. Currently, when manufacturer ASP 
data or specific data elements are not available, we calculate an ASP 
price for a billing code based on other applicable and available 
pricing data from manufacturers for that drug. This includes WAC prices 
from compendia if manufacturer data are not available for a billing 
code. WAC prices tend to be higher than manufacturer ASP prices.
    Although problems with reporting have been uncommon, we have 
recently encountered situations where delays in manufacturer ASP 
reporting could have led to significant ASP payment limit fluctuations 
for highly utilized HCPCS codes. The greatest potential impact occurs 
when data for high volume drug products within a HCPCS code that is 
represented by a limited number of NDCs have not been reported and 
cannot be included in the ASP volume weighted calculations described in 
section 1847A(b) of the Act. For multisource drugs, such a situation is 
likely to artificially increase or decrease Medicare ASP payment 
limits, which in turn would affect beneficiary cost sharing amounts. 
Such artificial fluctuations of the ASP payment limit could provide the 
appearance of instability unrelated to market forces and could also 
create access issues for providers and beneficiaries and confusion that 
could ultimately affect product demand in the marketplace.
    In order to minimize the possibility of ASP payment limit 
fluctuations due to missing data, we are proposing a process, 
consistent with our authority in section 1847A(c)(5)(B), to update 
ASPs, based on the manufacturer's ASP calculated for the most recent 
quarter for which data is available. Specifically, we are proposing to 
carry over the previously reported manufacturer ASP for an NDC(s) when 
missing manufacturer ASP and/or WAC data could cause significant 
changes or fluctuations in ASP payment limits, and efforts by us to 
obtain manufacturer reported ASP before Medicare ASP payment limits 
publication deadlines have not been successful. For example, the most 
recently reported manufacturer ASP prices for products on the market 
would be carried over to the next quarter if an entire manufacturer's 
submission was not received, manufacturer ASP price data for specific 
NDCs has not been reported, or only WAC data has been reported; 
however, NDCs that have zero sales or are no longer being manufactured 
will not be subjected to this process. Also, we are proposing to apply 
the carryover process only in cases where missing data results in a 10 
percent or greater change in the ASP payment limit compared to the 
previous quarter. Based on experience with ASP methodology since 2006, 
we believe that this percentage threshold meets the definition of 
significant. We are specifically seeking comments on our use of 10 
percent as the threshold amount. In order to better represent actual 
market trends, that is actual increases or decreases in manufacturer 
reported ASP for the group of NDCs that represent the HCPCS code, we 
are proposing that the manufacturer ASP payment amounts for the 
individual NDCs that are carried over will be adjusted by the weighted 
average of the change in the manufacturer ASP for the NDCs that were 
reported during both the most recently available quarter and the 
current quarter. We would appreciate comments about whether other 
methods to account for

[[Page 40154]]

marketplace price trends to the carried over NDCs could be a better 
substitute for applying the weighted average change. The previous 
quarter's sales volumes will be carried over. An example of the 
proposed process appears in Table 44.
    We propose to apply this process to both single source drugs and 
multiple source drugs. However, we are concerned that including single 
source drugs in the carry over process could create an incentive for 
non-reporting in situations where ASP prices for a single source drug 
are falling and the manufacturer stops reporting ASP in an effort to 
preserve a higher payment amount despite the risk of significant 
statutory penalties for such an action. Therefore, we are specifically 
requesting comments on this option and the effect of limiting this 
proposal to multiple source drugs only. We will consider these comments 
carefully before including both single source and multisource drugs in 
this process.

                                       Table 44--Proposed ASP Carryover Example for NDCs in a Specific HCPCS Code
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Previous                               Current
                                                        Qtr      Previous    Current Qtr      Qtr       Current    Current Qtr  Current Qtr  Current Qtr
          Previous quarter reported NDCs             reported     Qtr ASP     reported     reported     Qtr ASP     NDCs for     volume for   price for
                                                      volume       price        NDCs        volume       price     calculation  calculation  calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
12345-6789-10.....................................        2000      $1.000  12345-6789-1        2500      $0.980  12345-6789-1         2500       $0.980
                                                                                       0                                     0
12345-6789-11.....................................        3000       1.000  12345-6789-1        1700       0.980  12345-6789-1         1700        0.980
                                                                                       1                                     1
12345-6789-12.....................................        5000       1.000  12345-6789-1        5500       0.980  12345-6789-1         5500        0.980
                                                                                       2                                     2
45678-1234-90.....................................        9000       1.100          (**)        (**)        (**)  45678-1234-9         9000      * 1.078
                                                                                                                             0
45678-1234-99.....................................       27000       1.100          (**)        (**)        (**)  45678-1234-9        27000      * 1.078
                                                                                                                             9
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This result is obtained by calculating the weighted average price change in NDCs available (that is, 12345-6789-10 thru 12345-6789-12) in both the
  previous and current quarters, which is -2% [(0.98-1.00)*100], and applying that change to the previous quarter's manufacturer ASP for the missing
  NDCs (that is, 45678-1234-90 and 45678-1234-99). The last two columns on the right would be used to calculate the weighted ASP and payment limits for
  the 5 NDCs as a HCPCS code and accounts for missing prices for two high volume NDCs that represent most of the units sold within the HCPCS code and
  therefore heavily influence the price calculation for the HCPCS code.
** Missing.

    Our proposed approach is intended to establish a straightforward 
and transparent solution that minimizes the effect of missing 
manufacturer ASP data on Medicare ASP payment limits. We believe that 
the availability of a mechanism to minimize non-market related price 
fluctuations is desirable when efforts to obtain manufacturer's ASP 
data by deadlines have not been successful. Our proposed mechanism is 
not intended to alter or adjust reported prices and will not be used to 
do so, but instead is intended to more accurately represent prices in 
the marketplace if manufacturer ASP data for particular drug product(s) 
is missing. Based on our experience with ASP reporting since 2004, we 
do not believe that this process will be used frequently. However, as 
we stated previously, recent concerns with delays in reporting of 
manufacturer ASP data have led to this proposal.
    We also remind manufacturers that significant civil monetary 
penalties for not reporting or misrepresenting manufacturer ASP data 
are authorized under sections 1847A(d)(4) and 1927(b)(3)(C) of the Act 
and codified in regulations at Sec.  414.806. This proposal should not 
be interpreted to mean that CMS and the OIG will refrain from 
collecting such penalties for ASP reporting violations. Late or missing 
reports will not be tolerated. This proposed policy would be 
implemented regardless of any efforts by the OIG to enforce Civil 
Monetary Penalties for non-reporting.
    We would also like to remind manufacturers that additional specific 
information about reporting ASP data to us is available. (See for 
example.: 69 FR 17936, 69 FR 66299, 70 FR 70215, 71 FR 69665, 72 FR 
66256, 73 FR 69751, and 74 FR 61904.) Also, Frequently Asked Questions 
are posted in the Related Links Inside CMS Section of the ASP Overview 
Web page at http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01_overview.asp#TopOfPage, and the Downloads section of the same webpage 
contains a link to the ASP Data Form (addendum A), which includes 
examples of how ASP data must be reported and formatted for submission. 
In particular, we would like to remind manufacturers to report sales 
volume in quantities of NDC units sold (not vials or other units of 
sale), and to use a zero (that is the character ``0'') instead of a 
blank when reporting items that did not have any sales in a particular 
quarter. In addition, manufacturers should report both the ASP and the 
WAC for each NDC, the expiration date for the last lot sold, if 
applicable, and the date of first sale for an NDC.
    In summary, in situations where any current quarter's manufacturer 
ASP data is unavailable, we are proposing, consistent with our 
authority in section 1847A(c)(5)(B), to use the most recent data 
available in the ASP payment limit calculation for single source and 
multiple source drugs. We look forward to comments on this proposal and 
the proposed changes to Sec.  414.904(i).
2. Partial Quarter ASP Data
    Section 1847A(c)(4) of the Act states that ``In the case of a drug 
or biological during an initial period (not to exceed a full calendar 
quarter) in which data on the prices for sales for the drug or 
biological is not sufficiently available from the manufacturer to 
compute an average sales price for the drug or biological, the 
Secretary may determine the amount payable under this section for the 
drug or biological based on-- (A) the wholesale acquisition cost; or 
(B) the methodologies in effect under this part on November 1, 2003, to 
determine payment amounts for drugs or biological.''
    When a new drug product enters the market, the first date of sale 
rarely coincides with the beginning of a calendar quarter. Therefore, 
the ASP data for many new drug products falls into partial quarter 
status during the first quarter of sales. We are taking this 
opportunity to describe our policy regarding how reported data is used 
in the calculation of ASP payment limits during the first quarter of 
sales for single source and multiple source drugs.
    In accordance with section 1847A(c)(4)(A) of the Act, it has been 
our policy to price new single source drugs at WAC for the first 
quarter (unless the date of first sale is on the first day of the 
quarter), and to add new

[[Page 40155]]

NDCs for multi source drugs and product line expansions of single 
source drugs to the ASP calculation for a quarter as soon as these 
products are reported.
    We believe that the approaches for both single source and multi 
source drugs are consistent with the statute, particularly section 
1847A(c)(4) of the Act, and we intend to continue this policy.
3. Determining the Payment Amount for Drugs and Biological Which 
Include Intentional Overfill
    The methodology for developing Medicare drug payment allowances 
based on the manufacturers' submitted ASP data is specified in 42 CFR 
part 414, subpart K. We initially established this regulatory text in 
the CY 2005 PFS final rule with comment period (69 FR 66424). We 
further described the formula we use to calculate the payment amount 
for each HCPCS billing code in the CY 2006 PFS proposed rule (70 FR 
45844) and final rule with comment period (70 FR 70217). With the 
enactment of the Medicare, Medicaid and SCHIP Extension Act (MMSEA) 
(Pub. L. 110-173), the formula we use changed beginning April 1, 2008. 
Section 112(a) of the MMSEA requires us to calculate payment amounts 
using a specified volume-weighting methodology. In addition, section 
112(b) of the MMSEA sets forth a special rule for determining the 
payment amount for certain drugs and biological. We addressed these 
changes in the CY 2009 PFS proposed and final rules (73 FR 38520 and 
69571, respectively). For each billing code, we calculate a volume-
weighted, ASP-based payment amount using the ASP data submitted by 
manufacturers. Manufacturers submit ASP data to us at the 11-digit 
National Drug Code (NDC) level, including the number of units of the 
11-digit NDC sold and the ASP for those units. We determine the number 
of billing units in an NDC based on the amount of drug in the package.
    For example: A manufacturer sells a box of 4 vials of a drug. Each 
vial contains 20 milligrams (mg); the billing code is per 10 MG. The 
number of billing units in this NDC for this billing code is (4 vials x 
20mg)/10mg = 8 billable units.
    Beginning April 1, 2008, we use a two-step formula to calculate the 
payment amount for each billing code. We sum the product of the 
manufacturer's ASP and the number of units of the 11-digit NDC sold for 
each NDC assigned to the billing and payment code, and then divide this 
total by the sum of the product of the number of units of the 11-digit 
NDC sold and the number of billing units in that NDC for each NDC 
assigned to the billing and payment code.
    The provisions in section 112 of the MMSEA were self-implementing 
for services on and after April 1, 2008. Because of the limited time 
between enactment and the implementation date, it was not practical to 
undertake and complete rulemaking on this issue prior to implementing 
the required changes. As a result of the legislation, we revised Sec.  
414.904 to codify the changes to the determination of payment amounts 
consistent with section 112 of the MMSEA.
    Since that time, we have become aware of situations where 
manufacturers, by design, include a small amount of ``intentional 
overfill'' in containers of drugs. We understand that this 
``intentional overfill'' is intended to compensate for loss of product 
when a dose is prepared and administered properly. For instance, a 
hypothetical drug is intended to be delivered at a 0.5 mg dose which 
must be drawn into a syringe from a vial labeled for single use only. 
The vial is labeled to contain 0.5 mg of product but actually contains 
1.5 mg of product. The additional 1.0 mg of product is included, by 
design, and is intended to be available to the provider so as to ensure 
a full 0.5 mg dose is administered to the patient.
    Our ASP payment calculations are based on data reported to us by 
manufacturers. This data includes the ``volume per item.'' In our 
``Appendix A--Average Sales Price Reporting Data Elements'' available 
on our Web site at http://www.cms.gov/McrPartBDrugAvgSalesPrice/, we 
define ``volume per item'' as ``The amount in one item. (ex., 10 ml in 
one vial, or 500 tablets in one bottle) Enter ``1'' for certain forms 
of drugs (for example, powders and sheets) when ``Strength of the 
Product'' indicates the amount of the product per item.'' In order to 
accurately calculate Medicare ASP payment limits under section 1847A, 
we interpret ``the amount in one item'' to be the amount of product in 
the vial or other container as indicated on the FDA-approved label.
    It has been longstanding Medicare policy that in order to meet the 
general requirements for coverage under the ``incident to'' provision, 
services or supplies should represent an expense incurred by the 
physician or entity billing for the services or supplies (See Medicare 
Benefit Policy Manual (Publication 100-02), Chapter 15, 
Sections 50.3, 60.1.A). Such physicians' services and supplies include 
drugs and biological under section 1861(s)(2)(A). In accordance with 
this policy, providers may only bill for the amount of drug product 
actually purchased and that the cost of the product must represent an 
expense to the physician.
    We further understand that when a provider purchases a vial or 
container of product, the provider is purchasing an amount of drug 
defined by the product packaging or label. Any excess, free product 
(that is, overfill) is provided without charge to the provider. In 
accordance with our policy, providers may not bill Medicare for 
overfill harvested from containers, including overfill amounts pooled 
from more than one container, because that overfill does not represent 
a cost to the provider. Claims for drugs and biological that do not 
represent a cost to the provider are not reimbursable, and providers 
who submit such claims may be subject to scrutiny and follow up action 
by CMS, its contractors, and OIG.
    Because such overfill is not included in the calculation of payment 
limits under the methodology in section 1847A of the Act and does not 
represent an incurred cost to a provider, we are proposing to update 
our regulations at 42 CFR part 414 subpart J to clearly state that 
Medicare ASP payment limits are based on the amount of product in the 
vial or container as reflected on the FDA-approved label. We are also 
proposing to update our regulations to clearly state that payment for 
amounts of free product, or product in excess of the amount reflected 
on the FDA-approved label, will not be made under Medicare.
4. WAMP/AMP
    Section 1847A(d)(1) of the Act states that ``the Inspector General 
of HHS shall conduct studies, which may include surveys to determine 
the widely available market prices (WAMP) of drugs and biologicals to 
which this section applies, as the Inspector General, in consultation 
with the Secretary, determines to be appropriate.'' Section 1847A 
(d)(2) of the Act states that, ``Based upon such studies and other data 
for drugs and biologicals, the Inspector General shall compare the ASP 
under this section for drugs and biologicals with--
     The widely available market price (WAMP) for these drugs 
and biologicals (if any); and
     The average manufacturer price (AMP) (as determined under 
section 1927(k)(1) of the Act) for such drugs and biologicals.''
    Section 1847A(d)(3)(A) of the Act states that, ``The Secretary may 
disregard the ASP for a drug or biological that exceeds the WAMP or the 
AMP for such drug or biological by the applicable

[[Page 40156]]

threshold percentage (as defined in subparagraph (B)).'' Section 
1847A(d)(3)(C) of the Act states that if the OIG finds that the ASP for 
a drug or biological is found to have exceeded the WAMP or AMP by this 
threshold percentage, the OIG ``shall inform the Secretary (at such 
times as the Secretary may specify to carry out this subparagraph) and 
the Secretary shall, effective as of the next quarter, substitute for 
the amount of payment otherwise determined under this section for such 
drug or biological, the lesser of--(i) the widely available market 
price for the drug or biological (if any); or (ii) 103 percent of the 
average manufacturer price * * *.''
    The applicable threshold percentage is specified in section 
1847A(d)(3)(B)(i) of the Act as 5 percent for CY 2005. For CY 2006 and 
subsequent years, section 1847A(d)(3)(B)(ii) of the Act establishes 
that the applicable threshold percentage is ``the percentage applied 
under this subparagraph subject to such adjustment as the Secretary may 
specify for the WAMP or the AMP, or both.'' In the CY 2006 (70 FR 
70222), CY 2007 (71 FR 69680), CY 2008 (72 FR 66258), CY 2009 (73 FR 
69752), and CY 2010 (74 FR 61904) PFS final rules with comment period, 
we specified an applicable threshold percentage of 5 percent for both 
the WAMP and AMP. We based this decision on the fact that data was too 
limited to support an adjustment to the current applicable threshold 
percentage.
    For CY 2011, we are proposing to specify two separate adjustments 
to the applicable threshold percentages. When making comparisons to the 
WAMP, we propose the applicable threshold percentage to remain at 5 
percent. The applicable threshold percentage for the AMP is addressed 
below in this section of the preamble. Although the latest WAMP 
comparison was published in 2008, the OIG is continuing to perform 
studies comparing ASP to WAMP. Based on available OIG reports that have 
been published comparing WAMP to ASP, we do not have sufficient 
information to determine that the 5 percent threshold percentage is 
inappropriate. As a result, we believe that continuing the 5 percent 
applicable threshold percentage for the WAMP is appropriate for CY 
2011. Therefore we are proposing to revise Sec.  414.904(d)(3) to 
include the CY 2011 date.
    As we noted in the CY 2010 PFS final rule with comment period (74 
FR 61904), we understand that there are complicated operational issues 
associated with this policy. We continue to proceed cautiously in this 
area. We remain committed to providing stakeholders, including 
providers and manufacturers of drugs impacted by potential price 
substitutions with adequate notice of our intentions regarding such, 
including the opportunity to provide input with regard to the processes 
for substituting the WAMP for the ASP.
    We welcome comments on our proposal to continue the applicable 
threshold percentage at 5 percent for the WAMP for 2011.
5. AMP Threshold and Price Substitutions
a. AMP Threshold
    As mentioned elsewhere in this proposal, when making comparisons of 
ASP to AMP, the applicable threshold percentage for CY 2005 was 
specified in statute as 5 percent. Section 1847A(d)(3) of the Act 
allows the Secretary to specify adjustments to this threshold 
percentage for years subsequent to 2005, and to specify the timing for 
any price substitution. For CY 2006 (70 FR 70222), CY 2007 (71 FR 
69680), CY 2008 (72 FR 66258), CY 2009 (73 FR 69752), and CY 2010 (74 
FR 61904), the Secretary made no adjustments to the threshold 
percentage; it remained at 5 percent.
    For CY 2011, we are proposing with respect to AMP substitution to 
apply the applicable percentage subject to certain adjustment such that 
comparisons of ASP to AMP will only be made when the ASP exceeds the 
AMP by 5 percent in two consecutive quarters immediately prior to the 
current pricing quarter, or three of the previous four quarters 
immediately prior to the current quarter.
    In general, the ASP methodology reflects average market prices for 
Part B drugs for a quarter. The ASP is based, in part, on the average 
sales price to all purchasers for a calendar quarter; the AMP, in turn, 
represents the average price paid by certain wholesalers. Accordingly, 
while the ASP payment amount for a billing code may exceed its AMP for 
that billing code for any given quarter, this may only reflect a 
temporary fluctuation in market prices that would be otherwise 
corrected in a subsequent quarter. We believe this fluctuation is 
demonstrated by how few billing codes exceed the applicable threshold 
percentage over multiple quarters. For example, in the Inspector 
General's report ``Comparison of Average Sales Prices and Average 
manufacturer Prices: An Overview of 2008'', only 33 of 482 examined 
billing codes exceeded the applicable threshold percentage over 
multiple quarters. This figure also included billing codes that 
exceeded the threshold based on partial price comparisons (OEI-03-09-
00350). We are concerned that comparisons of a single quarter's ASP to 
AMP will not adequately account for these temporary fluctuations and 
underlying market trends. We believe that applying this threshold 
percentage adjusted to reflect data from multiple quarters will account 
for continuing differences between ASP and AMP, and allow us to better 
identify those drugs that consistently trigger the substitution 
threshold.
    We further propose to apply the applicable AMP threshold percentage 
only for those situations where AMP and ASP comparisons are based on 
the same set of NDCs for a billing code (that is, ``complete'' AMP 
data). Prior to 2008, the OIG calculated a volume-weighted AMP and made 
ASP and AMP comparisons for only billing codes with such ``complete'' 
AMP data. In such comparisons, a volume-weighted AMP for a billing code 
was calculated when NDC-level AMP data was available for the same NDCs 
used by us to calculate the volume-weighted ASP. Beginning in the first 
quarter of 2008, the OIG also began to make ASP and AMP comparisons 
based on ``partial'' AMP data (that is, AMP data for some, but not all 
NDCs in a billing code). For these comparisons, the volume-weighted AMP 
for a billing code is calculated even when only such limited AMP data 
is available. That is, the volume-weighted AMP calculated by the 
Inspector General is based on fewer NDCs than the volume-weighted ASP 
calculated by CMS. Moreover, volume-weighted ASPs are not adjusted by 
the Inspector General to reflect the fewer number of NDCs in the 
volume-weighted AMP.
    Because the OIG's partial AMP data comparison does not reflect all 
the NDCs used in our volume-weighted ASP calculations, we have some 
concerns using the volume-weighted AMP. We believe that such AMP data 
may not adequately account for market-related drug price changes and 
may lead to the substitution of incomplete and inaccurate volume-
weighted prices. Such substitutions may impact physician and 
beneficiary access to drugs. Therefore, in accordance with our 
authority as set forth in section 1847A(d)(1) and (3) of the Act, we 
are proposing the substitution of 103 percent of AMP for 106 percent of 
ASP should be limited to only those drugs with ASP and AMP comparisons 
based on the same set of NDCs. We are proposing to revise Sec.  
414.904(d)(3) to reflect corresponding regulatory text changes, and we 
welcome comments on all aspects of this proposal.

[[Page 40157]]

b. AMP Price Substitution
(1) Inspector General Studies
    Section 1847A(d) of the Act requires the Inspector General to 
conduct studies of the widely available market price for drugs and 
biological to which section 1847A of the Act applies. However, it does 
not specify the frequency of when such studies should be conducted. The 
Inspector General has conducted studies comparing AMP to ASP for 
essentially each quarter since the ASP system has been implemented. 
Since 2005, the OIG has published 18 reports pertaining to the price 
substitution issue (see Table 45), of which 16 have identified billing 
codes with volume-weighted ASPs that have exceeded their volume-
weighted AMPs by the applicable threshold percentage.

         Table 45--Published OIG Reports on Price Substitutions
------------------------------------------------------------------------
           Date                             Report title
------------------------------------------------------------------------
7/2008...................  A Comparison of Average Sales Price to Widely
                            Available Market Prices for Inhalation Drugs
                            (OEI-03-07-00190).
6/2006...................  A Comparison of Average Sales Price to Widely
                            Available Market Prices: Fourth Quarter 2005
                            (OEI-03-05-00430).
4/2010...................  Comparison of Third-Quarter 2009 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for First
                            Quarter 2010 (OEI-03-10-00150).
2/2010...................  Comparison of Average Sales Prices and
                            Average Manufacturer Prices: An Overview of
                            2008 (OEI-03-09-00350).
1/2010...................  Comparison of Second-Quarter 2009 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Fourth
                            Quarter 2009 (OEI-03-09-00640).
8/2009...................  Comparison of First-Quarter 2009 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Third
                            Quarter 2009 (OEI-03-09-00490).
8/2009...................  Comparison of Fourth-Quarter 2008 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Second
                            Quarter 2009 (OEI-03-09-00340).
4/2009...................  Comparison of Third-Quarter 2008 Average
                            Sales Prices and Average Manufacturer
                            Prices: Impact on Medicare Reimbursement for
                            First Quarter 2009 (OEI-03-09-00150).
2/2009...................  Comparison of Second-Quarter 2008 Average
                            Sales Prices and Average Manufacturer
                            Prices: Impact on Medicare Reimbursement for
                            Fourth Quarter 2008 (OEI-03-09-00050).
12/2008..................  Comparison of First-Quarter 2008 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Third
                            Quarter 2008 (OEI-03-08-00530).
12/2008..................  Comparison of Average Sales Prices and
                            Average Manufacturer Prices: An Overview of
                            2007 (OEI-03-08-00450).
8/2008...................  Comparison of Fourth-Quarter 2007 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Second
                            Quarter 2008 (OEI-03-08-00340).
5/2008...................  Comparison of Third-Quarter 2007 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for First
                            Quarter 2008 (OEI-03-08-00130).
12/2007..................  Comparison of Second-Quarter 2007 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Fourth
                            Quarter 2007 (OEI-03-08-00010).
9/2007...................  Comparison of First-Quarter 2007 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Third
                            Quarter 2007 (OEI-03-07-00530).
7/2007...................  Comparison of Third-Quarter 2006 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for First
                            Quarter 2007 (OEI-03-07-00140).
7/2006...................  Comparison of Fourth-Quarter 2005 Average
                            Sales Price and Average Manufacturer Prices:
                            Impact on Medicare Reimbursement for Second
                            Quarter 2006 (OEI-03-06-00370).
4/2006...................  Monitoring Medicare Part B Drug Prices: A
                            Comparison of Average Sales Price to Average
                            Manufacturer Prices (OEI-03-04-00430).
------------------------------------------------------------------------

    For example, in their latest report comparing AMP to ASP entitled 
``Comparison of Third-Quarter 2009 Average Sales Price and Average 
Manufacturer Prices: Impact on Medicare Reimbursement for First Quarter 
2010'' (OEI-03-10-00150), the Inspector General found that of 356 
billing codes with complete AMP data in the third quarter of 2009, 16 
met the 5 percent threshold, that is, ASP exceeded AMP by at least 5 
percent. Eight of these 16 billing codes were also eligible for price 
adjustments in one or more of the previous four quarters, with three 
drugs meeting the 5-percent threshold in all five quarters under 
review. This Inspector General report further indicates that, ``If 
reimbursement amounts for all 16 drugs had been based on 103 percent of 
the AMPs, we estimate that Medicare expenditures would have been 
reduced by over half a million dollars in the first quarter of 2010.'' 
These drugs and the savings found by the Inspector General constitute 
potential savings for the Medicare program and beneficiaries.
(2) Regulatory, Judicial, and Legislative Changes
    Since 2005, regulatory and legislative changes, as well as 
litigation, have had a direct impact on this price substitution issue. 
In 2007, we published a final rule that, in accordance with section 
6001(c) of the Deficit Reduction Act, was designed to clarify the 
definition of AMP (72 FR 39142). On December 19, 2007, the United 
States District Court for the District of Columbia issued a preliminary 
injunction in National Association of Chain Drug Stores et al. v. 
Health and Human Services, Civil Action No. 1:07-cv-02017(RCL) that 
enjoins CMS, in part, from posting any AMP data on a public Web site or 
otherwise disclosing any AMP data to certain individuals or entities, 
including, but not limited to, States or their representatives. (For 
additional information on this injunction, please see our Web site at 
http://www.cms.hhs.gov/DeficitReductionAct/Downloads/AMPPIOrder.pdf).
    In 2010, section 2503 of ACA amended the definition of AMP, in 
part, to reflect the average price paid for covered outpatient drugs: 
(1) By wholesalers for drugs distributed to retail community 
pharmacies; and (2) by retail community pharmacies that purchase drugs 
directly from the manufacturer. The statute defines retail community 
pharmacies, in part, as independent, chain, and supermarket pharmacies.
(3) Proposal
    Overall, we are cognizant that any policy must reflect market-
related pricing changes. Additionally, we continue to recognize the 
need, in light of the statute, to implement a price substitution 
policy.

[[Page 40158]]

    As discussed previously, section 1847A(d)(3) of the Act provides 
authority for us to determine the applicable percentage subject to 
``such adjustment as the Secretary may specify for the widely available 
market price or the average manufacturer price, or both.'' We also have 
authority to specify the timing of any ASP substitution. Consistent 
with this authority, we are proposing a policy to substitute 103 
percent of AMP for 106 percent of ASP where the applicable percentage 
has been satisfied for a number of calendar quarters, as discussed 
elsewhere in this rule. This policy would apply to both single source 
and multiple source drugs and biologicals as defined respectively at 
section 1847A(c)(6)(C) and (D) of the Act.
    We acknowledge the limitation of the preliminary injunction on our 
ability to publicly disclose AMP data and until that injunction is 
modified, we will not implement this price substitution policy.
    Because of the lack of data regarding WAMP to ASP comparisons, we 
are explicitly excluding WAMP from this price substitution proposal 
though we are proposing to maintain the WAMP threshold at 5 percent for 
CY 2011 in a separate section of this rule. Overall, we are interested 
in implementing a price substitution policy that reflects market-
related pricing changes and which focuses on those drugs that 
consistently exceed the price substitution threshold over multiple 
quarters. Unlike the OIG's AMP studies, the published WAMP studies have 
recommended price substitutions based on specific timeframes that do 
not illustrate whether such pricing discrepancies are singular or 
consistent across multiple quarters. We will reconsider proposing a 
policy for the substitution of WAMP at a later date.
(4) Timeframe for and Duration of Price Substitutions
    As stated in Sec.  414.804(a)(5), a manufacturer's average sales 
price must be submitted to CMS within 30 days of the close of the 
quarter. We then calculate an ASP for each billing code as per the 
process outlined at Sec.  414.904. Then, as per our CY 2005 PFS final 
rule (69 FR 66300), we implement these new prices through program 
instructions or otherwise at the first opportunity after we receive the 
data, which is the calendar quarter after receipt.
    Section 1847A(d)(3)(C) of the Act indicates that a price 
substitution would be implemented ``effective as of the next quarter'' 
after the OIG has informed us that the ASP for a drug or biological 
exceeds its AMP by the applicable percentage threshold. The OIG does 
not receive new ASP prices for a given quarter until after we have 
finalized them. Also, the results of their pricing comparisons are not 
available until after the ASP prices for a given quarter have gone into 
effect. Therefore, we anticipate that there will be a three quarter lag 
for substituted prices from the quarter in which manufacturer sales 
occurred, though this will depend in great part upon the timeframe in 
which we obtain comparison data from the OIG. Table 46 provides an 
example of this timeframe.

                                 Table 46--Example Price Substitution Timeframe
----------------------------------------------------------------------------------------------------------------
                                    Q2-10               Q3-10                 Q4-10                 Q1-11
----------------------------------------------------------------------------------------------------------------
ASP Process..................  Manufacturer     Manufacturer submits  CMS publishes Q4-10
                                sells drug.      Q2-10 pricing data.   payment limits.
                                                 CMS calculates ASP
                                                 payment limits for
                                                 Q4-10.
                                                                                            CMS calculates ASP
                                                                                             payment limits for
                                                                                             Q1-11. Compares
                                                                                             calculated payment
                                                                                             limits to OIG
                                                                                             substitute prices.
                                                                                             Publishes Q1-11
                                                                                             prices that may
                                                                                             include OIG
                                                                                             substitute prices
OIG Process..................  ...............  ....................  OIG receives Q4-10
                                                                       pricing from CMS
                                                                       and compares it to
                                                                       Q2-10 volume-
                                                                       weighted AMP data.
                                                                       Notifies CMS of
                                                                       eligible HCPCS for
                                                                       substitution.
----------------------------------------------------------------------------------------------------------------

    Given this lag in time, the ASP price for a billing code may have 
decreased since the OIG's comparison. Therefore, consistent with our 
authorities in section 1847A(d)(3) of the Act and our desire to provide 
accurate payments consistent with these provisions, we believe that the 
timing of any substitution policy should permit a final comparison 
between the OIG's volume-weighted 103 percent AMP for a billing code 
(calculated from the prior quarter's data) and the billing code's 
volume-weighted 106 percent ASP, as calculated by CMS, for the current 
quarter. This final comparison would assure the Secretary that the 106 
percent ASP payment limit continues to exceed 103 percent of the OIG's 
calculated AMP in order to avoid a situation in which the Secretary 
would inadvertently raise the Medicare payment limit through this price 
substitution policy. We specifically request comments on this proposal.
    ASP payment limits are calculated on a quarterly basis as per 
section 1847A(c)(5)(A) of the Act, and we are particularly mindful that 
the ASP-based payment allowance for a billing code may change from 
quarter to quarter. As such, we propose that any price substitution 
would last for one quarter.
    Overall, we believe that our proposal as outlined above to 
substitute 103 percent of AMP for 106 percent of ASP provides us with a 
viable mechanism for generating savings for the Medicare program and 
its beneficiaries since it will allow Medicare to pay based off lower 
market prices for those drugs and biologicals that consistently exceed 
the applicable threshold percentage. Moreover, it will enable us to 
address a programmatic vulnerability identified by the OIG. We welcome 
comments on all aspects of our proposal.
    We are also seeking comment on other issues related to the 
comparison between ASP and AMP, such as--
     Any effect of definitional differences between AMP and 
ASP, particularly in light of the revised definition of AMP per ACA;
     The impact of any differences in AMP and ASP reporting by 
manufacturers on price substitution comparisons; and
     Whether and/or how general differences and similarities 
between AMP and manufacturer's ASP would affect comparisons between 
these two.

[[Page 40159]]

B. Ambulance Fee Schedule Issue: Policy for Reporting Units When 
Billing for Ambulance Fractional Mileage

    Under the ambulance fee schedule, the Medicare program pays for 
transportation services for Medicare beneficiaries when other means of 
transportation are contraindicated and all other applicable medical 
necessity requirements are met. Ambulance services are classified into 
different levels of ground (including water) and air ambulance services 
based on the medically necessary treatment provided during transport. 
These services include the following levels of service:
     For Ground--
    ++ Basic Life Support (BLS) (emergency and nonemergency).
    ++ Advanced Life Support, Level 1 (ALS1) (emergency and 
nonemergency).
    ++ Advanced Life Support, Level 2 (ALS2).
    ++ Specialty Care Transport (SCT).
    ++ Paramedic ALS Intercept (PI).
     For Air--
    ++ Fixed Wing Air Ambulance (FW).
    ++ Rotary Wing Air Ambulance (RW).
1. History of Medicare Ambulance Services
a. Statutory Coverage of Ambulance Services
    Under sections 1834(l) and 1861(s)(7) of the Act, Medicare Part B 
(Supplementary Medical Insurance) covers and pays for ambulance 
services, to the extent prescribed in regulations, when the use of 
other methods of transportation would be contraindicated by the 
beneficiary's medical condition. The House Ways and Means Committee and 
Senate Finance Committee Reports that accompanied the 1965 Social 
Security Amendments suggest that the Congress intended that--
     The ambulance benefit cover transportation services only 
if other means of transportation are contraindicated by the 
beneficiary's medical condition; and
     Only ambulance service to local facilities be covered 
unless necessary services are not available locally, in which case, 
transportation to the nearest facility furnishing those services is 
covered (H.R. Rep. No. 213, 89th Cong., 1st Sess. 37 and Rep. No. 404, 
89th Cong., 1st Sess. Pt 1, 43 (1965)).
    The reports indicate that transportation may also be provided from 
one hospital to another, to the beneficiary's home, or to an extended 
care facility.
b. Medicare Regulations for Ambulance Services
    Our regulations relating to ambulance services are set forth at 42 
CFR part 410, subpart B, and 42 CFR part 414, subpart H. Section 
410.10(i) lists ambulance services as one of the covered medical and 
other health services under Medicare Part B. Therefore, ambulance 
services are subject to basic conditions and limitations set forth at 
Sec.  410.12 and to specific conditions and limitations as specified in 
Sec.  410.40 and Sec.  410.41. Part 414, subpart H, describes how 
payment is made for ambulance services covered by Medicare.
2. Mileage Reporting
a. Background and Current Process for Reporting Ambulance Mileage
    Historically, the Medicare fee-for-service (FFS) claims processing 
system lacked the capability to accept and process fractional unit 
amounts reported in any claim format. Therefore, the standard for 
reporting units for ambulance mileage was to bill in whole number 
increments. Thus, if the total units of service for ambulance mileage 
included a fractional amount, providers and suppliers of ambulance 
services (hereafter referred to collectively as ``providers and 
suppliers'') were instructed to round the fraction up to the next whole 
number. Claims billed with fractional units of service were, at that 
time, returned as unprocessable as CMS' claims processing systems could 
not accept nor adjudicate fractional unit amounts properly.
    Consequently, in Change Request (CR) 1281 (Transmittal AB-00-88, 
issued on September 18, 2000), we instituted an operational procedure 
requiring whole-unit reporting of mileage on ambulance claims. 
Specifically, we instructed providers and suppliers that ``If mileage 
is billed, the miles must be whole numbers. If a trip has a fraction of 
a mile, round up to the nearest whole number.'' Our instructions also 
stated that ``1'' should be reported for trips totaling less than a 
single mile. This was an operational instruction based on Medicare's 
FFS system limitations and capabilities at the time, as our claims 
processing systems were not capable of accepting and processing claims 
submitted with fractional units of service. Since then, our claims 
processing system functionality has evolved to the point where this 
rounding process is no longer necessary for most ambulance transports, 
as it is now possible for our FFS systems to capture and accurately 
process fractional units on both paper and electronic forms.
    Under our current instructions, providers and suppliers continue to 
report loaded mileage as whole-number units on both paper and 
electronic claims. Providers and suppliers utilize the appropriate 
Healthcare Common Procedure Coding System (HCPCS) code for ambulance 
mileage to report the number of miles traveled during a Medicare-
covered trip rounded up to the nearest whole mile at a minimum of 1 
unit for the purpose of determining payment for mileage. Transmittal 
AB-00-88 established a list of HCPCS codes accepted by Medicare for the 
purpose of billing mileage. Providers and suppliers were instructed to 
use these specific HCPCS codes and enter the total number of covered 
miles in the ``units'' field of the claim form. For example, if a 
covered trip from the point of pickup (POP) to the Medicare-approved 
destination (see Sec.  414.40 for a list of approved destinations) 
totaled 9.1 miles, the provider would enter the appropriate HCPCS code 
for covered mileage and a ``10'' in the units field. Providers and 
suppliers billing for trips totaling, for example, 0.5 covered miles, 
would enter ``1'' in the units field along with the appropriate HCPCS 
code for mileage.
b. Concerns Regarding the Potential for Inaccuracies in Reporting Units 
and Associated Considerations
    Often an ambulance provider will transport a distance that is 
either not an exact whole number of miles or less than one whole mile 
during a covered trip. Currently, providers and suppliers billing for 
ambulance services must round up the total billable mileage to the 
nearest whole mile for trips that include a fraction of a mile or less 
than one whole mile. Under our current instructions, a provider or 
supplier is required to bill as much as .9 of a mile more than what was 
actually traveled.
    We have been contacted by suppliers on several occasions with 
concerns regarding our current instructions for reporting ambulance 
mileage. Certain suppliers believe that our instructions require them 
to bill inaccurately. One company in particular stated that they 
routinely need to bill for trips totaling less than 1 mile. The 
beneficiaries that are being transported by this company live in the 
immediate vicinity of the facility to which they are being transported, 
and therefore, the number of loaded miles for each trip totals 
approximately one half of a mile. The company was concerned that since 
Medicare requires that they enter a ``1'' in the units field of their 
claims for mileage, they are being overpaid by

[[Page 40160]]

Medicare for mileage based on the service they actually provided.
    However, the company's main concern revolved around the risk of 
creating an appearance of impropriety. Although our instructions 
clearly state that providers and suppliers should, as a matter of 
procedure, round up fractional mileage amounts to the nearest whole 
mile, some providers and suppliers indicated that they wanted to bill 
as accurately as possible and that they only wanted to be paid for the 
service they actually provided. We thoroughly considered these concerns 
while reevaluating the procedure for reporting units for fractional 
mileage amounts.
    Our first priority in considering the issues raised by ambulance 
providers and suppliers was to ascertain the basis for the current 
mileage reporting instructions. As previously discussed, the original 
instructions for reporting fractional mileage were published in 
Transmittal AB-00-88, issued on September 18, 2000. We instructed 
providers and suppliers to round fractional mileage amounts ``up to the 
nearest whole mile'' and to enter ``1'' for fractional mileage totaling 
less than one mile. This particular process had also been in place 
prior to issuance of the transmittal. The reason for the procedure was 
that our claims processing systems were not capable of accepting and 
processing claims submitted with fractional units of service--even if 
the service was commonly measured in fractional amounts, as with 
ambulance mileage.
    We then explored whether a change in our procedure would be: (a) 
Appropriate, (b) possible considering our current system capabilities 
and industry standards of measurement, and (c) applicable to any 
service other than ambulance mileage. As to the appropriateness of 
changing the procedure for reporting units of service on provider 
claims for fractional ambulance mileage, we believe that we should make 
every effort to create and implement policies and processes that create 
the best opportunity for accuracy in billing. It is not our intention 
to put providers and suppliers in a position where they are required to 
bill inaccurately for the service they provide. We continue to strive 
toward ensuring that providers and suppliers bill and are paid only for 
services actually provided. We believe that changing our current 
procedure for reporting units of service to require reporting of 
fractional mileage will help to ensure that providers and suppliers can 
submit claims that more precisely reflect actual mileage, and are 
reimbursed more accurately for the services they actually provided. We 
originally instituted a policy of accepting and processing only whole 
units because at that time, system limitations prevented us from 
accepting and processing fractional ambulance mileage.
    Second, we considered whether it is currently possible for our 
claims processing systems to accept and process fractional unit amounts 
on both paper and electronic claims. Upon reevaluating our system 
capabilities, we found that technological advancements in Optical 
Character Recognition (OCR) and electronic claim submission have made 
it possible for our FFS systems to capture and accurately process 
fractional units on both paper and electronic claims. We note that our 
systems currently have the capability to accept fractional units with 
accuracy up to as much as one thousandth of a unit (that is, to 3 
decimal places).
    We also considered whether ambulance providers and suppliers have 
the capability to measure fractional mileage. This was an important 
point because if providers and suppliers are not able to measure 
mileage with any more specificity than the nearest whole number mile, 
then there would be no need to modify the current procedure for billing 
fractional mileage. In that case, providers and suppliers would 
continue to report mileage as whole numbers since they could measure no 
more accurately than that. However, both analog and digital motor 
vehicle odometers are designed to measure mileage accurately to within 
a minimum of a tenth of a mile. While we found that some vehicle 
odometers measure mileage more accurately than a tenth of a mile, most 
odometers are accurate to the nearest tenth of a mile. Additionally, 
aircraft geographic positioning system (GPS) technology provides the 
means to accurately determine billable mileage to the tenth of a mile.
    Third, we considered whether a policy of billing fractional units 
would be applicable to any other service besides ambulance mileage. The 
units of service field on both the electronic and paper claim is used 
to report the quantity of services or supplies provided to Medicare 
beneficiaries and is used to report a wide range of services and 
supplies including, but not limited to: Number of office visits; 
anesthesia minutes; quantity of drugs administered; covered miles. 
Although Medicare currently makes payment based on fractional units for 
some services (for example, calculation of payment after conversion of 
anesthesia time reported in minutes to time units), there is currently 
no requirement that providers bill fractional units on the claim. If we 
were to implement a policy of requiring reporting of fractional units 
for other types of services or supplies we would first need to evaluate 
whether it is possible to do so considering industry standards of 
measurement. As previously discussed, providers and suppliers of 
ambulance services have the capability to determine fractional mileage 
using standard onboard equipment, that is, an odometer, GPS, and/or 
other similar equipment used to measure distance traveled. This would 
enable us to readily implement a fractional unit billing policy for 
ambulance mileage; whereas applicability to other areas (such as 
anesthesia, drugs, etc.) would require more analysis to determine 
whether a fractional unit billing policy is feasible, efficacious, and 
cost effective. Additionally, this issue was first raised by ambulance 
suppliers who were concerned about overbilling and being overpaid by 
Medicare. Therefore, we believe it is most reasonable to first address 
the area where concerns have been raised (that is, ambulance mileage) 
and consider applicability of this procedure to other types of services 
and items in the future.
    Finally, and perhaps most importantly, we considered that our 
claims processing system should be configured to process claims as 
accurately as possible so as to provide for more accurate payments and 
to safeguard Medicare dollars. As previously discussed, ambulance 
providers and suppliers currently have the capability to measure 
mileage accurately to within a minimum of a tenth of a mile using 
devices (for example, odometers, GPS technology, etc.) already equipped 
onboard their vehicles. We believe that requiring ambulance providers 
and suppliers to round (and report) fractional ambulance mileage up to 
the next tenth of a mile strikes a proper balance between ensuring that 
the claims processing system adjudicates a claim as accurately as the 
system will permit without unduly burdening the ambulance community.
    Based on all of the above considerations, we have decided that our 
claims processing instructions for submission of claims for ambulance 
mileage should be revised to reflect the current functionality of our 
claims processing systems so as to maximize the accuracy of claims 
payment, as further discussed below in this section.

[[Page 40161]]

c. Billing of Fractional Units for Mileage
    It is both reasonable and prudent that, in order to ensure accuracy 
of payment, we facilitate and allow submission of the most accurate 
information on all Medicare ambulance claims. Furthermore, since our 
claims processing systems are currently capable of accepting and 
processing fractional units of service, we believe that ambulance 
mileage should be billed to and paid by Medicare in fractional amounts 
to enhance payment accuracy. Based on all the considerations discussed 
above, we are proposing to require that claims for mileage submitted by 
ambulance providers and suppliers for an ambulance transport (ground 
and air) be billed in fractional units, by rounding up to the nearest 
tenth of a mile (with the exception discussed below). As discussed 
above, we believe that requiring ambulance providers and suppliers to 
round (and report) fractional mileage up to the next tenth of a mile 
would allow us to provide for more accurate claims payment without 
unduly burdening the ambulance community.
    Therefore, we are proposing that, effective for claims with dates 
of service on and after January 1, 2011, ambulance providers and 
suppliers would be required to report mileage rounded up to the nearest 
tenth of a mile for all claims for mileage totaling up to 100 covered 
miles. Providers and suppliers would submit fractional mileage using a 
decimal in the appropriate place (for example, 99.9). Since standard 
vehicle mileage (analog, digital, and GPS) is or can be calculated 
accurately to the nearest tenth of a mile, we are proposing that the 
mileage billed to Medicare by ambulance providers and suppliers be 
reported by rounding up to the next tenth of a mile.
    Although the electronic claim formats can accommodate fractional 
mileage when mileage is equal to or greater than 100 covered miles (for 
example, 100.0), the paper claim cannot. Because the Form CMS-1500 
paper claim currently only supports four characters (including the 
decimal point) in the units field (Item 24G), we also propose that 
mileage equal to or greater than 100 covered miles continue to be 
reported in whole number miles on both paper and electronic claims. We 
propose that providers and suppliers would round up fractional mileage 
to the next whole number for mileage that exceeds 100 covered miles and 
report the resulting whole number in the units' field. We would revise 
the instructions set forth in our Claims Processing Manual to reflect 
the revised procedures for submitting and paying claims for fractional 
ambulance.

C. Clinical Laboratory Fee Schedule: Signature on Requisition

    In the March 10, 2000 Federal Register, we published the ``Medicare 
Program; Negotiated Rulemaking: Coverage and Administrative Policies 
for Clinical Diagnostic Laboratory Services'' proposed rule (65 FR 
13082) announcing and soliciting comments on the results of our 
negotiated rulemaking committee tasked to establish national coverage 
and administrative policies for clinical diagnostic laboratory tests 
under Part B of Medicare. In our final rule published in the November 
23, 2001 Federal Register (66 FR 58788), we explained our policy on 
ordering clinical diagnostic laboratory services and amended Sec.  
410.32 to make our policy more explicit. Our regulation at Sec.  
410.32(a) states the requirement that ``[a]ll diagnostic x-ray tests, 
diagnostic laboratory tests, and other diagnostic tests must be ordered 
by the physician who is treating the beneficiary.'' In the November 23, 
2001 final rule, we added paragraph (d)(2) to Sec.  410.32 to require 
that the physician or qualified nonphysician practitioner (NPP) (that 
is, clinical nurse specialists, clinical psychologists, clinical social 
workers, nurse-midwives, nurse practitioners (NPs), and physician 
assistants (PAs)) who orders the service must maintain documentation of 
medical necessity in the beneficiary's medical record (66 FR 58809). In 
the preamble discussions to the March 10, 2000 proposed rule and 
November 23, 2001 final rule (65 FR 13089 and 66 FR 58802, 
respectively), we noted that ``[w]hile the signature of a physician on 
a requisition is one way of documenting that the treating physician 
ordered the test, it is not the only permissible way of documenting 
that the test has been ordered.'' In those preambles, we described the 
policy of not requiring physician signatures on requisitions for 
clinical diagnostic laboratory tests, but implicitly left in place the 
existing requirements for a written order to be signed by the ordering 
physician or NPP for clinical diagnostic laboratory tests, as well as 
other types of diagnostic tests. We further stated in the preambles of 
the proposed and final rules that we would publish an instruction to 
Medicare contractors clarifying that the signature of the ordering 
physician is not required for Medicare purposes on a requisition for a 
clinical diagnostic laboratory test (65 FR 13089 and 66 FR 58802).
    On March 5, 2002, we published a program transmittal implementing 
the administrative policies set forth in the final rule, including the 
following instruction: ``Medicare does not require the signature of the 
ordering physician on a laboratory service requisition. While the 
signature of a physician on a requisition is one way of documenting 
that the treating physician ordered the service, it is not the only 
permissible way of documenting that the service has been ordered. For 
example, the physician may document the ordering of specific services 
in the patient's medical record.'' (Transmittal AB-02-030, Change 
Request 1998, dated March 5, 2002).
    On January 24, 2003, we published a program transmittal in order to 
manualize the March 5, 2002 Transmittal. (Transmittal 1787, Change 
Request 2410, dated January 24, 2003). The cover note to the 
transmittal states, ``Section 15021, Ordering Diagnostic Tests, 
manualizes Transmittal AB-02-030, dated March 5, 2002. In accordance 
with negotiated rulemaking for outpatient clinical diagnostic 
laboratory services, no signature is required for the ordering of such 
services or for physician pathology services.'' In the manual 
instructions in that transmittal in a note, we stated: ``No signature 
is required on orders for clinical diagnostic services paid on the 
basis of the physician fee schedule or for physician pathology 
services.'' The manual instructions did not explicitly reference 
clinical diagnostic laboratory tests as the cover note did. Rather, the 
transmittal seemed to extend the policy set forth in the Federal 
Register (that no signature is required on requisitions for clinical 
diagnostic laboratory tests paid under the Clinical Laboratory Fee 
Schedule (CLFS)) to also apply to clinical diagnostic tests paid on the 
basis of the Physician Fee Schedule (PFS) and physician pathology 
services. In addition, the manual instructions used the term ``order'' 
instead of ``requisition,'' which some members of the industry have 
asserted caused confusion.
    When we transitioned from paper manuals to the current electronic 
Internet Only Manual system, these manual instructions were 
inadvertently omitted from the new Benefit Policy Manual (BPM).
    In August 2008, we issued a program transmittal (Transmittal 94, 
Change Request 6100, dated August 29, 2008) to update the BPM to 
incorporate language that was previously contained in section 15021 of 
the Medicare Carriers Manual. The reissued language states, ``No 
signature is required on orders for clinical diagnostic tests paid on 
the basis of the clinical laboratory fee schedule, the physician fee 
schedule, or

[[Page 40162]]

for physician pathology services.'' Based on further review, we have 
determined that there are no clinical diagnostic laboratory tests paid 
under the PFS. After Transmittal 94 was published, we received numerous 
inquiries from laboratory, diagnostic testing, and hospital 
representatives who had questions about whether the provision applied 
to all diagnostic services, including x-rays, MRIs, and other 
nonclinical laboratory fee schedule diagnostic services.
    To resolve any existing confusion surrounding the implementation of 
the policy in 2001 and subsequent transmittals, we restated and 
solicited public comments on our policy in the CY 2010 PFS proposed 
rule (74 FR 33641). Our current policy is that a physician's signature 
is not required on a requisition for clinical diagnostic laboratory 
tests paid on the basis of the CLFS; however, it must be evident, in 
accordance with our regulations at Sec.  410.32(d)(2) and (3), that the 
physician ordered the services.
    We note that we solicited and received comments on this signature 
requirement during the notice and comment period for the March 10, 2000 
proposed rule in the context of our proposal to add paragraph (d)(2)(i) 
to Sec.  410.32 to require that the practitioner who orders a 
diagnostic laboratory test must maintain documentation of medical 
necessity in the beneficiary's medical record. The majority of comments 
supported the adoption of a policy that the signature of the 
practitioner on a requisition for a clinical diagnostic laboratory test 
paid under the CLFS is not the only way of documenting that the test 
has been ordered and, thus, should not be required provided such 
documentation exists in an alternate form.
    This policy regarding requisitions for clinical diagnostic 
laboratory tests does not supersede other applicable Medicare 
requirements (such as those related to hospital Conditions of 
Participation (CoPs)) which require the medical record to include an 
order signed by the physician who is treating the beneficiary. Nor do 
we believe that anything in our policy regarding signatures on 
requisitions for clinical diagnostic laboratory tests supersedes other 
requirements mandated by professional standards of practice or 
obligations regarding orders and medical records promulgated by 
Medicare, the Joint Commission, or State law; nor do we believe the 
policy would require providers to change their business practices.
    We also restated and solicited public comment on our long-standing 
policy consistent with the principle in Sec.  410.32(a) that a written 
order for diagnostic tests including those paid under the CLFS and 
those that are not paid under the CLFS (for example, that are paid 
under the PFS or under the OPPS), such as X-rays, MRIs, and the TC of 
physician pathology services, must be signed by the ordering physician 
or NPP. That is, the policy that signatures are not required on 
requisitions for clinical diagnostic laboratory tests paid based on the 
CLFS applies only to requisitions (as opposed to written orders) (74 FR 
33642).
    Additionally, we solicited public comments about the distinction 
between an order and a requisition (74 FR 33642). We note that an 
``order'' as defined in our IOM, 100-02, Chapter 15, Section 80.6.1, is 
a communication from the treating physician/practitioner requesting 
that a diagnostic test be performed for a beneficiary. The order may 
conditionally request an additional diagnostic test for a particular 
beneficiary if the result of the initial diagnostic test ordered yields 
to a certain value determined by the treating physician/practitioner 
(for example, if test X is negative, then perform test Y). As set forth 
in the CY 2010 MPFS final rule (FR 74 61930), an order may be delivered 
via any of the following forms of communication:
     A written document signed by the treating physician/
practitioner, which is hand-delivered, mailed, or faxed to the testing 
facility.
     A telephone call by the treating physician/practitioner or 
his or her office to the testing facility.
     An electronic mail, or other electronic means, by the 
treating physician/practitioner or his or her office to the testing 
facility.
    If the order is communicated via telephone, both the treating 
physician/practitioner, or his or her office, and the testing facility 
must document the telephone call in their respective copies of the 
beneficiary's medical records.
    In the proposed rule (74 FR 33642), we defined a ``requisition'' as 
the actual paperwork, such as a form, which is provided to a clinical 
diagnostic laboratory that identifies the test or tests to be performed 
for a patient. It may contain patient information, ordering physician 
information, referring institution information, information about where 
to send reports, billing information, specimen information, shipping 
addresses for specimens or tissue samples, and checkboxes for test 
selection. We believe it is ministerial in nature, assisting 
laboratories with billing and handling of results, and serves as an 
administrative convenience to providers and patients. We believe that a 
written order, which may be part of the medical record, and the 
requisition are two different documents, although a requisition that is 
signed may serve as an order. We welcomed comments from the public 
about the distinction between requisitions and orders.
    During the proposed and final rulemaking process for CY 2010, we 
received numerous comments on these issues, including, among others: 
Expressions of continued confusion over the difference between an 
``order'' and a ``requisition''; requests that CMS develop a single 
policy for all outpatient laboratory services, without the distinction 
for those paid under the CLFS or the PFS; and concerns about reference 
laboratory technicians who felt compelled to perform a test in order to 
protect the viability of the specimen although they did not have the 
proper documentation. See 74 FR 61930-32 for a complete discussion of 
the comments received and responses to these issues. In the CY 2010 PFS 
final rule with comment period (74 FR 61931), we stated that, in light 
of the issues and concerns raised during the comment period, and our 
desire to create policy that will address the concerns in a meaningful, 
clear and thoughtful way, we would continue to carefully consider the 
issues of physician signatures on requisitions and orders and that we 
plan to revisit these issues in the future paying particular attention 
to the definitions of order and requisition.
    Since the publication of the CY 2010 PFS final rule with comment 
period, we have considered an approach that would address the concerns 
raised. We are proposing to require a physician's or NPP's signature on 
requisitions for clinical diagnostic laboratory tests paid on the basis 
of the CLFS.
    We believe that this policy would result in a less confusing 
process. We believe that it would be less confusing because a 
physician's signature would then be required for all requisitions and 
orders, eliminating uncertainty over whether the documentation is a 
requisition or an order, whether the type of test being ordered 
requires a signature, or which payment system does or does not require 
a physician or NPP signature. We also believe that it would not 
increase the burden on physicians because it is our understanding that, 
in most instances, physicians are annotating the patient's medical 
record with either a signature or an initial (the ``order''), as well 
as providing a signature on the paperwork that is provided to the 
clinical diagnostic laboratory that identifies the

[[Page 40163]]

test or tests to be performed for a patient (the ``requisition'') as a 
matter of course. Further, this policy would make it easier for the 
reference laboratory technicians to know whether a test is 
appropriately requested, and potential compliance problems would be 
minimized for laboratories during the course of a subsequent Medicare 
audit because a signature would be consistently required. As already 
discussed, this minimizes confusion and provides a straightforward 
directive for laboratories to meet.
    We welcome comments on this proposal.

D. Discussion of Chiropractic Services Demonstration

    Section 651 of MMA requires the Secretary to conduct a 2-year 
demonstration to evaluate the feasibility and advisability of expanding 
coverage for chiropractic services under Medicare. Medicare coverage 
for chiropractic services is limited to manual manipulation of the 
spine to correct a subluxation described in section 1861(r)(5) of the 
Act. The demonstration expanded current Medicare coverage to include 
``care for neuromusculoskeletal conditions typical among eligible 
beneficiaries and diagnostic and other services that a chiropractor is 
legally authorized to perform by the State or jurisdiction in which 
such treatment is provided'' and was conducted in four geographically 
diverse sites, two rural and two urban regions, with each type 
including a Health Professional Shortage Area (HPSA). The two urban 
sites were 26 counties in Illinois and Scott County, Iowa, and 17 
counties in Virginia. The two rural sites were the States of Maine and 
New Mexico. The demonstration, which ended on March 31, 2007, was 
required to be budget neutral as section 651(f)(1)(B) of MMA mandates 
the Secretary to ensure that ``the aggregate payments made by the 
Secretary under the Medicare program do not exceed the amount which the 
Secretary would have paid under the Medicare program if the 
demonstration projects under this section were not implemented.''
    In the CY 2006, 2007, and 2008 PFS final rules with comment period 
(70 FR 70266, 71 FR 69707, 72 FR 66325, respectively), we included a 
discussion of the strategy that would be used to assess budget 
neutrality (BN) and the method for adjusting chiropractor fees in the 
event the demonstration resulted in costs higher than those that would 
occur in the absence of the demonstration. We stated BN would be 
assessed by determining the change in costs based on a pre-post 
comparison of Medicare costs for beneficiaries in the demonstration and 
their counterparts in the control groups and the rate of change for 
specific diagnoses that are treated by chiropractors and physicians in 
the demonstration sites and control sites. We also stated that our 
analysis would not be limited to only review of chiropractor claims 
because the costs of the expanded chiropractor services may have an 
impact on other Medicare costs.
    In the CY 2010 PFS final rule with comment period (74 FR 61926), we 
discussed the evaluation of this demonstration conducted by Brandeis 
University and the two sets of analyses used to evaluate budget 
neutrality. In the ``All Neuromusculoskeletal Analysis,'' which 
compared the Medicare costs of all beneficiaries who received services 
for a neuromusculoskeletal condition in the demonstration areas with 
those of beneficiaries with similar characteristics from similar 
geographic areas that did not participate in the demonstration, the 
total effect of the demonstration to Medicare was $114 million. In the 
``Chiropractic User Analysis,'' which compared the Medicare costs of 
beneficiaries who used expanded chiropractic services to treat a 
neuromusculoskeletal condition in the demonstration areas, with those 
of beneficiaries with similar characteristics who used chiropractic 
services as currently covered by Medicare to treat a 
neuromusculoskeletal condition from similar geographic areas that did 
not participate in the demonstration, the total effect of the 
demonstration to Medicare was $50 million.
    As explained in the CY 2010 PFS final rule, we based the BN 
estimate on the ``Chiropractic User Analysis'' because of its focus on 
users of chiropractic services rather than all Medicare beneficiaries 
with neuromusculoskeletal conditions, including those who did not use 
chiropractic services and who would not have become users of 
chiropractic services even with expanded coverage for them (74 FR 61926 
through 61927). Users of chiropractic services are most likely to have 
been affected by the expanded coverage provided by this demonstration. 
Cost increases and offsets, such as reductions in hospitalizations or 
other types of ambulatory care, are more likely to be observed in this 
group.
    As explained in the CY 2010 PFS final rule (74 FR 61927), because 
the costs of this demonstration were higher than expected and we did 
not anticipate a reduction to the PFS of greater than 2 percent per 
year, we finalized a policy to recoup $50 million in expenditures from 
this demonstration over a 5-year period, that is, CYs 2010 through 2014 
(74 FR 61927). Specifically, we are recouping $10 million for each such 
year through adjustments to the chiropractic CPT codes. Payment under 
the PFS for these codes will be reduced by approximately 2 percent. We 
believe that spreading this adjustment over a longer period of time 
will minimize its potential negative impact on chiropractic practices.
    We are continuing the implementation of the required budget 
neutrality adjustment by recouping $10 million in CY 2011. Our Office 
of the Actuary estimates chiropractic expenditures in CY 2011 to be 
approximately $524 million based on actual Medicare spending for 
chiropractic services for the most recent available year. To recoup $10 
million in CY 2011, the payment amount under the PFS for the 
chiropractic CPT codes (that is, CPT codes 98940, 98941, and 98942) 
will be reduced by approximately 2 percent. We are reflecting this 
reduction only in the payment files used by the Medicare contractors to 
process Medicare claims rather than through adjusting the RVUs. 
Avoiding an adjustment to the RVUs would preserve the integrity of the 
PFS, particularly since many private payers also base payment on the 
RVUs.

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

    Since August 1, 1983, payment for dialysis services furnished by 
ESRD facilities has been based on a composite rate payment system that 
provides a fixed, prospectively determined amount per dialysis 
treatment, adjusted for geographic differences in area wage levels. The 
composite rate is designed to cover a package of goods and services 
needed to furnish dialysis treatments that include, but not be limited 
to, certain routinely provided drugs, laboratory tests, supplies, and 
equipment. Unless specifically included in the composite rate, other 
injectable drugs and laboratory tests medically necessary for the care 
of patients on dialysis are separately billable.
    Other than periodic updates, there were no significant changes to 
the composite rate payment system until the implementation of the basic 
case-mix adjusted composite rate payment system beginning January 1, 
2005. The Congress has enacted a number of adjustments to the composite 
rate since that time. As a result of the July 15, 2008 enactment of 
MIPPA, we are required to implement an end-stage renal disease (ESRD)

[[Page 40164]]

bundled prospective payment system effective January 1, 2011 (referred 
to as the ``ESRD PPS''). Below we briefly discuss the ESRD PPS, the 
basic case-mix composite payment system, as well as our proposed 
updates to the composite rate portion of the blended payment for CY 
2011.
a. MIPPA--The ESRD PPS
    On September 29, 2009, we published in the Federal Register a 
proposed rule entitled ``End-Stage Renal Disease Prospective Payment 
System'' (74 FR 49922). In that rule, we proposed to implement a case-
mix adjusted bundled PPS for renal dialysis services beginning January 
1, 2011, in accordance with the statutory provisions set forth in 
section 153(b) of MIPPA. The ESRD PPS would replace the current basic 
case-mix adjusted composite payment system and the methodologies for 
the reimbursement of separately billable outpatient ESRD services.
    As explained in the ESRD PPS proposed rule (74 FR 50019), section 
1881(b)(14)(E)(i) of the Act requires a 4-year transition (phase-in) 
from the current composite payment system to the ESRD PPS, and section 
1881(b)(14)(E)(ii) of the Act allows ESRD facilities to make a one-time 
election to be excluded from the transition. Electing to be excluded 
from the 4-year transition means that the ESRD facility receives 
payment for renal dialysis services based on 100 percent of the payment 
rate established under the ESRD PPS, rather than a blended rate under 
each year of the transition based in part on the payment rate under the 
current payment system and in part on the payment rate under the ESRD 
PPS. As of January 1, 2011, ESRD facilities that elect to go through 
the transition would be paid in the first year a blended amount that 
will consist of 75 percent of the basic case-mix adjusted composite 
payment system and the remaining 25 percent would be based on the ESRD 
PPS payment. Thus, we must continue to update the basic case-mix 
composite payment system for purposes of determining the composite rate 
portion of the blended payment amount during the ESRD PPS 4-year 
transition (CYs 2011 through 2013.) Accordingly, in this proposed rule, 
we are proposing the composite rate portion of the blend, which 
includes an update to the drug add-on and the application of the wage 
index, as well as the payment amount for the first-year (CY 2011) of 
the ESRD PPS transition. We anticipate that the final rule for the ESRD 
PPS will be published this summer.
b. Medicare Modernization Act (MMA)--The Basic Case-Mix Adjusted 
Composite Payment System
    Section 623 of the MMA amended section 1881 of the Act to require 
changes to the composite rate payment methodology, as well as to the 
pricing methodology for separately billable drugs and biologicals 
furnished by ESRD facilities. Section 1881(b)(12) of the Act, as added 
by section 623(d) of the MMA, requires the establishment of a basic 
case-mix adjusted composite payment system that includes services 
comprising the composite rate and an add-on to the composite rate 
component to account for the difference between current payments for 
separately billed drugs and the revised drug pricing specified in the 
statute. In addition, section 1881(b)(12)(A) of the Act requires that 
the composite rate be adjusted for a number of patient characteristics 
(case-mix) and section 1881(b)(12)(D) of the Act gives the Secretary 
discretion to revise the wage indices and the urban and rural 
definitions used to develop them. Finally, section 1881(b)(12)(E) of 
the Act imposed a budget neutrality (BN) requirement, so that aggregate 
payments under the basic case-mix adjusted composite payment system 
equal the aggregate payments for the same period if section 1881(b)(12) 
of the Act did not apply.
1. CY 2005 Revisions
    In the CY 2005 PFS final rule with comment period (69 FR 66319 
through 66334), we implemented section 1881(b)(12) of the Act, as added 
by section 623 of the MMA, and revised payments to ESRD facilities. 
These revisions that were effective January 1, 2005, included an update 
of 1.6 percent to the composite rate component of the payment system; a 
drug add-on adjustment of 8.7 percent to the composite rate to account 
for the difference between pre-MMA payments for separately billable 
drugs and payments based on revised drug pricing for 2005 which used 
acquisition costs.
    Also, to implement section 1881(b)(13) of the Act, we revised 
payments for drugs billed separately by independent ESRD facilities, 
paying for the top 10 ESRD drugs based on acquisition costs (as 
determined by the OIG) and for other separately billed drugs at the 
average sales price +6 percent (ASP+6).
    In addition, effective April 1, 2005, we implemented the case-mix 
adjustments to the composite rate for certain patient characteristics 
(that is, age, low body mass index, and body surface area). For further 
explanation of the development of the basic case-mix adjusted composite 
payment system, see the CY 2005 PFS final rule with comment period (69 
FR 66319 through 66334).
2. CY 2006 Revisions
    In the CY 2006 PFS final rule with comment, we implemented 
additional revisions to payments to ESRD facilities required under 
section 623 of the MMA. We revised the drug payment methodology 
applicable to drugs furnished by ESRD facilities. Effective January 1, 
2006, all separately billed drugs and biologicals furnished by both 
hospital-based and independent ESRD facilities were paid based on ASP+6 
percent. The drug add-on adjustment was updated to 14.5 percent to 
reflect the expected growth in expenditures for separately billable 
drugs in CY 2006.
    We also implemented a revised geographic adjustment authorized by 
section 1881(b)(12)(D) of the Act. This adjustment revised the labor 
market areas to incorporate the Core-Based Statistical Area (CBSA) 
designations established by the Office of Management and Budget (OMB) 
by providing a 4-year transition from the previous wage-adjusted 
composite rates. Effective January 1, 2006, 25 percent of the payment 
was based on the revised geographic adjustments, and the remaining 75 
percent of payment was based on the metropolitan statistical area-based 
(MSA-based) adjustments. Other adjustments included the elimination of 
the wage index ceiling, and reducing the wage index floor to 0.8500, as 
well as a revised labor portion of the composite rate to which the 
geographic adjustment is applied.
    In addition, section 5106 of the DRA (Pub. L. 109-171) provided for 
a 1.6 percent update to the composite rate component of the basic case-
mix adjusted composite payment system, effective January 1, 2006. For 
further explanation of the revisions to the basic case-mix adjusted 
composite payment system, see the CY 2006 PFS final rule with comment 
period (70 FR 70161 through 70771).
3. CY 2007 Revisions
    In the CY 2007 PFS final rule with comment period, we implemented a 
method to annually calculate the growth update to the drug add-on 
adjustment required by section 1881(b)(12) of the Act, as well as a 
growth update of 0.5 percent to the drug add-on adjustment. Also, 
section 103 of the MIEA-TRHCA (Pub. L. 109-432) established a 1.6 
percent update to the composite rate portion of the payment system, 
effective

[[Page 40165]]

April 1, 2007. The effect of this increase in the composite rate was a 
reduction in the drug add-on adjustment to 14.9 percent, effective 
April 1, 2007. As a result, the drug add-on adjustment to the composite 
rate increased from 14.5 to 15.1 percent. Since we compute the drug 
add-on adjustment as a percentage of the weighted average base 
composite rate, increases in the composite rate portion of the payment 
reduce the drug add-on percentage.
    We provided an update to the wage index adjustments to reflect the 
latest hospital wage data, including a BN adjustment factor. We also 
implemented the second year of the transition to the CBSA-based wage 
index, where 50 percent of the payment was based on the CBSA-based 
geographic adjustments, and the remaining 50 percent of payment was 
based on the MSA-based adjustments. In addition, we reduced the wage 
index floor 0.85 to 0.80.
    For further explanation of the development of the basic case-mix 
adjusted composite payment system, see the CY 2007 PFS final rule with 
comment period (71 FR 69681 through 69688).
4. CY 2008 Revisions
    In the CY 2008 PFS final rule with comment period (72 FR 66280), we 
implemented a growth update to the drug add-on adjustment of 0.5 
percent. As a result, the drug add-on adjustment to the composite 
payment rate increased from 14.9 percent to 15.5 percent. In addition, 
we updated the wage index adjustments to reflect the latest hospital 
wage data, including a wage index BN adjustment of 1.055473 to the wage 
index for CY 2008, and finally, for CY 2008, we implemented the third 
year of the transition to the CBSA-based wage index, where 75 percent 
of the payment was based on the the CBSA-based adjustments and the 
remaining 25 percent of payment was based on the MSA-based adjustments. 
In addition, we reduced the wage index floor from 0.80 to 0.75.
5. CY 2009 Revisions
    For CY 2009, section 153(a) of the MIPPA updated sections 
1881(b)(12)(G) and 1881(b)(12)(A) of the Act to revise payments to ESRD 
facilities effective for services furnished on or after January 1, 2009 
and January 1, 2010. The revisions included an update of 1 percent to 
the composite rate, and the establishment of a site neutral composite 
rate to both hospital-based and independent dialysis facilities that 
reflects the labor share applicable to independent dialysis facilities 
(53.711). The 1 percent increase to the independent dialysis facility's 
CY 2008 composite rate of $132.49 resulted in a CY 2009 base composite 
rate for hospital-based and independent dialysis facilities of $133.81. 
The one percent increase in the composite rate portion of the payment 
system effective January 1, 2009, reduced the drug add-on adjustment 
from 15.5 to 15.2 percent.
    Also, we updated the wage index adjustments to reflect the latest 
available wage data, including a wage index BN adjustment of 1.056672 
to the wage index for CY 2009. Finally, we completed the 4-year 
transition to the CBSA-based geographic adjustments and reduced the 
wage index floor from 0.7500 to 0.700. For further detail, regarding 
the ESRD provisions, see the 2008 PFS final rule with comment period 
(73 FR 61921 through 61926).
6. CY 2010 Revisions
    For CY 2010, we updated the case-mix adjusted composite rate 
payment system by updating the drug add-on component of the composite 
rate system, as well as the wage index values used to adjust the labor 
component of the composite rate. Specifically, to update the drug add-
on adjustment, we conducted a trend analysis of CY 2006 through 2008, 
we implemented a zero growth update to the drug add-on adjustment to 
the composite rates for 2010 required by section 1881(b)(12)(F) of the 
Act.
    Also, section 1881(b)(12)(G)(iv) of the Act, as added by section 
153(a)(1) of the MIPPA, increased the composite rate by 1.0 percent for 
ESRD services furnished on or after January 1, 2010. The 1.0 percent 
increase resulted in a base composite rate of $135.15 per treatment and 
reduced the drug add-on adjustment from 15.2 to 15.0 percent.
    Lastly, we updated the wage index to reflect the latest available 
wage data, including a revised BN adjustment factor of 1.057888. We 
applied a reduction to the wage index floor from 0.700 to 0.6500.
    For further detail, regarding the ESRD provisions, see the 2009 
final rule with comment period (74 FR 33634 through 33639).
7. CY 2011 Proposals
    For purposes of establishing the composite rate portion of the 
blended payments under the ESRD PPS for those facilities electing to go 
through the transition in CY 2011, CMS is proposing the following:
     An update to the drug add-on adjustment to the composite 
rate, using a refined methodology for projecting growth in drug 
expenditures; and
     An update to the wage index adjustment to reflect the 
latest available wage data, including a revised BN adjustment.
     A reduction in the ESRD wage index floor from 0.6500 to 
0.600.
8. The Affordable Care Act
    Section 1881(b)(14)(F) of the Act, as added by section 153(b) of 
MIPPA and amended by section 3401(h) of ACA, governs the ESRD market 
basket increase factor (that is, the ESRD market basket). As explained 
in the ESRD PPS proposed rule (74 FR 4997), we described how the ESRD 
Bundled market basket would be used to update the composite rate 
portion of the ESRD payments during the PPS transition.
    Ordinarily in updating the composite payment system, we discuss any 
updates to the composite rate. However, beginning in 2011, the 
composite payment would be used as part of the blended payments during 
the ESRD PPS transition. Since the publication of the ESRD PPS proposed 
rule, and as explained in the ESRD PPS final rule, which we anticipate 
will be published this summer, we interpret this provision as requiring 
that the composite rate portion of the blended payment amount be 
increased in CY 2011 by the ESRD market basket percentage increase 
factor (the ``ESRD market basket'').
    For purposes of this proposed rule, for CY 2011, we anticipate an 
estimate of a 2.5 percent increase to the ESRD composite rate portion 
of the blended payment amount, resulting in a CY 2011 composite rate of 
$138.53 ($135.15*1.025). This 2.5 percent increase does not apply to 
the drug add-on adjustment to the composite rate. Also, we note that 
the drug add-on percentage would be reduced from 15.0 to 14.7 as a 
result of the proposed increase to the composite rate in CY 2011. (A 
detailed explanation of the reduction to the drug add-on adjustment is 
discussed below).
9. Proposed Update to the Drug Add-on Adjustment to the Composite Rate
a. Estimating Growth in Expenditures for Drugs and Biologicals in CY 
2011
    Section 1881(b)(12)(F) of the Act specifies that the drug add-on 
increase must reflect ``the estimated growth in expenditures for drugs 
and biologicals (including erythropoietin) that are separately billable 
* * *.'' By referring to ``expenditures,'' we believe the statute 
contemplates that the update would account for both increases in drug 
prices, as well as increases in utilization of those drugs.
    Since we now have 4 years of drug expenditure data based on ASP 
pricing,

[[Page 40166]]

we propose to continue estimating growth in drug expenditures based on 
the trends in available data. Therefore, for CY 2011, we are proposing 
to use trend analysis from drug expenditure data to update the per 
treatment drug add-on adjustment. We then removed growth in enrollment 
for the same time period from the expenditure growth so that the 
residual reflects per patient expenditure growth (which includes price 
and utilization combined).
    We further propose to use the per patient growth update to the drug 
add-on adjustment for CY 2011. To estimate drug expenditure growth 
using trend analysis, we looked at the average annual growth in total 
drug expenditures between 2006 and 2009. First, we estimated the total 
drug expenditures for all ESRD facilities in CY 2009. For this proposed 
rule, we used the final CY 2006, through CY 2008 ESRD claims data and 
the latest available CY 2009 ESRD facility claims, updated through 
December 31, 2009 (that is, claims with dates of service from January 1 
through December 31, 2009, that were received, processed, paid, and 
passed to the National Claims History File as of December 31, 2009). 
For the CY 2011 PFS final rule, we plan to use additional updated CY 
2009 claims with dates of service for the same timeframe. This updated 
CY 2009 data file will include claims received, processed, paid, and 
passed to the National Claims History File as of June 30, 2010.
    While the CY 2009 claims file used in this proposed rule is the 
most current available, we recognize that it does not reflect a 
complete year, as claims with dates of service towards the end of the 
year have not all been processed. To more accurately estimate the 
update to the drug add-on, aggregate drug expenditures are required. 
Based on an analysis of the 2008 claims data, we are proposing to 
inflate the CY 2009 drug expenditures to estimate the June 30, 2010 
update of the 2009 claims file. We used the relationship between the 
December 2008 and the June 2009 versions of 2008 claims to estimate the 
more complete 2009 claims that will be available in June 2010 and 
applied that ratio to the 2009 claims data from the December 2009 
claims file. The net adjustment to the CY 2009 claims data is an 
increase of 12.22 percent to the 2009 expenditure data. This adjustment 
allows us to more accurately compare the 2008 and 2009 drug expenditure 
data to estimate per patient growth. As stated earlier in this section, 
we plan to use additional updated CY 2009 claims in the CY 2011 PFS 
final rule.
    Using the full-year 2009 drug expenditure figure, we calculated the 
average annual change in drug expenditures from 2006 through 2009. This 
average annual change showed an increase of 2.1 percent for this 
timeframe. We propose to use this 2.1 percent increase to project drug 
expenditures for both 2010 and 2011.
b. Estimating Per Patient Growth
    Once we had the projected growth in drug expenditures from 2010 to 
2011, which is what we believe that section 1881(b)(12)(F) of the Act 
requires us to use to update the drug add-on adjustment. To calculate 
the per patient growth between CYs 2010 and 2011, we removed the 
enrollment component by using the estimated growth in enrollment data 
between CY 2010 and CY 2011. This was approximately 3.6 percent. To do 
this, we divided the total drug expenditure change between 2010 and 
2011 (1.021) by enrollment growth of 3.6 percent (1.036) for the same 
timeframe. The result is a per patient growth factor equal to 0.986 
(1.021/1.036 = 0.986). Thus, we are projecting a 1.4 percent decrease 
in per patient growth in drug expenditures between 2010 and 2011.
c. Applying the Proposed Growth Update to the Drug Add-On Adjustment
    In CY 2006, we applied the projected growth update percentage to 
the total amount of drug add-on dollars established for CY 2005 to 
establish a dollar amount for the CY 2006 growth update. In addition, 
we projected the growth in dialysis treatments for CY 2006 based on the 
projected growth in ESRD enrollment. We divided the projected total 
dollar amount of the CY 2006 growth by the projected growth in total 
dialysis treatments to develop the per treatment growth update amount. 
This growth update amount, combined with the CY 2005 per treatment drug 
add-on amount, resulted in an average drug add-on amount per treatment 
of $18.88 (or a 14.5 percent adjustment to the composite rate) for CY 
2006.
    In the CY 2007 PFS final rule with comment period (71 FR 69684), we 
revised our update methodology by applying the growth update to the per 
treatment drug add-on amount. That is, for CY 2007, we applied the 
growth update factor of 4.03 percent to the $18.88 per treatment drug 
add-on amount for an updated amount of $19.64 per treatment (71 FR 
69684). For CY 2008, the per treatment drug add-on amount was updated 
to $20.33. In the CY 2009 and 2010 PFS final rule with comment period 
(73 FR 69755 through 69757 and 74 FR 61923), we applied a zero update 
to per treatment drug add-on amount which left it at $20.33. As 
discussed in detail below, for CY 2011, we are again proposing no 
update to the per treatment drug add-on amount of $20.33 established in 
CY 2008.
d. Proposed Update to the Drug Add-On Adjustment
    As discussed previously in this section, we estimate a 2.1 percent 
increase in drug expenditures between CY 2010 and CY 2011. Combining 
this reduction with a 3.6 percent increase in enrollment, as described 
above, we are projecting a 1.4 percent decrease in per patient growth 
of drug expenditures between CY 2010 and CY 2011. Therefore, we are 
projecting that the combined growth in per patient utilization and 
pricing for CY 2011 would result in a negative update equal to 0.2 
percent. However, similar to last year and as indicated above, we are 
proposing a zero update to the drug add-on adjustment. We believe this 
approach is consistent with the language under section 1881(b)(12)(F) 
of the Act which states in part that ``the Secretary shall annually 
increase'' the drug add-on amount based on the growth in expenditures 
for separately billed ESRD drugs. Our understanding of the statute 
contemplates ``annually increase'' to mean a positive or zero update to 
the drug add-on. Therefore, we propose to apply a zero update, and to 
maintain the $20.33 per treatment drug add-on amount for CY 2011.
e. Proposed Update to the Geographic Adjustments to the Composite Rate
    The purpose of the wage index is to adjust the composite rates for 
differing wage levels covering the areas in which ESRD facilities are 
located. The wage indexes are calculated for each urban and rural area.
    In addition, we generally have followed wage index policies related 
to these definitions as used under the inpatient hospital prospective 
payment system (IPPS), but without regard to any approved geographic 
reclassification authorized under sections 1886(d)(8) and (d)(10) of 
the Act or other provisions that only apply to hospitals paid under the 
IPPS (70 FR 70167). For purposes of the ESRD wage index methodology, 
the hospital wage data we use is pre-classified, pre-floor hospital 
data and unadjusted for occupational mix.
f. Proposed Updates to Core-Based Statistical Area (CBSA) Definitions
    In the CY 2006 PFS final rule with comment period (70 FR 70167), we 
announced our adoption of the OMB's

[[Page 40167]]

CBSA-based geographic area designations to develop revised urban/rural 
definitions and corresponding wage index values for purposes of 
calculating ESRD composite rates. The CBSA-based geographic area 
designations are described in OMB Bulletin 03-04, originally issued 
June 6, 2003, and is available online at http://www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB has published subsequent 
bulletins regarding CBSA changes, including changes in CBSA numbers and 
titles. We wish to point out that this and all subsequent ESRD rules 
and notices are considered to incorporate the CBSA changes published in 
the most recent OMB bulletin that applies to the hospital wage index 
used to determine the current ESRD wage index. The OMB bulletins may be 
accessed online at http://www.whitehouse.gov/omb/bulletins/index.html.
g. Updated Wage Index Values
    In the CY 2007 PFS final rule with comment period (71 FR 69685), we 
stated that we intended to update the ESRD wage index values annually. 
The ESRD wage index values for CY 2011 were developed from FY 2007 wage 
and employment data obtained from the Medicare hospital cost reports. 
As we indicated, the ESRD wage index values are calculated without 
regard to geographic classifications authorized under sections 
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data 
that is unadjusted for occupational mix. We propose to use the same 
methodology for CY 2011, with the exception that FY 2007 hospital data 
would be used to develop the CY 2011 wage index values. For a detailed 
description of the development of the proposed CY 2011 wage index 
values based on FY 2007 hospital data, see the FY 2011 IPPS proposed 
rule (75 FR 23944). Section III.G, of the preamble to the FY 2011 IPPS 
proposed rule, ``Method for Computing the Proposed FY 2011 Unadjusted 
Wage Index,'' describes the cost report schedules, line items, data 
elements, adjustments, and wage index computations. The wage index data 
affecting the ESRD composite rate for each urban and rural locale may 
also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage data are located in the 
section entitled, ``FY 2011 Proposed Rule Occupational Mix Adjusted and 
Unadjusted Average Hourly Wage and Pre-reclassified Wage Index by 
CBSA.''
i. Reduction to the ESRD Wage Index Floor
    In the CY 2010 PFS final rule with comment period, we stated our 
intention to continue to reassess the need for a wage index floor (74 
FR 61924). We also stated that a gradual reduction in the floor is 
needed to support continuing patient access to dialysis in areas that 
have low wage index values, especially in Puerto Rico where the wage 
index values are below the current wage index floor.
    In the ESRD PPS proposed rule (74 FR 49968), we stated our intent 
to continue to reduce the wage index floor to the composite rate during 
the transition. For CY 2011, we propose that the ESRD wage index floor 
would be reduced from 0.65 to 0.60.
j. Proposed Wage Index Values for Areas With No Hospital Data
    As discussed in the CY 2010 PFS final rule (74 FR 61925), and the 
ESRD PPS proposed rule (74 FR 49969) we have a methodology for 
identifying the small number of ESRD facilities in both urban and rural 
geographic areas where there are no hospital wage data from which to 
calculate ESRD wage index values. At that time those rules were 
published, the affected areas were rural Puerto Rico, and the urban 
area Hinesville-Fort Stewart, GA (CBSA 25980), and rural Massachusetts.
    In the case of Massachusetts, the entire rural area consists of 
Dukes and Nantucket Counties. We determined that the borders of Dukes 
and Nantucket counties are contiguous with CBSA 12700, Barnstable Town, 
MA, and CBSA 39300, Providence-New Bedford-Fall River, RI-MA. We intend 
to use the same methodology for CY 2011. Under this methodology, this 
results in a proposed CY 2011 wage index value of 1.3577 for the 
composite rate portion of the blend, and a wage index value of 1.2844 
for the ESRD PPS portion of the blend for Barnstable Town, MA (CBSA 
12700) and also results in a proposed CY 2011 wage index value of 
1.1343 for the composite rate portion of the blend, and a wage index 
value of 1.0731 for the ESRD PPS portion of the blend for (Providence-
New Bedford-Fall River, RI-MA (CBSA 39300). These averages result in an 
imputed proposed wage index value of 1.2460 for rural Massachusetts in 
CY 2011, for the composite rate portion of the blend, and a wage index 
value of 1.1788 for the ESRD PPS portion of the blend.
    For Hinesville-Fort Stewart, GA (CBSA 25980), which is an urban 
area without specific hospital wage data, we propose to apply the same 
methodology used to impute a wage index value that we used in CYs 2006 
through 2010. Specifically, we compute the average wage index value of 
all urban areas within the State of Georgia. This results in a CY 2011 
wage index value of 0.9465 for the composite rate portion of the blend, 
and a wage index value of 0.8954 for the ESRD PPS portion of the blend 
for Hinesville-Fort Stewart, GA (CBSA 25980).
    For CY 2011, there is an additional urban area--Anderson, SC--with 
no hospital data. For this urban area, Anderson, SC (CBSA 11340), we 
propose to use the same methodology we have used for the other urban 
area with no hospital data, that is, Hinesville-Fort Stewart, GA (CBSA 
25980). Under the methodology used for that area, we compute the 
average of all urban areas within the State of South Carolina. This 
approach would result in a CY 2011 wage index value of 0.9480 for the 
composite rate portion of the blend, and a wage index value of 0.8839 
for the ESRD PPS portion of the blend for the Anderson, SC CBSA (CBSA 
11340).
    For Puerto Rico, because all geographic areas in Puerto Rico were 
subject to the wage index floor in CYs 2006 through 2010, we applied 
the ESRD wage index floor to rural Puerto Rico as well. Therefore, for 
CY 2011, all urban areas in Puerto Rico that have a wage index are 
eligible for the ESRD wage index floor of 0.60. Currently there are no 
ESRD facilities located in rural Puerto Rico, however, should any 
facilities open in rural Puerto Rico, we intend to apply the CY 2011 
proposed wage index floor of 0.60 to facilities that are located in 
rural Puerto Rico. The proposed reduction to the wage index floor of 
0.60 remains higher than the actual wage index values for ESRD 
facilities located in Puerto Rico, which currently range from 0.3674 to 
0.4828. Also, in the CY 2010 PFS final rule with comment period (74 FR 
61925), we stated that we would continue to evaluate existing hospital 
wage data and possibly wage data from other sources such as the Bureau 
of Labor Statistics, to determine if other methodologies might be 
appropriate for imputing wage index values for areas without hospital 
wage data for CY 2011 and subsequent years. To date, no data from other 
sources, superior to that currently used in connection with the IPPS 
wage index has emerged. For ESRD purposes, we continue to believe this 
is an appropriate policy.
    Finally, for CY 2011, we are proposing to use the FY 2011 wage 
index data (collected from cost reports submitted by hospitals for cost 
reporting

[[Page 40168]]

periods beginning FY 2007) to compute the ESRD composite payment rates 
effective beginning January 1, 2011.
k. Budget Neutrality Adjustment
    We have previously interpreted the statute as requiring that the 
geographic adjustment be made in a budget neutral manner. Given our 
application of the ESRD wage index, this means that aggregate payments 
to ESRD facilities in CY 2011 would be the same as aggregate payments 
that would have been made if we had not made any changes to the 
geographic adjusters. We note that this BN adjustment only addresses 
the impact of changes in the geographic adjustments. A separate BN 
adjustment was developed for the case-mix adjustments required by the 
MMA.
    As we are not proposing any changes to the case-mix measures for CY 
2011, the current case-mix BN adjustment of 0.9116 would remain in 
effect for CY 2011. Consistent with prior rulemaking, For CY 2011, we 
propose to apply the wage-index BN adjustment factor of 1.057057 
directly to the ESRD wage index values to the composite rate portion of 
the blend. Because the ESRD wage index is only applied to the labor-
related portion of the composite rate, we computed the BN adjustment 
factor based on that proportion (53.711 percent).
    To compute the proposed CY 2011 wage index BN adjustment factor 
(1.057057), we used the FY 2007 pre-floor, pre-reclassified, non-
occupational mix-adjusted hospital data to compute the wage index 
values, 2009 outpatient claims (paid and processed as of December 31, 
2009), and geographic location information for each facility which may 
be found through Dialysis Facility Compare Web page on the CMS Web site 
at http://www.cms.hhs.gov/DialysisFacilityCompare/. The FY 2011 
hospital wage index data for each urban and rural locale by CBSA may 
also be accessed on the CMS Web site at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the 
section entitled, ``FY 2011 Proposed Rule Occupational Mix Adjusted and 
Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by 
CBSA.''
    Using treatment counts from the 2009 claims and facility-specific 
CY 2010 composite rates, we computed the estimated total dollar amount 
each ESRD provider would have received in CY 2010. The total of these 
payments became the target amount of expenditures for all ESRD 
facilities for CY 2011. Next, we computed the estimated dollar amount 
that would have been paid for the same ESRD facilities using the 
proposed ESRD wage index for CY 2011. The total of these payments 
becomes the new CY 2011 amount of wage-adjusted composite rate 
expenditures for all ESRD facilities.
    After comparing these two dollar amounts (target amount divided by 
the new CY 2011 amount), we calculated an adjustment factor that, when 
multiplied by the applicable CY 2011 ESRD wage index value, would 
result in aggregate payments to ESRD facilities that would remain 
within the target amount of composite rate expenditures. When making 
this calculation, the ESRD wage index floor value of 0.6000 is applied 
whenever appropriate. The proposed wage BN adjustment factor for CY 
2011 is 1.057057.
    To ensure BN, we also must apply the BN adjustment factor to the 
wage index floor of 1.057057 which results in an adjusted wage index 
floor of 0.6343 (0.6000 x 1.057057) for CY 2011. This budget neutrality 
factor is not applied to the wage index values for the ESRD PPS portion 
of the blend.
l. ESRD Wage Index Tables
    The CY 2011 ESRD proposed wage index tables are located in Addenda 
K and L of this proposed rule. The wage index tables lists two separate 
columns of wage index values. The first column lists the wage index 
values will be applied under the composite rate portion and includes 
the budget neutrality adjustment of 1057057. The second column lists 
the wage index values that will be applied under the ESRD PPS.

F. Issues Related to the Medicare Improvements for Patients and 
Providers Act of 2008 (MIPPA)

1. Section 131: Physician Payment, Efficiency, and Quality 
Improvements--Physician Quality Reporting Initiative (PQRI)
a. Program Background and Statutory Authority
    The Physician Quality Reporting Initiative (PQRI) is a voluntary 
reporting program, first implemented in 2007, that provides an 
incentive payment to identified EPs (EPs) who satisfactorily report 
data on quality measures for covered professional services furnished 
during a specified reporting period. We propose to add Sec.  414.90 to 
title 42 of the Code of Federal Regulations to implement the provisions 
of the PQRI discussed in this section of the proposed rule.
    Under section 1848(k)(3)(B) of the Act, the term ``EP'' means any 
of the following: (1) A physician; (2) a practitioner described in 
section 1842(b)(18)(C); (3) a physical or occupational therapist or a 
qualified speech-language pathologist; or (4) a qualified audiologist. 
The PQRI was first implemented in 2007 as a result of section 101 of 
Division B of the Tax Relief and Health Care Act of 2006--the Medicare 
Improvements and Extension Act of 2006 (Pub.L. 109-432) (MIEA-TRHCA), 
which was enacted on December 20, 2006. The PQRI was extended and 
further enhanced as a result of the Medicare, Medicaid, and SCHIP 
Extension Act of 2007 (Pub. L. 110-173) (MMSEA), which was enacted on 
December 29, 2007, and the MIPPA, which was enacted on July 15, 2008. 
Changes to the PQRI as a result of these laws, as well as information 
about the PQRI in 2007, 2008, 2009, and 2010 are discussed in detail in 
the CY 2008 PFS proposed and final rules (72 FR 38196 through 38204 and 
72 FR 66336 through 66353, respectively), CY 2009 PFS proposed and 
final rules (73 FR 38558 through 38575 and 73 FR 69817 through 69847, 
respectively), and CY 2010 PFS proposed and final rules (74 FR 33559 
through 33600 and 74 FR 61788 through 61861, respectively). Further 
detailed information, about the PQRI program, related laws, and help 
desk resources, is available on the CMS Web site at http://www.cms.gov/PQRI.
    The ACA makes a number of changes to the PQRI, including 
authorizing incentive payments through 2014, and requiring a penalty 
beginning in 2015 for EPs who do not satisfactorily report data on 
quality measures in the applicable reporting period for the year. The 
various provisions of the ACA, with respect to PQRI, are further 
discussed in sections VI.F.1.b., VI.F.1.k., and VI.F.1.l. of this 
proposed rule.
    Prior to the enactment of the ACA, PQRI incentive payments were 
only authorized through 2010. As discussed further in sections 
VI.F.1.b. and VI.F.1.l. below, under section 1848(m)(1)(A) of the Act, 
as amended by section 3002(a) of the ACA, PQRI incentive payments are 
extended through 2014 for EPs that satisfactorily report data on PQRI 
quality measures for the applicable reporting period. Section 
1848(m)(1)(B) of the Act, as amended by section 3002(a) of the ACA, 
authorizes a 1.0 percent incentive payment for program year 2011 and a 
0.5 percent incentive payment for program years 2012 through 2014 for 
qualified EPs who satisfactorily submit PQRI quality measures data. 
Beginning in 2015, an incentive payment adjustment will be implemented 
for EPs who do not satisfactorily report quality measures as required 
by section 1848(a)(8) of the Act

[[Page 40169]]

and added by section 3002(b) of the ACA.
    Section 3002(e) of the ACA amends section 1848(m)(5) of the Act to 
require the Secretary to provide timely feedback to EPs on the 
performance of the EP with respect to satisfactorily submitting data on 
quality measures. This is discussed further in section VI.F.1.l.(4) 
below.
    Section 3002(f)(2) amends section 1848(m)(5) of the Act by adding a 
requirement with respect to an informal appeals process. Specifically, 
section 1848(m)(5)(I) of the Act, as discussed further in section 
VI.F.1.l.(5) below, requries that the Secretary establish and have in 
place an informal process by January 1, 2011, whereby EPs may seek a 
review of the determination that an EP did not satisfactorily submit 
data on quality measures for purposes of qualifying for a PQRI 
incentive payment.
    Section 1848(m)(7) of the Act (``Additional Incentive Payment''), 
as added by section 10327(a) of the ACA, provides that for years 2011 
through 2014, the applicable quality percent under PQRI for EPs 
satisfactorily reporting PQRI quality measures data will be increased 
by 0.5 percentage points, if the EP also meets certain requirements, 
including satisfactorily reporting data on quality measures for a year 
and having such data submitted on their behalf through a Maintenance of 
Certification Program (MOCP) (as defined under section 1848(m)(7) of 
the Act) and participating in an MOCP practice assessment more 
frequently than is required to qualify for or maintain board 
certification status. Section 1848(m)(7) of the Act (``Additional 
Incentive Payment'') is discussed in more detail in section 
VI.F.1.l.(2). Furthermore, section 3002(c) of the ACA, as amended by 
section 10327(b) of the ACA authorizes the Secretary to incorporate 
participation and successful completion in an MOCP and successful 
completion of a qualified MOCP practice assessment into the composite 
of measures of quality of care furnished under the PFS payment 
modifier.
    Also discussed further in section VI.F.1.k. below, section 10331 of 
the ACA requires the Secretary to develop a Physician Compare Internet 
web site by January 1, 2011, on which information on physicians 
enrolled in the Medicare program and other EPs who participate in the 
PQRI program would be posted. With respect to measures collected under 
the PQRI program, to the extent practicable, the Secretary will 
implement a plan by January 1, 2013, to report 2012 PQRI information on 
the Physician Compare Web site.
    Finally, section 1848(m)(7) of the Act (``Integration of Physician 
Quality Reporting and EHR Reporting''), as added by section 3002 of the 
ACA requires that not later than January 1, 2012, the Secretary shall 
develop a plan to integrate reporting on quality measures under 
subsection (o) relating to the meaningful use of electronic health 
records (EHRs), as discussed further in section VI.F.1.l.(3) below.
b. Incentive Payments for the 2011 PQRI
    As stated above, for years 2011 through 2014, section 3002(a) of 
the ACA extends the opportunity for EPs to earn a PQRI incentive 
payment for satisfactorily reporting PQRI quality measures. For 2011 
PQRI, section 1848(m)(2)(B) of the Act, as amended by section 3002(a) 
of the ACA, authorizes a 1.0 percent incentive, and for 2012 through 
2014, a 0.5 percent incentive, for qualified EPs who satisfactorily 
submit PQRI quality measures data. Regardless of the reporting 
mechanism, and/or the associated reporting period (both discussed in 
detail below) an EP chooses to report quality data for purposes of 
PQRI, if the EP meets the respective criteria for satisfactory 
reporting, the EP may receive a 1.0 percent incentive.
    The PQRI incentive payment amount is calculated using estimated 
Medicare Part B PFS allowed charges for all covered professional 
services, not just those charges associated with the reported quality 
measures. ``Allowed charges'' refers to total charges, including the 
beneficiary deductible and coinsurance, and is not limited to the 80 
percent paid by Medicare or the portion covered by Medicare where 
Medicare is secondary payer. Amounts billed above the PFS amounts for 
assigned and non-assigned claims will not be included in the 
calculation of the incentive payment amount. In addition, since, by 
definition under section 1848(k)(3)(A) of the Act, ``covered 
professional services'' are limited to services for which payment is 
made under, or is based on, the PFS and which are furnished by an EP, 
other Part B services and items that may be billed by EPs, but are not 
paid under or based upon the Medicare Part B PFS, are not included in 
the calculation of the incentive payment amount.
    As mentioned above, we are proposing a number of reporting 
mechanisms that EPs may choose in order to participate in PQRI. Our 
proposals for claims-based reporting, registry-based reporting, and 
EHR-based reporting are discussed below with respect to the opportunity 
for individual EPs to participate in PQRI. For satisfactory reporting 
at the individual level in 2011, 1.0 percent of qualified charges would 
be paid at the TIN/NPI level. These proposed reporting mechanisms are 
addressed in section G.1.d. below. Our proposed criteria for 
satisfactorily reporting using the various reporting mechanisms are 
discussed in further detail in sections VI.F.1.e. and VI.F.1.f. below. 
Our proposals with respect to the reporting mechanisms and criteria for 
satisfactorily reporting for group practices are also addressed below, 
in section VI.F.1.g. Those group practices that satisfactorily report 
will also be paid a 1.0 percent incentive payment based upon the 
qualified charges for the group practice TIN.
c. Proposed 2011 Reporting Periods for Individual EPs
    Under section 1848(m)(6)(C) of the Act, the ``reporting period'' 
for the 2008 PQRI and subsequent years is defined to be the entire 
year, but the Secretary is authorized to revise the reporting period 
for years after 2009 if the Secretary determines such revision is 
appropriate, produces valid results on measures reported, and is 
consistent with the goals of maximizing scientific validity and 
reducing administrative burden. For the 2011 PQRI, we propose the 
following reporting periods: (1) 12-month reporting period for claims-
based reporting and registry-based reporting (that is, January 1, 2011 
through December 31, 2011); (2) 12-month reporting period for EHR-based 
reporting (that is, January 1, 2011 through December 31, 2011; and (3) 
6-month reporting period for claims-based reporting and registry-based 
reporting (that is, July 1, 2011 through December 31, 2011). 
Additionally, as discussed further below in their respective sections, 
we propose the 12-month reporting period for the group practice 
reporting option (GPRO) for both PQRI and the eRx Prescribing Incentive 
Program (January 1, 2011 through December 31, 2011).
    The proposed 2011 PQRI reporting periods are consistent with the 
2010 reporting periods. In addition, in prior program years, we 
received input from stakeholders in support of partial year reporting 
for all reporting mechanisms, to give more EPs the opportunity to begin 
reporting later in the year. We agree that having the same reporting 
periods for all mechanisms may be less complex, and may facilitate 
participation in 2011 PQRI for certain EPs. In an effort to be 
consistent with prior program years, and move in the direction of 
maintaining program

[[Page 40170]]

stability and continuing program flexibility, while increasing 
successful reporting of 2011 PQRI measures, we propose to retain 2010 
PQRI reporting periods as described above. We invite comments on the 
proposed reporting periods for 2011 PQRI.
d. Proposed 2011 PQRI Reporting Mechanisms for Individual EPs
    When the PQRI was first implemented in 2007, there was only 1 
reporting mechanism available to submit data on PQRI quality measures. 
For the 2007 PQRI, EPs had to submit quality data codes (QDCs) on 
Medicare Part B claims (claims-based reporting). QDCs are Current 
Procedural Terminology (CPT) Category II codes or G-codes (where CPT 
Category II codes are not yet available). CPT Category II codes and G-
codes are Healthcare Common Procedure Coding System (HCPCS) codes for 
reporting quality data. For the 2008 PQRI, we added registry-based 
reporting as an alternative reporting mechanism as required by section 
1848(k)(4) of the Act. Under this option, EPs may submit data on PQRI 
quality measures to a qualified PQRI registry and request the registry 
to submit PQRI quality measures results and numerator and denominator 
data on the 2008 PQRI quality measures or measures groups. For the 2009 
PQRI, we retained the 2 reporting mechanisms used in the 2008 PQRI 
(that is, claims-based reporting and registry-based reporting) for 
reporting individual PQRI quality measures and for reporting measures 
groups.
    Finally, to promote the adoption of EHRs, and to facilitate quality 
measure data reporting, we sought to establish an EHR reporting option 
by conducting limited testing of EHR reporting for the 2008 and 2009 
PQRI. This involved the submission of clinical quality data extracted 
from an EHR, or the EHR-based reporting mechanism. No incentive payment 
was available to those EPs who participated in testing the EHR-based 
reporting mechanism.
    For the 2010 PQRI, we retained the claims-based reporting 
mechanism, the registry-based reporting mechanism, and established EHR 
reporting for a limited subset of the 2010 PQRI quality measures, as 
identified in Table 14 of the CY 2010 PFS final rule with comment 
period (74 FR 61831), contingent upon the successful completion of our 
2009 EHR data submission testing process and a determination based on 
that testing process that accepting data from EHRs on quality measures 
for the 2010 PQRI was practical and feasible. In the 2010 PQRI, 
following the successful completion of the 2009 EHR data submission 
testing process, it was determined that it is practical and feasible to 
accept data from EHRs on quality measures for the 2010 PQRI.
    For the 2011 PQRI, we are proposing to retain the claims-based 
reporting mechanism and the registry-based reporting mechanism. We also 
propose to retain the 2010 EHR-based reporting mechanism, by which we 
will continue to accept quality measures data extracted from a 
qualified EHR product for a limited subset of the proposed 2011 PQRI 
quality measures, as identified in Tables 55 and 56. Under the 2011 
PQRI, we propose that the EHR submission is optional.
    For the 2011 PQRI, we are not proposing to offer additional 
reporting options for individual EPs beyond those discussed above. In 
contrast to prior program years (2008 PQRI, 2009 PQRI, and 2010 PQRI), 
we believe that other options would not facilitate reporting of quality 
data for PQRI by EPs. However, we seek public comment on these 
proposals and invite suggestions as to other options that could be 
included in the PQRI.
    We recognize that there continues to be a number of limitations 
associated with claims-based reporting since the claims processing 
system was developed for billing purposes and not for the submission of 
quality data. Claims submission, however, is available to all EPs. We 
have observed that only about half of those EPs who participated in 
PQRI via the claims-based reporting mechanism satisfied the criteria 
for satisfactory reporting (that is, reported at least 3 PQRI measures 
or 1-2 measures if there were fewer than 3 applicable measures, for at 
least 80 percent of the EP's Medicare Part B FFS patients for whom 
services were furnished during the reporting period to which the 
measure applies) and qualified for the incentive. We have also found 
that measures with complex specifications, such as those that require 
multiple diagnosis codes are not as conducive to claims-based reporting 
and may be associated with a greater number of invalidly reported QDCs. 
Similarly, when multiple measures share the same codes it may be 
difficult to determine which measure(s) the EP intended to report 
through claims. Finally, for pragmatic efficiency it is not practical 
to allow resubmission of claims for the sole purpose of adding QDCs. 
This means that claims-based reporting must be concurrent with billing.
    By contrast, our experience with the registry-based reporting 
mechanism continues to be a favorable option, as the drawbacks 
discussed above do not apply. Data has shown that not only have the 
participation rates for registry-based reporting increased, but also 
satisfactory reporting, resulting in an incentive payment for EPs, has 
also increased. Furthermore, the available number of qualified 
registries has also increased since 2008, and we expect additional 
registries to become qualified in future years. For these reasons, we 
maintain that the registry-based reporting option remains viable, and 
furthermore, we anticipate continuing to expand this option in future 
years.
    We also believe that EHR-based reporting continues to be a viable 
option for overcoming the limitations associated with claims-based 
reporting of quality measures, as clinical quality data is extracted 
from the EHR for submission. We believe further that retaining the EHR-
based reporting mechanism for 2011 PQRI will continue to promote the 
adoption and use of EHRs and further align with the provision in the 
ACA related to the integration of PQRI EHR measures and the EHR 
incentive program measures in years after 2011, which is discussed in 
further detail in section VI.F.1.l.(3) below.
    In summary, we propose that for 2011, an EP may choose to report 
data on PQRI quality measures through claims, a qualified registry (for 
the proposed qualification requirements for registries, see section 
VI.F.1.d.(4) of this proposed rule), or through a qualified EHR product 
(for the proposed qualification requirements for the EHR vendors and 
their products, see section VI.F.1.d.(5) of this proposed rule). As in 
previous years, depending on which PQRI individual quality measures or 
measures groups an EP selects, one or more of the proposed reporting 
mechanisms may not be available for reporting a particular 2011 PQRI 
individual quality measure or measures group. For example, the EHR 
reporting mechanism currently is not available for reporting measures 
groups and specifications for the electronic transmission of a measure 
via an EHR are not available for all of the individual PQRI measures. 
In addition, as discussed previously the specifications for some 
measures are too complex for claims-based reporting. The proposed 2011 
reporting mechanisms through which each proposed 2011 PQRI individual 
quality measure and measures group could be reported are identified in 
Tables 47 and 48. We invite comments on our proposal for the 2011 
reporting mechanisms.
    While we propose to retain the claims-based reporting mechanism for 
2011, we note that we continue to

[[Page 40171]]

consider significantly limiting the claims-based mechanism of reporting 
clinical quality measures in future program years. This limitation 
continues to be contingent upon there being an adequate number and 
variety of registries available and/or the continuation and/or 
expansion of the EHR reporting option. Potentially, we would continue 
to retain claims-based reporting in years after 2011 principally for 
the reporting of structural measures, such as Measure 124 
Health Information Technology (HIT): Adoption/Use of Electronic Health 
Records (EHR), and in circumstances where claims-based reporting is the 
only available mechanism for certain categories of EPs to report on 
PQRI quality measures.
    Continuing to reduce our reliance on the claims-based reporting 
mechanism after 2011 would allow us and EPs to continue to devote 
available resources towards maximizing the potential of registries and 
EHRs for quality measurement reporting. Both mechanisms hold the 
promise of more sophisticated and timely reporting of clinical quality 
measures. Clinical data registries allow the collection of more 
detailed data, including outcomes, without the necessity of a single 
submission contemporaneously with claims billing, which overcomes some 
of the limitations of the claims-based reporting mechanism. Registries 
can also provide feedback and quality improvement information based on 
reported data. Finally, clinical data registries can also receive data 
from EHRs, and therefore, serve as an alternative means to reporting 
clinical quality data extracted from an EHR. As we continue to qualify 
additional registries (qualified registries are listed on the CMS PQRI 
Web site http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage), we believe there may be 
a sufficient number of registries by 2012 to make it possible to reduce 
the claims-based reporting mechanism for many measures after 2011. We 
again invite comments on our intent to lessen our reliance on the 
claims-based reporting mechanism for the PQRI program beyond 2011.
    As in previous years, regardless of the reporting mechanism chosen 
by an EP, there is no requirement for the EP to sign up or register to 
participate in the PQRI. However, there may be some requirements for 
participation through a specific reporting mechanism that are unique to 
that particular reporting mechanism. In addition to the proposed 
criteria for satisfactory reporting of individual measures and measures 
groups described in section VI.F.1.e. and section VI.F.1.f., 
respectively, of this proposed rule, EPs must ensure that they meet all 
requirements for their chosen reporting mechanism for 2011.
(1) Proposed Requirements for Individual EPs Who Choose the Claims-
Based Reporting Mechanism
    For EPs who choose to participate in the 2011 PQRI by submitting 
data on individual quality measures or measures groups through the 
claims-based reporting mechanism, we propose the EP would be required 
to submit the appropriate PQRI QDCs on the professionals' Medicare Part 
B claims. QDCs for the EP's selected individual PQRI quality measures 
or measures group may be submitted to CMS at any time during 2011. 
Please note, however, that as required by section 1848(m)(1)(A) of the 
Act, all claims for services furnished between January 1, 2011 and 
December 31, 2011, would need to be processed by no later than February 
28, 2012, to be included in the 2011 PQRI analysis.
(2) Proposed Requirements for Individual EPs Who Choose the Registry-
Based Reporting Mechanism
    We propose that in order to report quality data on the 2011 PQRI 
individual quality measures, or measures groups, through a qualified 
clinical registry, an EP must enter into and maintain an appropriate 
legal arrangement with a qualified 2011 PQRI registry. Such 
arrangements would provide for the registry's receipt of patient-
specific data from the EP and the registry's disclosure of quality 
measures results and numerator and denominator data on PQRI quality 
measures or measures groups on behalf of the EP to CMS. Thus, the 
registry would act as a Health Insurance Portability and Accountability 
Act of 1996 (Pub. L. 104-191) (HIPAA) Business Associate and agent of 
the EP. Such agents are referred to as ``data submission vendors.'' The 
``data submission vendors'' would have the requisite legal authority to 
provide clinical quality measures results and numerator and denominator 
data on individual quality measures or measures groups on behalf of the 
EP for the PQRI. We propose that the registry, acting as a data 
submission vendor, would submit CMS-defined registry-derived measures 
information to our designated database for the PQRI, using a CMS-
specified record layout, which would be provided to the registry by 
CMS.
    To maintain compliance with applicable statutes and regulations, 
our program and our data system must maintain compliance with the HIPAA 
requirements for requesting, processing, storing, and transmitting 
data. EPs that conduct HIPAA covered transactions also would need to 
maintain compliance with the HIPAA requirements.
    We propose that EPs choosing to participate in PQRI through the 
registry-based reporting mechanism for 2011 would need to select a 
qualified PQRI registry and submit information on PQRI individual 
quality measures or measures groups to the selected registry in the 
form and manner and by the deadline specified by the registry.
    We propose to post on the PQRI section of the CMS Web site at 
http://www.cms.gov a list of qualified registries for the 2011 PQRI, 
including the registry name, contact information, and the 2011 
measure(s) and/or measures group(s) and eRx reporting (if qualified) 
for which the registry is qualified and intends to report. As in the 
2010 PQRI, we propose for the 2011 PQRI to post the names of the 2011 
PQRI qualified registries in 3 phases, which are discussed below. In 
any event, even though a registry is listed as ``qualified,'' we cannot 
guarantee or assume responsibility for the registry's successful 
submission of the required PQRI quality measures results or measures 
group results or required data elements submitted on behalf of a given 
EP.
    In the first phase, we propose to post, by December 31, 2010, a 
list of those registries qualified for the 2011 PQRI based on the 
following: (1) Being a qualified registry for a prior PQRI program year 
that successfully submitted 2008 and/or 2009 PQRI quality measures 
results and numerator and denominator data on the quality measures; (2) 
having received a letter indicating their continued interest in being a 
PQRI registry for 2011 by October 31, 2010; and (3) the registry's 
compliance with the 2011 PQRI registry requirements. This list may be 
modified if any given registry fails to meet any new requirement(s) 
proposed for 2011. The testing of any additional requirements will be 
completed as soon as possible but by the end of the first quarter of 
2011 at the latest. By posting this first list of qualified registries 
for the 2011 PQRI, we seek to make available the names of registries 
that can be used at the start of the 2011 reporting period.
    We propose in the second phase, to add the names of the registries 
that were initially qualified in 2010 and submitted actual quality data 
on behalf of their EPs to CMS for the first time in early 2011. 
Successful submission of data to CMS

[[Page 40172]]

for the year in which a registry is qualified is the final step in the 
qualification process and a necessary requirement if the registry 
desires to continue to participate in PQRI in subsequent years. We 
propose that these registries also must meet any new 2011 requirements 
and will also undergo testing, which will be completed by the end of 
the first quarter of 2011 at the latest.
    In the third phase, we propose to complete posting of the list of 
qualified 2011 registries as soon as we have completed vetting the 
additional registries interested in and capable of participating in the 
2011 PQRI. We anticipate this will be completed no later than the 
summer of 2011. An EP's ability to report PQRI quality measures data 
and numerator and denominator data on PQRI quality measures or measures 
groups using the registry-based reporting mechanism should not be 
impacted by the complete list of qualified registries for the 2011 PQRI 
being made available after the start of the reporting period. First, 
registries would not begin submitting EPs' PQRI quality measures 
results and numerator and denominator data on the quality measures or 
measures groups to CMS until 2012. Second, if an EP decides that he or 
she is no longer interested in submitting quality measures data and 
numerator and denominator data on PQRI individual quality measures or 
measures group through the registry-based reporting mechanism after the 
complete list of qualified registries becomes available, this would not 
preclude the EP from attempting to meet the criteria for satisfactory 
reporting through another 2011 PQRI reporting mechanism, such as claims 
or EHR-based data submission.
    In addition to meeting the above proposed requirements specific to 
registry-based reporting, we propose that EPs who choose to participate 
in PQRI through the registry-based reporting mechanism would need to 
meet the relevant criteria proposed for satisfactory reporting of 
individual measures or measures groups that all EPs must meet in order 
to satisfactorily report for PQRI 2011. However, in 2011, we propose 
not to count measures that are reported through a registry or EHR that 
have a zero percent performance rate. That is, if the recommended 
clinical quality action is not performed on at least 1 patient for a 
particular measure or measures group reported by the EP via a registry 
or EHR, we will not count the measure (or measures groups) as a measure 
(or measures group) reported by an EP. We propose to disregard measures 
(or measures groups) that are reported through a registry or EHR that 
have a zero percent performance rate in the 2011 PQRI because we are 
assuming that the measure was not applicable to the EP and was likely 
reported from EHR-derived data (or from data mining) and was 
unintentionally submitted from the registry or EHR to CMS. We also seek 
to avoid the possibility of intentional submission of spurious data 
solely for the purpose of receiving an incentive payment for reporting.
(3) Proposed Requirements for Individual EPs Who Choose the EHR-Based 
Reporting Mechanism
    For 2011, in addition to meeting the criteria for satisfactory 
reporting of at least 3 individual measures, we propose the following 
requirements associated with EHR-based reporting: (1) Selection of a 
PQRI qualified EHR product; and (2) submission of clinical quality data 
extracted from the EHR to a CMS clinical data warehouse in the CMS-
specified manner and format. These proposed requirements are identical 
to the 2010 requirements for individual EPs who choose the EHR-based 
requirements. We are proposing to retain the 2010 requirements because 
results from 2010 EHR data submission will not be available until 2011. 
A test of quality data submission from EPs who wish to report 2010 
quality measure data directly from their qualified EHR product will be 
required and occur in early 2011 immediately followed by the submission 
of the EP's actual 2010 PQRI data. This entire final test/production 
2010 data submission timeframe is expected to be January 2011 through 
March 2011. As discussed in the CY 2010 PFS final rule with comment 
period (74 FR 61800), throughout most of 2010, we will continue to vet 
newly self-nominated EHR vendor products for possible qualification for 
the 2011 PQRI program year. We expect to list any additional PQRI 
qualified EHR products by January 2011. It is expected that these newly 
qualified products would be able to submit 2011 PQRI data in early 
2012.
    Measures group reporting is not an option for EHR based quality 
measure reporting for 2010. We propose to continue this policy for 2011 
and therefore, propose not to include measures group reporting via EHRs 
for the 2011 PQRI. We will receive 2010 production data in early 2011 
and since this will be the first time we have an opportunity to receive 
direct EHR data submission for quality reporting and to calculate the 
results, we believe it is best not to add another reporting option 
using EHRs at this time. We propose that EPs who choose the EHR-based 
reporting mechanism for the 2011 PQRI would be required to (in addition 
to meeting the criteria for satisfactory reporting of individual 
measures)--
     Have a qualified EHR product;
     Have an active Individuals Authorized Access to CMS 
Computer Services (IACS) user account with a data submission role or be 
able to use the surrogate data submission method (if one exists) that 
will be used to submit clinical quality data extracted from the EHR to 
a CMS clinical data warehouse or another CMS approved means of securely 
transmitting the quality measures data to CMS such as a CMS/OCSQ 
approved HIE (health information exchange) if we are able to collect 
data from HIEs in 2012 using the NHIN (national health information 
network) or NHIN direct network;
     Submit a test file containing real or test clinical 
quality data extracted from the EHR to a CMS clinical data warehouse 
via an approved data submission method such as IACS, an HIE, or the 
NHIN between July 1, 2011 and September 30, 2011 (if technically 
feasible); and
     Submit a file containing the EP's 2011 PQRI clinical 
quality data extracted from the EHR for the entire reporting period 
(that is January 1, 2011 through December 31, 2011) via IACS or an 
acceptable surrogate (if technically feasible) between January 1, 2012, 
through February 28, 2012.
    However, as stated above, the 2010 EHR Testing Program is still 
ongoing. Since we are proposing that only EHR vendors that self-
nominated to participate in the 2011 EHR Testing Program and 
successfully complete the 2011 EHR Testing Program would be considered 
qualified EHR vendors for the 2011 PQRI, there is no guarantee that 
there will be any additionally qualified EHR vendors available for the 
2011 PQRI. In addition, as we complete the 2010 EHR Testing Program and 
are better able to determine what is technically feasible, the actual 
dates on which EPs are required to submit their test files and/or to 
begin submitting their actual 2011 PQRI data are subject to change.
    We cannot assume responsibility for the successful submission of 
data from an EP's EHR. Any EP who chooses to submit PQRI data extracted 
from an EHR should contact the EHR product's vendor to determine if the 
product is qualified and has been updated to facilitate PQRI quality 
measures data submission. Such professionals also should begin 
attempting submission soon after the opening of the clinical data 
warehouse in order to assure the

[[Page 40173]]

professional has a reasonable period of time to work with his or her 
EHR and/or its vendor to correct any problems that may preclude 
successful quality measures data submission through that EHR. As we 
indicated above, we are proposing that data submission for the 2011 
PQRI would need to be completed by February 28, 2012.
    The specifications for the electronic transmission of the 2011 PQRI 
measures, identified in Tables 55 and 56 of this proposed rule as being 
available for EHR-based reporting in 2011, will be posted on the 
Alternative Reporting Mechanisms page of the PQRI section of the CMS 
Web site during the summer of 2010.
(4) Proposed Qualification Requirements for Registries
    In order to be ``qualified'' to submit quality measures results and 
numerator and denominator data on PQRI quality measures and measures 
groups on behalf of EPs pursuing a PQRI incentive for the 2008, 2009, 
and 2010 PQRI, we required registries to complete a self-nomination 
process and to meet certain technical and other requirements. For the 
2010 PQRI, registries that were qualified for 2009 did not need to be 
``re-qualified'' for 2010 unless they were unsuccessful at submitting 
2009 PQRI data (that is, failed to submit 2009 PQRI data per the 2009 
PQRI registry requirements). Registries that were ``qualified'' for 
2009 and wished to continue to participate in 2010 were only required 
to communicate their desire to continue participation for 2010 by 
submitting a letter to CMS indicating their continued interest in being 
a PQRI registry for 2010 and their compliance with the 2010 PQRI 
registry requirements by March 31, 2010.
    For the 2011 PQRI, we are proposing to require a self-nomination 
process for registries wishing to submit 2011 PQRI quality measures or 
measures groups on behalf of EPs for services furnished during the 
applicable reporting periods in 2011. We propose that the registry 
self-nomination process for the 2011 PQRI would be based on a registry 
meeting specific technical and other requirements, as discussed below.
    To be considered a qualified registry for purposes of submitting 
individual quality measures and measures groups on behalf of EPs who 
choose to report using this reporting mechanism under the 2011 PQRI, we 
propose that all registries (new to PQRI and those previously 
qualified) must:
     Be in existence as of January 1, 2011;
     Have at least 25 participants by January 1, 2011;
     Provide at least 1 feedback report per year to 
participating EPs;
     Not be owned and managed by an individual locally-owned 
single-specialty group (in other words, single-specialty practices with 
only 1 practice location or solo practitioner practices would be 
prohibited from self-nominating to become a qualified PQRI registry);
     Participate in ongoing 2011 PQRI mandatory support 
conference calls hosted by CMS (approximately 1 call per month), 
including an in-person registry kick-off meeting to be held at CMS 
headquarters in Baltimore, MD. Registries that miss more than one 
meeting will be precluded from submitting PQRI data for the reporting 
year (2011);
     Be able to collect all needed data elements and transmit 
to CMS the data at the TIN/NPI level for at least 3 measures in the 
2011 PQRI program (according to the posted 2011 PQRI Measure 
Specifications);
     Be able to calculate and submit measure-level reporting 
rates or the data elements needed to calculate the reporting rates by 
TIN/NPI;
     Be able to calculate and submit, by TIN/NPI, a performance 
rate (that is, the percentage of a defined population who receive a 
particular process of care or achieve a particular outcome) for each 
measure on which the TIN/NPI reports or the data elements needed to 
calculate the reporting rates;
     Be able to separate out and report on Medicare Part B FFS 
patients;
     Provide the name of the registry;
     Provide the reporting period start date the registry will 
cover;
     Provide the reporting period end date the registry will 
cover;
     Provide the measure numbers for the PQRI quality measures 
on which the registry is reporting;
     Provide the measure title for the PQRI quality measures on 
which the registry is reporting;
     Report the number of eligible instances (reporting 
denominator);
     Report the number of instances of quality service 
performed (numerator);
     Report the number of performance exclusions;
     Report the number of reported instances, performance not 
met (EP receives credit for reporting, not for performance);
     Be able to transmit this data in a CMS-approved XML 
format. We expect that this CMS-specified record layout will be 
substantially the same as for the 2008, 2009, and 2010 PQRI if 
aggregate level data is continued but will likely change if individual 
data elements are required, as discussed below. This layout will be 
provided to registries in 2011;
     Comply with a CMS-specified secure method for data 
submission, such as submitting the registry's data in an XML file 
through an IACS user account or another approved method such as over 
the NHIN (national health information network) if technically feasible;
     Submit an acceptable ``validation strategy'' to CMS by 
March 31, 2011. A validation strategy ascertains whether EPs have 
submitted accurately and on at least the minimum number (80 percent) of 
their eligible patients, visits, procedures, or episodes for a given 
measure. Acceptable validation strategies often include such provisions 
as the registry being able to conduct random sampling of their 
participant's data, but may also be based on other credible means of 
verifying the accuracy of data content and completeness of reporting or 
adherence to a required sampling method;
     Perform the validation outlined in the strategy and send 
the results to CMS by June 30, 2012 for the 2011 reporting year's data;
     Enter into and maintain with its participating 
professionals an appropriate Business Associate agreement that provides 
for the registry's receipt of patient-specific data from the EPs, as 
well as the registry's disclosure of quality measure results and 
numerator and denominator data on behalf of EPs who wish to participate 
in the PQRI program;
     Obtain and keep on file signed documentation that each 
holder of an NPI whose data are submitted to the registry has 
authorized the registry to submit quality measures and numerator and 
denominator data to CMS for the purpose of PQRI participation. This 
documentation must be obtained at the time the EP signs up with the 
registry to submit PQRI quality measures data to the registry and must 
meet any applicable laws, regulations, and contractual business 
associate agreements;
     Provide CMS access (if requested for validation purposes) 
to review the Medicare beneficiary data on which 2011 PQRI registry-
based submissions are founded or provide to CMS a copy of the actual 
data (if requested);
     Provide the reporting option (reporting period and 
reporting criteria) that the EP has satisfied or chosen;
     Provide CMS a signed, written attestation statement via 
mail or e-mail which states that the quality measure results and any 
and all data including numerator and denominator data

[[Page 40174]]

provided to CMS are accurate and complete;
     Indicate the reporting period chosen for each EP who 
chooses to submit data on measures groups;
     Base reported information on measures groups only on 
patients to whom services were furnished during the 12-month reporting 
period of January through December 2011 or the 6-month reporting period 
of July 1, 2011 through December 31, 2011;
     Agree that the registry's data may be inspected or a copy 
requested by CMS and provided to CMS under our oversight authority;
     Be able to report data on all applicable measures in a 
given measures group on either 30 or more Medicare Part B FFS patients 
from January 1, 2011 through December 31, 2011, or on 80 percent of 
applicable Medicare Part B FFS patients for each EP (with a minimum of 
15 patients during the January 1, 2011, through December 31, 2011, 
reporting period or a minimum of 8 patients during the July 1, 2011, 
through December 31, 2011, reporting period).
    These proposed qualification requirements for 2011 registries are 
similar to the PQRI qualification requirements for registries for 
previous years. However, we note, that registries would no longer be 
permitted to include non-Medicare patients for measures group reporting 
(see section VI.F.1.f. of this proposed rule for further discussion of 
the criteria for satisfactory reporting of measures groups by 
individual EPs).
    In addition, in prior years registries were permitted to develop 
their own algorithms to calculate measure results (that is, reporting 
and performance rates) from the data provided to them from their EP 
members. For the 2011 PQRI, we propose that all current and future 
registries would have to meet the following new requirements proposed 
for 2011:
     Use PQRI measure specifications and the CMS provided 
measure calculation algorithm to calculate reporting rates or 
performance rates unless otherwise stated if aggregated measures data 
is continued for 2011 PQRI registry reporting. CMS will provide 
registries a calculation algorithm for each measure and/or measures 
group they intend to report in 2011.
     Provide a calculated result using the CMS supplied 
algorithm and XML file for each measure that the registry intends to 
calculate (as described below). This applies to all registries; those 
that are new to the program, and those that were previously qualified. 
The registries will be required to show that they can calculate the 
proper measure results (that is, reporting and performance rates) using 
the CMS-supplied algorithm and send the calculated data back to CMS in 
the specified format.
     Provide us the individual data elements used to calculate 
the measures if so requested by CMS for validation purposes, if 
aggregated data submission is still the selected method of data 
collection. Registries that are subject to validation will be asked to 
send discrete data elements for a measure (determined by CMS) in the 
required data format for us to recalculate the registries' reported 
results. Validation will be conducted for several measures at a 
randomly selected sample of registries in order to validate their data 
submissions.
    While registries allow EPs to collect data over a broader timeframe 
enabling us to implement more sophisticated measures in PQRI and 
despite their apparent success as a vehicle for quality reporting (over 
90.0 percent of EPs who participated in the 2008 PQRI through registry-
based reporting were incentive eligible), registry data results have 
been inconsistent when we have validated the registry data against 
claims. Even though qualified registries go through a thorough vetting 
and testing process, we have found differences in measure results (that 
is, performance rates) reported by the registries when compared to 
measure results calculated from claims data for the same EP. This makes 
it difficult for EPs to analyze their performance results for practice 
improvement in that the information may not be reliable and 
reproducible from registry to registry. This also makes possible 
physician comparison difficult and inconsistent. We believe there are 
likely several reasons for these inconsistencies, including the fact 
that some registries are getting their data from an EP's EHR, the use 
of non-Medicare patients by registries for measures groups, and the use 
of different algorithms by registries to calculate measures. We believe 
the proposed new requirements for registries discussed above will help 
us in validating the registry data we receive by addressing some of the 
reasons leading to the inconsistencies. The proposal for 2011 to retain 
many of the 2010 requirements while introducing some new requirements 
is intended to improve the registry-based reporting mechanism by 
capitalizing on some of the registry's existing quality improvement 
functions, maximizing the registry's ability to successfully submit 
EP's quality measure results and numerator and denominator data on PQRI 
individual quality measures or measures groups to CMS, and discouraging 
small physicians' offices or an individual EP from self-nominating to 
become a qualified registry. We continue to be concerned that an 
individual EP or a small practice does not have either the resources, 
or the capabilities, to successfully submit quality measures results 
and numerator and denominator data on PQRI individual measures or 
measures groups through the registry data submission process. We invite 
comments on the process and requirements that we propose to use to 
determine whether a registry is qualified to submit quality measures 
results (performance rates and reporting rates) and numerator and 
denominator data on PQRI quality measures or measures groups on an EP's 
behalf.
    As stated previously, registries currently calculate the measure 
results (that is reporting and performance rates) from the data 
submitted to them by their EP members and send us the measure results 
for each participating EP, which are aggregated, nonpatient 
identifiable data. An advantage of this approach is that less data will 
need to be transmitted to CMS (since we only receive aggregated data), 
which means there is less data for CMS to analyze.
    Another option that we considered was changing the requirements 
with respect to the type of data that registries send us. For 2011, we 
considered requiring registries, instead, to send discrete data 
elements for a measure (as determined by CMS) in the required data 
format for us to calculate the EP's measure results. Thus, the registry 
would be required to send CMS beneficiary-level data provided to the 
registry by the EP and CMS would use the data to calculate the EP's 
measure results (that is, reporting and performance rates). This 
approach is similar to the approach that was contemplated when registry 
data submission began in 2008 and was referred to as ``Option 2'' in 
the CY 2008 PFS proposed rule (72 FR 38203). An advantage of this 
approach is that it allows us to calculate the measure results and 
reduces the variation that occurs when registries try to aggregate 
their data and calculate the measure results themselves. Reducing the 
variation would facilitate comparison of EPs' results should we move 
towards public reporting of performance results in the future. Also, if 
the measure specifications change from year to year, this approach 
would require the registry to make fewer systems changes. The registry 
would not need to update the algorithms used to calculate the

[[Page 40175]]

measure's results. We invite comments on this alternative that was 
considered.
    We propose to post the final 2011 PQRI registry requirements, 
including the exact date by which registries that wish to qualify for 
2011 must submit a self-nomination letter and instructions for 
submitting the self-nomination letter, on the PQRI section of the CMS 
Web site at http://www.cms.gov/PQRI by November 15, 2010. We anticipate 
that new registries that wish to self-nominate for 2011 would be 
required to do so by January 31, 2011.
    Similar to 2010 PQRI, we propose that registries that were 
``qualified'' for 2010 and wish to continue to participate in 2011 will 
not need to be ``re-qualified'' for 2011 except to the extent that the 
requirements change for 2011 (as proposed above). If this occurs, we 
propose that all previously qualified registries would need to 
demonstrate that they can meet the new 2011 data submission 
requirements. Additionally, we propose that registries that are 
unsuccessful submitting 2010 PQRI data (that is, fail to submit 2010 
PQRI data per the 2010 PQRI registry requirements) will need to go 
through a full self-nomination vetting process for 2011. Successful 
2010 PQRI registries that choose to report on new or different 2011 
PQRI measures would also need to qualify for these additional measures 
and/or methods. We also propose that registries that are ``qualified'' 
for 2010, who were successful in submitting 2010 PQRI data, and wish to 
continue to participate in 2011 would need to indicate their desire to 
continue participation for 2011 by submitting a letter to CMS 
indicating their continued interest in being a PQRI registry for 2011 
and their compliance with the 2011 PQRI registry requirements by no 
later than October 31, 2010. Instructions regarding the procedures for 
submitting this letter will be provided to qualified 2010 PQRI 
registries on the 2010 PQRI registry support conference calls.
    Similar to 2010 PQRI, we propose that if a qualified 2010 PQRI 
registry fails to submit 2010 PQRI data per the 2010 PQRI registry 
requirements, the registry would be considered unsuccessful at 
submitting 2010 PQRI data and would need to go through the full self-
nomination process again to participate in the 2011 PQRI. By March 31, 
2011, registries that are unsuccessful at submitting quality measures 
results and numerator and denominator data for 2010 would need to be 
able to meet the 2011 PQRI registry requirements and go through the 
full vetting process again. This would include CMS receiving the 
registry's self-nomination by March 31, 2011. As discussed further 
under section VI.F.2. of this proposed rule, we propose that the above 
registry requirements would apply not only for the purpose of a 
registry qualifying to report 2011 PQRI quality measure results and 
numerator and denominator data on PQRI individual quality measures or 
measures groups, but also for the purpose of a registry qualifying to 
submit the proposed electronic prescribing measure for the 2011 
Electronic Prescribing Incentive Program. We invite comments on the 
proposed qualification requirements for registries for the 2011 PQRI.
(5) Proposed Qualification Requirements for EHR Vendors and Their 
Products
    In 2010 PQRI, EHR products were listed on the PQRI section of the 
CMS Web site at http://www.cms.hhs.gov/PQRI as a ``qualified'' EHR 
product (that is, the name of the vendor software product and the 
version that was qualified), and were available for the product's users 
to submit quality data on Medicare beneficiaries to CMS directly from 
their system for the 2010 PQRI. This list of qualified EHR vendors and 
products was posted upon completion of the 2009 EHR Testing Program in 
January 2010.
    Vendors' EHR products that were listed as ``qualified'' products 
for the 2010 PQRI were selected because the vendor self-nominated to 
participate in the 2009 EHR Testing Program and demonstrated that their 
products met the ``Requirements for Electronic Health Record (EHR) 
Vendors to Participate in the 2009 PQRI EHR Testing Program'' that were 
posted on the Alternative Reporting Mechanisms page of the PQRI section 
of the CMS Web site at http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage on December 31, 2008. 
Additionally, a vendor's EHR system was required to be updated 
according to the Final 2010 EHR specifications, which were posted in 
January 2010 on the Alternative Reporting Mechanisms page of the PQRI 
section of the CMS Web site in order for an EHR vendor and its product 
to be qualified to submit information on 2010 PQRI measures.
    The EHR vendor qualification process for the 2011 PQRI was 
finalized in the 2010 PFS final rule with comment period (74 FR 61800 
through 61802) and is currently underway. We anticipate the EHR vendor 
vetting process for the 2011 PQRI will be complete in early 2011. At 
the conclusion of the 2011 PQRI EHR vendor vetting process, those EHR 
products that meet all of the 2011 EHR vendor requirements will be 
listed on the PQRI section of the CMS Web site as a ``qualified'' PQRI 
EHR product, which indicates that the product's users may submit 
quality data to CMS for the 2011 PQRI. We continue to caution there is 
no guarantee that there will be any qualified EHR vendors available for 
the 2011 PQRI. However, since seven EHR vendors and their programs were 
``qualified'' to submit quality data to CMS directly from their EPs for 
2010 PQRI reporting, we are optimistic that for 2011 PQRI and 
subsequent years there will continue to be multiple ``qualified'' EHR 
vendors available for EPs.
    During 2011, we propose to use the same self-nomination process 
described in the ``Requirements for Electronic Health Record (EHR) 
Vendors to Participate in the 2011 PQRI EHR Testing Program'' posted on 
the PQRI section of the CMS Web site at http://www.cms.gov/PQRI/20_AlternativeReportingMechanisms.asp#TopOfPage, to qualify additional EHR 
vendors and their EHR products to submit quality data extracted from 
their EHR products to the CMS clinical quality data warehouse for 2012 
PQRI. We propose that any EHR vendor interested in having one or more 
of their EHR products ``qualified'' to submit quality data extracted 
from their EHR products to the CMS clinical quality data warehouse for 
2012 and subsequent years will be required to submit their self-
nomination letter by January 31, 2011. Instructions for submitting the 
self-nomination letter will be provided in the 2012 EHR vendor 
requirements, which we expect to post in the 4th quarter of CY 2010. 
Specifically, for the 2012 PQRI, we propose that only EHR vendors that 
self-nominate to participate in the 2012 EHR Test Program will be 
considered qualified EHR vendors for the 2012 PQRI. We propose that the 
2011 PQRI EHR test vendors, who, if their testing is successful, may 
report 2012 PQRI data to CMS, must meet the following requirements:
     Be able to collect and transmit all required data elements 
according to the 2012 EHR Specifications.
     Be able to separate out and report on Medicare Part B FFS 
patients only.
     Be able to include TIN/NPI information submitted with an 
EP's quality data.
     Be able to transmit this data in the CMS-approved format.
     Comply with a secure method for data submission.
     Not be in a beta test form.
     Have at least 25 active users.
    Additionally, we propose that previously qualified PQRI EHR vendors 
and 2012 EHR test vendors must also

[[Page 40176]]

participate in ongoing PQRI mandatory support conference calls hosted 
by CMS (approximately one call per month). These requirements would 
apply not only for the purpose of a vendor's EHR product being 
qualified so that the product's users may submit data extracted from 
the EHR for the 2012 PQRI in 2013, but also for the purpose of a 
vendor's EHR product being qualified so that the product's users may 
electronically submit data extracted from the EHR for the electronic 
prescribing measure for the 2012 eRx Incentive Program in 2013. We 
propose that if a vendor misses more than one mandatory support call or 
meeting, the vendor and their product would be disqualified for the 
PQRI reporting year, which is covered by the call.
    We propose that previously qualified vendors and new vendors will 
need to incorporate any new EHR measures (measures electronically-
specified) added to PQRI for the reporting year they wish to maintain 
their PQRI qualification, as well as update their electronic measure 
specifications and data transmission schema should either or both 
change. This proposed requirement ensures that all PQRI qualified EHR 
products can be used by EPs to report any PQRI EHR measure. We invite 
comments on the proposed qualification requirements for EHR Vendors and 
their products for the 2012 PQRI.
e. Proposed Criteria for Satisfactory Reporting of Individual Quality 
Measures for Individual EPs
    Section 1848(m)(3)(A) of the Act established the criteria for 
satisfactorily submitting data on individual quality measures as at 
least 3 measures in at least 80 percent of the cases in which the 
measure is applicable. If fewer than 3 measures are applicable to the 
services of the professional, the professional may meet the criteria by 
submitting data on 1 or 2 measures for at least 80 percent of 
applicable cases where the measures are reportable. This section 
establishes the presumption that if an EP submits quality data codes 
for a particular measure the measure applies to the EP.
    For years after 2009, section 1848(m)(3)(D) of the Act provides 
additional authority to the Secretary, in consultation with 
stakeholders and experts, to revise the criteria for satisfactorily 
reporting data on quality measures. Based on this authority and the 
input we have previously received from stakeholders, we propose, for 
2011, the following 2 criteria for claims-based reporting of individual 
measures by individual EPs:
     Report on at least 3 measures that apply to the services 
furnished by the professional; and
     Report each measure for at least 50 percent of the EP's 
Medicare Part B FFS patients for whom services were furnished during 
the reporting period to which the measure applies.
    To the extent that an EP has fewer than 3 PQRI measures that apply 
to the EP's services, then we propose the EP would be able to meet the 
criteria for satisfactorily reporting data on individual quality 
measures by meeting the following 2 criteria:
     Report on all measures that apply to the services 
furnished by the professional (that is 1 to 2 measures); and
     Report each measure for at least 50 percent of the EP's 
Medicare Part B FFS patients for whom services were furnished during 
the reporting period to which the measure applies.
    We also propose for 2011 the requirement that an EP who reports on 
fewer than 3 measures through the claims-based reporting mechanism may 
be subject to the Measure Applicability Validation (MAV) process, which 
would allow us to determine whether an EP should have reported quality 
data codes for additional measures. This process was applied in prior 
years. Under the proposed MAV process, when an EP reports on fewer than 
3 measures, we propose to review whether there are other closely 
related measures (such as those that share a common diagnosis or those 
that are representative of services typically provided by a particular 
type of EP). We further propose that if an EP who reports on fewer than 
3 measures in 2011 reports on a measure that is part of an identified 
cluster of closely related measures and did not report on any other 
measure that is part of that identified cluster of closely related 
measures, then the EP would not qualify as a satisfactory reporter in 
2011 PQRI or earn an incentive payment. In 2011, we propose that these 
criteria for satisfactorily reporting data on fewer than 3 individual 
quality measures would apply for the claims-based reporting mechanism 
only.
    We note that the proposed 2011 criteria for satisfactory reporting 
of individual quality measures through claims submission are different 
from the 2010 criteria, which required reporting on at least 80 percent 
of the EP's Medicare Part B FFS patients for whom services were 
furnished during the reporting period to which the measure applies.
    The rationale for an 80 percent reporting rate is that this sample 
size would prevent selective reporting to achieve higher performance 
rates. However, we now have experience with claims based reporting, 
which has proved challenging for EPs, as discussed above. In 2007, 
approximately half of PQRI participants (defined as submitting at least 
one QDC), qualified for the PQRI incentive payment. Following the 2007 
program completion, we performed an extensive review and made a number 
of analytic changes that we detailed in our 2007 PQRI Experience 
Report. For 2008, the analytic changes that we made following the 
completion of the 2007 program resulted in substantial increases in 
valid QDC reporting and the number of professionals qualifying for an 
incentive payment. However, the number who qualified for the incentive 
for the 2008 program year remained at about half of those who 
participated. A major reason for this was reporting at less than the 
required 80 percent reporting requirement. As a result of our review of 
the 2007 and 2008 program results, we believe that we can reduce the 
reporting sample requirement to 50 percent for claims-based submission 
without increasing the likelihood that professionals will selectively 
report based on whether the performance expectation of a measure is met 
for that particular patient. Inasmuch as we do not allow resubmission 
of a claim solely for the purpose of resubmission of a QDC, EPs will 
still need to submit QDCs contemporaneously with the claim. Therefore, 
we believe that even at a 50 percent reporting it would be difficult to 
selectively report for the purpose of better performance. Based on our 
review, we further believe that by reducing the reporting sample, there 
will be substantial increases in the portion of participating 
professionals who qualify for the PQRI incentive. Thus, we believe we 
can encourage significantly broader participation which otherwise might 
be deterred if physicians and other EPs do not believe that they are 
likely to qualify for the incentive.
    As previously stated, we propose that the 50 percent reporting 
sample would apply only to the 2011 PQRI claims-based reporting 
mechanism available for reporting individual PQRI quality measures and 
not registry-based reporting or EHR-based reporting.
    For the 2011 PQRI, we propose the following 2 criteria for 
satisfactory reporting of data on individual PQRI quality measures for 
registry-based and EHR-based reporting:
     Report on at least 3 measures that apply to the services 
furnished by the professional; and

[[Page 40177]]

     Report each measure for at least 80 percent of the EP's 
Medicare Part B FFS patients for whom services were furnished during 
the reporting period to which the measure applies.
    We do not believe that reducing the reporting sample to 50 percent 
for registry-based reporting or EHR-based reporting would substantially 
impact the portion of participating professionals who qualify for the 
PQRI incentive. As stated previously, over 90.0 percent of EPs 
submitting data through registries were incentive eligible.
    The proposed 2011 criteria for satisfactory reporting of data on 
individual PQRI quality measures are summarized in Table 47 and are 
arranged by reporting mechanism and reporting period. We seek public 
comment on these proposed reporting criteria. We are particularly 
interested in receiving comments on our proposal to lower the reporting 
criteria for claims-based reporting of individual measures from 80 
percent to 50 percent. We seek input on whether 50 percent is an 
appropriate threshold or if another threshold would be more 
appropriate. We had considered lowering the reporting criteria to a 
higher threshold (such as 60 percent or 75 percent) but we found that 
differences in the performance rates at 50 percent and 80 percent 
reporting were not substantial while differences in the proportion of 
EPs satisfactorily reporting at the two different thresholds were 
substantial.

 Table 47--Proposed 2011 Criteria for Satisfactory Reporting of Data on
 Individual PQRI Quality Measures, by Reporting Mechanism and Reporting
                                 Period
------------------------------------------------------------------------
      Reporting mechanism         Reporting criteria    Reporting period
------------------------------------------------------------------------
Claims-based reporting........   Report at      January 1, 2011-
                                 least 3 PQRI            December 31,
                                 measures, or 1-2        2011.
                                 measures if less than
                                 3 measures apply to
                                 the EP; and
                                 Report each
                                 measure for at least
                                 50% of the EP's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
Claims-based reporting........   Report at      July 1, 2011-
                                 least 3 PQRI            December 31,
                                 measures, or 1-2        2011.
                                 measures if less than
                                 3 measures apply to
                                 the EP; and
                                 Report each
                                 measure for at least
                                 50% of the EP's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
Registry-based reporting......   Report at      January 1, 2011-
                                 least 3 PQRI            December 31,
                                 measures; and           2011.
                                 Report each
                                 measure for at least
                                 80% of the EP's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
Registry-based reporting......   Report at      July 1, 2011-
                                 least 3 PQRI            December 31,
                                 measures; and           2011.
                                 Report each
                                 measure for at least
                                 80% of the EP's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
EHR-based reporting...........   Report at      January 1, 2011-
                                 least 3 PQRI            December 31,
                                 measures; and           2011.
                                 Report each
                                 measure for at least
                                 80% of the EP's
                                 Medicare Part B FFS
                                 patients seen during
                                 the reporting period
                                 to which the measure
                                 applies.
------------------------------------------------------------------------

    Table 47 illustrates that there are a total of 5 proposed reporting 
options for 2011, or ways in which an EP may meet the criteria for 
satisfactorily reporting on individual quality measures for the 2011 
PQRI. Each proposed reporting option consists of the criteria for 
satisfactorily reporting such data and results on individual quality 
measures relevant to a given reporting mechanism and reporting period. 
EPs may potentially qualify for an incentive as satisfactorily 
reporting individual quality measures under more than one of the 
proposed reporting criteria, proposed reporting mechanism, and or for 
more than one proposed reporting period; however, only one incentive 
payment will be made to an EP based on the longest reporting period for 
which the EP satisfactorily reports.
f. Proposed Criteria for Satisfactory Reporting Measures Groups for 
Individual EPs
    We also propose that individual EPs have the option to report 
measures groups instead of individual quality measures to qualify for 
the 2011 PQRI incentive, using claims or registries. As stated 
previously, we do not propose to make the EHR-based reporting mechanism 
available for reporting on measures groups in 2011. The criteria that 
we propose for 2011 for satisfactory reporting of measures groups 
through claims-based or registry-based reporting for either the 12-
month or 6-month reporting period are as follows: (1) For claims-based 
reporting, the reporting of at least 1 measures group for at least 50 
percent of patients to whom the measures group applies, during the 
reporting period; or (2) for registry-based reporting, the reporting of 
at least 1 measures group for at least 80 percent of patients to whom 
the measures group applies during the reporting period. EPs, for both 
claims-based and registry-based reporting under these criteria, would 
be required to submit data on a minimum of 15 unique Medicare Part B 
FFS patients for the 12-month reporting period and a minimum of 8 
Medicare Part B FFS patients for the 6-month reporting period. We note 
that the proposed criteria for 2011 are the same criteria as for 2010 
PQRI reporting on measures groups, with the exception of our reducing 
the reporting sample from 80 percent to 50 percent for claims-based 
submission of measures groups. We propose to reduce the reporting 
sample requirement for claims-based submission of measures groups for 
the same reasons discussed in section VI.F.1.e. of this proposed rule 
for claims-based submission of individual measures. In other words, we 
believe that reducing the reporting sample from 80 percent to 50 
percent will substantially increase the portion of participating EPs 
who qualify for a 2011 PQRI incentive without encouraging EPs to 
selectively report only those cases that will increase their 
performance rates. Additionally for 2011, we propose to retain the 
criteria, available only for the 12-month reporting period, based on 
reporting on at least 1 measures group for at least 30 patients for 
whom

[[Page 40178]]

services were furnished between January 1, 2011, and December 31, 2011, 
to whom the measures group applies. We also propose that the 30 
patients on which an EP would need to report a measures group for 2011 
would not need to be consecutive patients. We propose that the EP may 
report on any 30 unique patients seen during the reporting period to 
which the measures group applies. As in previous years, we propose that 
for 2011, the patients, for claims-based reporting, would be limited to 
Medicare Part B FFS patients.
    Finally, for registry-based reporting in 2011, in contrast to prior 
program years, we propose to require that the minimum patient numbers 
or percentages must be met by Medicare Part B FFS patients exclusively 
and not non-Medicare Part B FFS patients. The reason for this is the 
difficulty of analyzing data we receive from registries, where patients 
other than Medicare Part B FFS patients are included. For example, 
under our proposal we would be able to compare claims data with 
registry submitted data to compare patients in the denominator of the 
measure for validation. The proposed 2011 criteria for satisfactory 
reporting of data on measures groups are summarized in Table 48 and are 
arranged by reporting mechanism and reporting period.

   Table 48--Proposed 2011 Criteria for Satisfactory Reporting on Measures Groups, by Reporting Mechanism and
                                                Reporting Period
----------------------------------------------------------------------------------------------------------------
          Reporting mechanism                         Reporting criteria                    Reporting period
----------------------------------------------------------------------------------------------------------------
Claims-based reporting.................   Report at least 1 PQRI measures      January 1, 2011-December
                                          group;                                        31, 2011.
                                          Report each measures group for at
                                          least 30 Medicare Part B FFS patients.
Claims-based reporting.................   Report at least 1 PQRI measures      January 1, 2011-December
                                          group;                                        31, 2011.
                                          Report each measures group for at
                                          least 50% of the EP's Medicare Part B FFS
                                          patients seen during the reporting period
                                          to whom the measures group applies; and
                                          Report each measures group on at
                                          least 15 Medicare Part B FFS patients seen
                                          during the reporting period to which the
                                          measures group applies.
Claims-based reporting.................   Report at least 1 PQRI measures      January 1, 2011-December
                                          group;                                        31, 2011.
                                          Report each measures group for at
                                          least 50% of the EP's Medicare Part B FFS
                                          patients seen during the reporting period
                                          to whom the measures group applies; and
                                          Report each measures group on at
                                          least 8 Medicare Part B FFS patients seen
                                          during the reporting period to which the
                                          measures group applies.
Registry-based reporting...............   Report at least 1 PQRI measures      January 1, 2011-December
                                          group;                                        31, 2011.
                                          Report each measures group for at
                                          least 30 Medicare Part B FFS patients.
Registry-based reporting...............   Report at least 1 PQRI measures      January 1, 2011-December
                                          group;                                        31, 2011.
                                          Report each measures group for at
                                          least 80% of the EP's Medicare Part B FFS
                                          patients seen during the reporting period
                                          to whom the measures group applies; and
                                          Report each measures group on at
                                          least 15 Medicare Part B FFS patients seen
                                          during the reporting period to which the
                                          measures group applies.
Registry-based reporting...............   Report at least 1 PQRI measures      January 1, 2011-December
                                          group;                                        31, 2011.
                                          Report each measures group for at
                                          least 80% of the EP's Medicare Part B FFS
                                          patients seen during the reporting period
                                          to whom the measures group applies; and
                                          Report each measures group on at
                                          least 8 Medicare Part B FFS patients seen
                                          during the reporting period to which the
                                          measures group applies.
----------------------------------------------------------------------------------------------------------------

    As illustrated in Table 48, there are a total of 6 proposed 
reporting options, or ways in which EPs may meet the criteria for 
satisfactory reporting of measures groups for the 2011 PQRI. Each 
proposed reporting option consists of the criteria for satisfactory 
reporting relevant to a given reporting mechanism and reporting period. 
As stated previously, EPs may potentially qualify as satisfactorily 
reporting for 2011 PQRI on measures groups under more than one of the 
reporting criteria, reporting mechanisms, and/or for more than one 
reporting period; however, only one incentive payment will be made to 
an EP based on the longest reporting period for which the EP 
satisfactorily reports. Similarly, an EP could also potentially qualify 
for the PQRI incentive payment by satisfactorily reporting both 
individual measures and measures groups. However, only one incentive 
payment will be made to the EP based on the longest reporting period 
for which the EP satisfactorily reports. We invite comments on the 
proposed criteria for satisfactory reporting measures groups for 
individual EPs.
g. Proposed Reporting Option for Satisfactory Reporting on Quality 
Measures by Group Practices
(1) Background and Authority
    Section 1848(m)(3)(C)(i) of the Act requires the Secretary to 
establish and have in place a process by January 1, 2010 under which 
EPs in a group practice (as defined by the Secretary) shall be treated 
as satisfactorily submitting data on quality measures

[[Page 40179]]

under PQRI if, in lieu of reporting measures under PQRI, the group 
practice reports measures determined appropriate by the Secretary, such 
as measures that target high-cost chronic conditions and preventive 
care, in a form and manner, and at a time specified by the Secretary. 
Section 1848(m)(3)(C)(ii) of the Act requires that this process provide 
for the use of a statistical sampling model to submit data on measures, 
such as the model used under the Medicare Physician Group Practice 
(PGP) demonstration project under section 1866A of the Act. A group 
practice reporting option (GPRO) was established for the 2010 PQRI in 
the CY 2010 PFS final rule with comment period (74 FR 61807 through 
61811).
    In addition, payments to a group practice under section 1848(m) of 
the Act by reason of the process proposed herein shall be in lieu of 
the PQRI incentive payments that would otherwise be made to EPs in the 
group practice for satisfactorily submitting data on quality measures 
(that is, prohibits double payments). Therefore, for the 2011 PQRI, we 
propose to continue to allow a group practice, as a whole (that is, for 
the TIN(s)), to participate in 2011 PQRI and to submit PQRI quality 
measures for 2011 and qualify to earn an incentive. If, however, an 
individual EP is affiliated with a group practice participating in the 
GPRO and the group practice satisfactorily reports under the GPRO, the 
EP will be considered as satisfactorily reporting PQRI quality measures 
data at the individual level under that same TIN(s) (that is, for the 
same TIN/NPI combination).
(2) Definition of ``Group Practice''
    As stated above, section 1848(m)(3)(C)(i) of the Act authorizes the 
Secretary to define ``group practice.'' For purposes of determining 
whether a group practice satisfactorily submits PQRI quality measures 
data, we propose that for the 2011 PQRI a ``group practice'' would 
consist of a physician group practice, as defined by a TIN, with 2 or 
more individual EPs (or, as identified by NPIs) who have reassigned 
their billing rights to the TIN. This proposed definition for group 
practice is different from the 2010 PQRI definition of group practice 
in that we propose to change the minimum group size from 200 to 2 to 
enable more group practices to participate in the PQRI GPRO in 2011.
    Generally, our intent continues to be to build on an existing 
quality reporting program that group practices may already be familiar 
with by modeling some aspects of the the PQRI GPRO after the PGP 
demonstration while concurrently expanding the availability of the GPRO 
to more group practices. Since the PGP demonstration is a demonstration 
program for large group practices, one of the requirements for group 
practices participating in the PGP demonstration is for each practice 
to have 200 or more members. To be consistent with the PGP 
demonstration, we propose one GPRO process, which we refer to as ``GPRO 
I'' that would be available only to similar large group practices. For 
group practices that have fewer than 200 members, we propose, if 
technically feasible, an alternative GPRO process which we refer to as 
``GPRO II''. We invite comments on the proposed definition of ``group 
practice'' and our proposal to expand the definition of group practice 
to include groups with 2 or more members.
    In order to participate in the 2011 PQRI through the GPRO, we 
propose to require group practices to complete a self-nomination 
process and to meet certain technical and other requirements. The 
proposed self-nomination process and participation requirements for 
GPRO I and GPRO II are separately discussed below.
    As discussed further in section VI.F.2. of this proposed rule, 
participation in the Electronic Prescribing (eRx) Incentive Program is 
voluntary for group practices selected to participate in the PQRI group 
practice reporting option. However, for 2011, we propose that group 
practices must participate in the PQRI group practice reporting option 
in order to be eligible to participate in the eRx group practice 
reporting option for 2011 PQRI. This is the current requirement under 
the 2010 PQRI and ERx Incentive programs. Therefore, we propose that a 
group practice that wishes to participate in both the PQRI group 
practice reporting option and the electronic prescribing group practice 
reporting option must notify CMS of its desire to do so at the time 
that it self-nominates to participate in the PQRI group practice 
reporting option.
    In addition, we propose that group practices that are participating 
in Medicare demonstration projects, as approved by the Secretary, would 
also be considered group practices for purposes of the 2011 PQRI GPRO. 
Specifically, for the 2011 PQRI we propose to deem group practices 
participating in the PGP, Medicare Care Management Performance (MCMP), 
and EHR demonstrations to be participating in the PQRI GPRO since many 
of the measures being reported under these demonstration programs are 
similar to PQRI measures. As a result, such practices do not need to 
separately self-nominate to participate in the PQRI GPRO, although it 
would be necessary for such groups to meet the requirements for 
incentive qualification under their respective approved demonstration 
project. For example, the MCMP demonstration sites would be required to 
meet the requirements for earning a PQRI incentive specified under the 
MCMP demonstration.
    For purposes of the 2011 eRx Incentive Program, however, we propose 
that group practices participating in CMS-approved demonstration 
projects discussed above would be required to meet the proposed 2011 
eRx Incentive Program GPRO requirements or the proposed 2011 eRx 
Incentive Program requirements for individual EPs in order to qualify 
for a 2011 eRx incentive. Such group practices would not be able to 
qualify for a 2011 eRx incentive via participation in an approved 
demonstration project since there is no eRx requirement under these 
demonstrations.
    (3) Proposed Process for Physician Group Practices To Participate 
as Group Practices and Criteria for Satisfactory Reporting
(i) Group Practice Reporting Option for Physician Group Practices With 
200 or More NPIs-GPRO I
    As stated above, we propose that group practices interested in 
participating in GPRO I must self-nominate to do so. Specifically, we 
propose that the 2011 PQRI self-nomination letter for group practices 
interested in participating in the 2011 PQRI through the GPRO I must be 
accompanied by an electronic file submitted in a format specified by 
CMS (such as, a Microsoft Excel file) that includes the group 
practice's TIN(s) and name of the group practice, the name and e-mail 
address of a single point of contact for handling administrative 
issues, as well as the name and e-mail address of a single point of 
contact for technical support purposes. This information was also 
required as part of the self-nomination process for the 2010 PQRI GPRO.
    One change that we propose from the 2010 PQRI GPRO is that we 
propose for 2011 PQRI GPRO I to validate that the group practice 
consists of a minimum of 200 NPIs and we will supply group practices 
with this list. We invite comment on this proposed change for self 
nomination criteria. In addition, we propose that the self-nomination 
letter must also indicate the group practice's compliance with the 
following requirements:
     Have an active IACS user account;

[[Page 40180]]

     Agree to attend and participate in all mandatory GPRO 
training sessions; and
     Have billed Medicare Part B on or after January 1, 2010 
and prior to October 29, 2010.

    We propose to post the final 2011 PQRI participation requirements 
for group practices, including instructions for submitting the self-
nomination letter and other requested information, on the PQRI section 
of the CMS Web site at http://www.cms.gov/PQRI by November 15, 2010. 
Group practices that wish to self-nominate for 2011 would be required 
to do so by January 31, 2011. Upon receipt of the self-nomination 
letters we propose to assess whether the participation requirements 
were met by each self-nominated group practice using 2010 Medicare 
claims data. We do not propose to preclude a group practice from 
participating in the GPRO I if we discover, from analysis of the 2010 
Medicare claims data, that there are some EPs (identified by NPIs) that 
are not established Medicare providers (that is, have not billed 
Medicare Part B on or after January 1, 2010 and prior to October 29, 
2010) as long as the group has at least 200 established Medicare 
providers. NPIs who are not established Medicare providers, however, 
would not be included in our incentive payment calculations. We propose 
that group practices that were selected to participate in the 2010 PQRI 
GPRO would automatically be qualified to participate in the 2011 PQRI 
GPRO I and would not need to complete the 2011 PQRI GPRO I self-
nomination process.
    For physician groups selected to participate in the PQRI GPRO I for 
2011, we propose to retain the existing 12-month reporting period 
beginning January 1, 2011. We propose that group practices 
participating in GPRO I submit information on these measures using a 
data collection tool based on the GPRO Tool used in 2010 PQRI GPRO by 
36 participating group practices to report quality measures under PQRI. 
The 2010 PQRI GPRO Tool will be updated as needed to include the 2011 
PQRI GPRO I measures. We believe that use of the GPRO data collection 
tool allows group practices the opportunity to calculate their own 
performance rates for reporting quality measures. We propose that 
physician groups selected to participate in the 2011 PQRI through the 
GPRO I report on a proposed common set of 26 NQF-endorsed quality 
measures that are based on measures currently used for 2010 PQRI GPRO. 
We believe these measures target high-cost chronic conditions and 
preventive care. The proposed quality measures are identified in Table 
71.
    The proposed 2011 PQRI GPRO I quality measures are based on a 
subset of the Doctor's Office Quality (DOQ) quality measures set 
developed under the direction of CMS and were used in the PGP and/or 
MCMP demonstration programs, and have subsequently been used in 2010 
PQRI GPRO. Contributors to the development of the DOQ measures set 
included the American Medical Association's Physician Consortium for 
Performances Improvement (AMA-PCPI), the American College of Cardiology 
(ACC), the American Heart Association (AHA), the National Diabetes 
Quality Improvement Alliance, the National Committee for Quality 
Assurance (NCQA), and the Veterans Health Administration (VA). In most 
instances, these measures overlap with the proposed 2011 PQRI measures 
for reporting by individual EPs, however, there are some measures 
proposed for GPRO I that are not proposed for individual EPs.
    These quality measures are grouped into four disease modules: 
coronary artery disease; diabetes; heart failure; and preventive care 
services. On February 2, 2010, we hosted a 2011 PQRI listening session 
to solicit input on a number of aspects of the PQRI, including measures 
for the 2011 PQRI GPRO. Since we received no suggestions for additional 
disease modules for the GPRO I from this listening session, we are not 
proposing any additional measures for the 2011 PQRI GPRO I. We invite 
comments on our proposal to use the 26 measures identified in Table 71 
for inclusion in 2011 PQRI GPRO I. We specifically request comments on 
whether these measures can and/or should be expanded for the group 
practice reporting option for future program years. Disease modules and 
measures should address high cost conditions and/or a gap in care. 
Further detail on criteria for measure selection can be found in 
section VI.F.1.h. below.
    The proposed process that group practices will be required to use 
to report data on quality measures for the 2011 PQRI GPRO I and the 
proposed associated criteria for satisfactory reporting of data on 
quality measures by group practices, are summarized in Table 49. Under 
our proposed 2011 program, group practices participating in PQRI GPRO I 
as a group practice would be required to report on all of the measures 
listed in Table 71.
    As part of the data submission process for 2011 GPRO I, we propose 
that during 2012, each group practice would be required to report 
quality measures with respect to services furnished during the 2011 
reporting period (that is, January 1, 2011, through December 31, 2011) 
on an assigned sample of Medicare beneficiaries. We propose to analyze 
the January 1, 2011 through October 31, 2011 (that is, the last 
business day of October 2011) National Claims History (NCH) file to 
assign Medicare beneficiaries to each physician group practice using a 
patient assignment methodology model