[Federal Register Volume 78, Number 139 (Friday, July 19, 2013)]
[Proposed Rules]
[Pages 43281-43532]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16547]



[[Page 43281]]

Vol. 78

Friday,

No. 139

July 19, 2013

Part II





Department of Health and Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Parts 405, 410, 411, et al.





 Medicare Program; Revisions to Payment Policies under the Physician 
Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to 
Part B for CY 2014; Proposed Rule

Federal Register / Vol. 78, No. 139 / Friday, July 19, 2013 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 411, 414, 423, and 425

[CMS-1600-P]
RIN 0938-AR56


Medicare Program; Revisions to Payment Policies under the 
Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other 
Revisions to Part B for CY 2014

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

ACTION: Proposed rule.

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SUMMARY: This major proposed rule addresses 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, as well as changes in the statute.

DATES: Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on September 6, 2013.

ADDRESSES: In commenting, please refer to file code CMS-1600-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-1600-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    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-1600-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) 786-7195 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: Chava Sheffield, (410) 786-2298, for 
issues related to practice expense methodology and impacts.

Ryan Howe, (410) 786-3355, for issues related to direct practice 
expense inputs and telehealth services.
Joanna Baldwin, (410) 786-7205, for issues related to misvalued 
services.
Ken Marsalek, (410) 786-4502, for issues related to the multiple 
procedure payment reduction.
Heidi Oumarou, (410) 786-7942, for issues related to the revision of 
Medicare Economic Index (MEI).
Roberta Epps, (410) 786-4503, for issues related to chiropractors 
billing for evaluation and management services.
Craig Dobyski, (410) 786-4584, for issues related to geographic 
practice cost indices.
Simone Dennis, (410) 786-8409, for issues related to therapy caps.
Darlene Fleischmann, (410) 786-2357, for issues related to ``incident 
to'' services.
Corinne Axelrod, (410) 786-5620, for issues related to ``incident to'' 
services in Rural Health Center s or Federally Qualified Health 
Centers.
Anne Tayloe-Hauswald, (410) 786-4546, for issues related to ambulance 
fee schedule and clinical lab fee schedule.
Sandra Adams, (410) 786-2982, for issues related to Medicare shared 
savings program.
Rashaan Byers, (410) 786-2305, for issues related to physician compare.
Christine Estella, (410) 786-0485, for issues related to the physician 
quality reporting system and EHR incentive program.
Ronke Fabayo, (410) 786-4460 or Jay Blake, (410) 786-9371, for issues 
related to individual liability for payments made to providers and 
suppliers and handling of incorrect payments.
Rosemarie Hakim, (410) 786-3934, for issues related to coverage of 
items and services furnished in FDA-approved investigational device 
exemption clinical trials.
Jamie Hermansen, (410) 786-2064 or Jyme Schafer, (410) 786-4643, for 
issues related to ultrasound screening for abdominal aortic aneurysms.
Pauline Lapin, (410)786-6883, for issues related to the chiropractic 
services demonstration budget neutrality issue.
Andrew Morgan, (410) 786-2543, for issues related to e-prescribing 
under Medicare Part D.
Michael Wrobleswki, (410) 786-4465, for issues related to value-based 
modifier and improvements to physician feedback.
Elliot Isaac, (410) 786-4735, for malpractice RVUs and for any 
physician payment issue not identified above.

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

I. Executive Summary and Background

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    A. Executive Summary
    B. Background
II. Provisions of the Proposed Rule for PFS
    A. Resource-Based Practice Expense (PE) Relative Value Units 
(RVUs)
    B. Misvalued Codes
    1. Valuing Services Under the PFS
    2. Identifying, Reviewing, and Validating the RVUs of 
Potentially Misvalued Services
    3. CY 2014 Identification and Review of Potentially Misvalued 
Services
    4. The Multiple Procedure Payment Reduction Policy
    C. Malpractice RVUs
    D. Medicare Economic Index (MEI)
    E. Geographic Practice Cost Indices (GPCIs)
    F. Medicare Telehealth Services for the Physician Fee Schedule
    G. Therapy Caps
    H. Requirements for Billing ``Incident To'' Services
    I. Complex Chronic Care Management Services
    J. Chiropractors Billing for Evaluation & Management Services
III. Other Provisions of the Proposed Regulations
    A. Medicare Coverage of Items and Services in FDA 
Investigational Device Exemption Clinical Studies--Revision of 
Medicare Coverage
    B. Ultrasound Screening for Abdominal Aortic Aneurysms
    C. Colorectal Cancer Screening: Modification to Coverage of 
Screening Fecal Occult Blood Tests
    D. Ambulance Fee Schedule
    E. Proposals Regarding the Clinical Laboratory Fee Schedule
    F. Liability for Overpayments to or on Behalf of Individuals 
Including Payments to Providers or Other Persons
    G. Physician Compare Web Site
    H. Physician Payment, Efficiency, and Quality Improvements--
Physician Quality Reporting System
    I. Electronic Health Record (EHR) Incentive Program
    J. Medicare Shared Savings Program
    K. Value-Based Payment Modifier and Physician Feedback Program
    L. Updating Existing Standards for E-Prescribing Under Medicare 
Part D
    M. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration
IV. Collection of Information Requirements
V. Response to Comments
VI. Regulatory Impact Analysis
Regulatory Text

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:

AMA RUC American Medical Association/[Specialty Society] Relative 
[Value] Update Committee
ATRA American Taxpayer Relief Act (Pub. L. 112-240)
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)
CAH Critical access hospital
CF Conversion factor
CPT [Physicians] Current Procedural Terminology (CPT codes, 
descriptions and other data only are copyright 2012 American Medical 
Association. All rights reserved.)
CY Calendar year
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
eRx Electronic prescribing
FFS Fee-for-service
FR Federal Register
GPCI Geographic practice cost index
HCPCS Healthcare Common Procedure Coding System
MCTRJCA Middle Class Tax Relief and Job Creation Act of 2012 (Pub. 
L. 112-96)
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MFP Multi-Factor Productivity
MIEA-TRHCA The Medicare Improvements and Extension Act, Division B 
of the Tax Relief and Health Care Act (Pub. L. 109-432)
MIPPA Medicare Improvements for Patients and Providers Act (Pub. L. 
110-275)
MP Malpractice
MPPR Multiple procedure payment reduction
MMEA Medicare and Medicaid Extenders Act (Pub. L. 111-309)
MMSEA Medicare, Medicaid, and State Children's Health Insurance 
Program Extension Act (Pub. L. 110-73)
NPP Nonphysician practitioner
OBRA '89 Omnibus Budget Reconciliation Act of 1989
OBRA '90 Omnibus Budget Reconciliation Act of 1990
PC Professional component
PE Practice expense
PE/HR Practice expense per hour
PFS Physician Fee Schedule
PQRS Physician Quality Reporting System
RFA Regulatory Flexibility Act
RIA Regulatory impact analysis
RVU Relative value unit
SGR Sustainable growth rate
TAP Technical Advisory Panel
TC Technical component
TPTCCA Temporary Payroll Tax Cut Continuation Act (Pub. L. 112-78)
VBP Value-based purchasing

Addenda Available Only Through the Internet on the CMS Web Site

    The PFS Addenda along with other supporting documents and tables 
referenced in this proposed rule with comment period are available 
through the Internet on the CMS Web site at http://www.cms.gov/PhysicianFeeSched/. Click on the link on the left side of the screen 
titled, ``PFS Federal Regulations Notices'' for a chronological list of 
PFS Federal Register and other related documents. For the CY 2014 PFS 
proposed rule, refer to item CMS-1600-P. Readers who experience any 
problems accessing any of the Addenda or other documents referenced in 
this proposed rule and posted on the CMS Web site identified above 
should contact Elliot Isaac at (410) 786-4735.

CPT (Current Procedural Terminology) Copyright Notice

    Throughout this proposed rule, we use CPT codes and descriptions to 
refer to a variety of services. We note that CPT codes and descriptions 
are copyright 2012 American Medical Association. All Rights Reserved. 
CPT is a registered trademark of the American Medical Association 
(AMA). Applicable Federal Acquisition Regulations (FAR) and Defense 
Federal Acquisition Regulations (DFAR) apply.

I. Executive Summary and Background

A. Executive Summary

1. Purpose
    This major proposed rule would revise payment polices under the 
Medicare Physician Fee Schedule (PFS) and make other policy changes 
related to Medicare Part B payment. These changes would be applicable 
to services furnished in CY 2014.
2. Summary of the Major Provisions
    The Social Security Act (Act) requires us to establish payments 
under the PFS based on national uniform relative value units (RVUs) 
that account for the relative resources used in furnishing a service. 
The Act requires that RVUs be established for three categories of 
resources: work, practice expense (PE); and malpractice (MP) expense; 
and that we establish by regulation each year payment amounts for all 
physicians' services, incorporating geographic adjustments to reflect 
the variations in the costs of furnishing services in different 
geographic areas. In this major proposed rule, we propose RVUs for CY 
2014 for the PFS 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, as well as changes in the 
statute. In addition, this proposed rule includes discussions and 
proposals regarding:
     Misvalued PFS Codes.
     Telehealth Services.
     Applying Therapy Caps to Outpatient Therapy Services 
Furnished by CAHs.
     Requiring the Compliance with State law as a Condition of 
Payment for Services Furnished Incident to Physician and Other 
Practitioner Services.
     Revising the MEI based on MEI TAP Recommendations.

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     Updating the Ambulance Fee Schedule regulations.
     Updating the--
    ++ Physician Compare Web site.
    ++ Physician Quality Reporting System.
    ++ Electronic Health Record (EHR) Incentive Program.
    ++ Medicare Shared Savings Program.
     Budget Neutrality for the Chiropractic Services 
Demonstration.
     Physician Value-Based Payment Modifier and the Physician 
Feedback Reporting Program.
3. Summary of Costs and Benefits
    The Act requires that annual adjustments to PFS RVUs not cause 
annual estimated expenditures to differ by more than $20 million from 
what they would have been had the adjustments not been made. If 
adjustments to RVUs would cause expenditures to change by more than $20 
million, we must make adjustments to preserve budget neutrality. These 
adjustments can affect the distribution of Medicare expenditures across 
specialties. In addition, several proposed changes would affect the 
specialty distribution of Medicare expenditures. For most specialties 
the projected impacts are a small percentage change in Medicare 
payments under the PFS. For a few specialties a larger impact is 
projected. Diagnostic Testing Facilities, Independent Laboratory, 
Pathology, Radiation Oncology, and Radiation Therapy Centers are 
projected to have a change of 5 percent or more.

B. Background

    Since January 1, 1992, Medicare has paid for physicians' services 
under section 1848 of the Act, ``Payment for Physicians' Services.'' 
The system relies on national relative values that are established for 
work, PE, and MP, which are then adjusted for geographic cost 
variations. These values are multiplied by a conversion factor (CF) to 
convert the RVUs into payment rates. The concepts and methodology 
underlying the PFS were enacted as part of the Omnibus Budget 
Reconciliation Act of 1989 (OBRA '89) (Pub. L. 101-239, enacted on 
December 19, 1989), and the Omnibus Budget Reconciliation Act of 1990 
(OBRA '90 (Pub. L. 101-508, enacted on November 5, 1990). The final 
rule published on November 25, 1991 (56 FR 59502) set forth the first 
fee schedule used for payment for physicians' services.
    We note that throughout this proposed rule, unless otherwise noted, 
the term ``practitioner'' is used to describe both physicians and 
nonphysician practitioners who are permitted to bill Medicare under the 
PFS for services furnished to Medicare beneficiaries.
1. Development of the Relative Values
a. Work RVUs
    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 
under a cooperative agreement with the Department of Health and Human 
Services (HHS). In constructing the code-specific vignettes used in 
determining 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.
    We establish work RVUs for new and revised codes based, in part, on 
our review of recommendations received from the American Medical 
Association/Specialty Society Relative Value Update Committee (AMA 
RUC).
b. Practice Expense RVUs
    Initially, only the work RVUs were resource-based, and the PE and 
MP RVUs were based on average allowable charges. 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 physicians' 
service beginning in 1998. We were required to consider general 
categories of expenses (such as office rent and wages of personnel, but 
excluding malpractice expenses) comprising PEs. Originally, this new 
method was to be used beginning in 1998, but section 4505(a) of the 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted on August 5, 
1997) delayed 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 the charge-based PE RVUs to the resource-
based PE 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 CY 1999. Based on the requirement 
to transition to a resource-based system for PE over a 4-year period, 
payment rates were not fully based upon resource-based PE RVUs until CY 
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. (These data 
sources are described in greater detail in the CY 2012 final rule with 
comment period (76 FR 73033).)
    Separate PE RVUs are established for services furnished in facility 
settings, such as a hospital outpatient department (HOPD) or an 
ambulatory surgical center (ASC), and in nonfacility settings, such as 
a physician's office. The nonfacility RVUs reflect all of the direct 
and indirect PEs involved in furnishing a service described by a 
particular HCPCS code. The difference, if any, in these PE RVUs 
generally results in a higher payment in the nonfacility setting 
because in the facility settings some costs are borne by the facility. 
Medicare's payment to the facility (such as the OPPS payment to the 
HOPD) would reflect costs typically incurred by the facility. Thus, 
payment associated with those facility resources is not made under the 
PFS.
    Section 212 of the Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113, enacted on November 29, 1999) 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 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. We adopted a 4-
year transition to the new PE RVUs. This transition was completed for 
CY 2010. In the CY 2010 PFS final rule with comment period, we updated 
the practice expense per hour (PE/HR) data that are used in the 
calculation of PE RVUs for most specialties (74 FR 61749). In CY 2010, 
we began a 4-year

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transition to the new PE RVUs using the updated PE/HR data, which was 
completed for CY 2013.
c. Malpractice RVUs
    Section 4505(f) of the BBA amended section 1848(c) of the Act to 
require that we implement resource-based MP RVUs for services furnished 
on or after CY 2000. The resource-based MP RVUs were implemented in the 
PFS final rule with comment period published November 2, 1999 (64 FR 
59380). The MP RVUs are based on malpractice insurance premium data 
collected from commercial and physician-owned insurers from all the 
states, the District of Columbia, and Puerto Rico.
d. 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. Prior to CY 2013, we conducted 
periodic reviews of work RVUs and PE RVUs independently. We completed 
Five-Year Reviews of Work RVUs that were effective for calendar years 
1997, 2002, 2007, and 2012.
    While refinements to the direct PE inputs initially relied heavily 
on input from the AMA RUC Practice Expense Advisory Committee (PEAC), 
the shifts to the bottom-up PE methodology in CY 2007 and to the use of 
the updated PE/HR data in CY 2010 have resulted in significant 
refinements to the PE RVUs in recent years.
    In the CY 2012 PFS final rule with comment period (76 FR 73057), we 
finalized a proposal to consolidate reviews of work and PE RVUs under 
section 1848(c)(2)(B) of the Act and reviews of potentially misvalued 
codes under section 1848(c)(2)(K) of the Act into one annual process.
    With regard to MP RVUs, we completed Five-Year Reviews of MP that 
were effective in CY 2005 and CY 2010.
    In addition to the Five-Year Reviews, beginning for CY 2009, CMS 
and the AMA RUC have identified and reviewed a number of potentially 
misvalued codes on an annual basis based on various identification 
screens. This annual review of work and PE RVUs for potentially 
misvalued codes was supplemented by the amendments to section 1848 of 
the Act, as enacted by section 3134 of the Affordable Care Act, which 
requires the agency to periodically identify, review and adjust values 
for potentially misvalued codes with an emphasis on seven specific 
categories (see section II.B.2. of this proposed rule).
e. Application of Budget Neutrality to Adjustments of RVUs
    As described in section VI.C.1. of this proposed rule, in 
accordance with section 1848(c)(2)(B)(ii)(II) of the Act, if revisions 
to the RVUs would cause expenditures for the year to change by more 
than $20 million, we make adjustments to ensure that expenditures do 
not increase or decrease by more than $20 million.
2. Calculation of Payments Based on RVUs
    To calculate the payment for each physicians' service, the 
components of the fee schedule (work, PE, and MP RVUs) are adjusted by 
geographic practice cost indices (GPCIs) to reflect the variations in 
the costs of furnishing the services. The GPCIs reflect the relative 
costs of physician work, PE, and MP in an area compared to the national 
average costs for each component. (See section II.E.2 of this proposed 
rule for more information about GPCIs.)
    RVUs are converted to dollar amounts through the application of a 
CF, which is calculated based on a statutory formula by CMS's Office of 
the Actuary (OACT). The CF for a given year is calculated using (a) the 
productivity-adjusted increase in the Medicare Economic Index (MEI) and 
(b) the Update Adjustment Factor (UAF), which is calculated by taking 
into account the Medicare Sustainable Growth Rate (SGR), an annual 
growth rate intended to control growth in aggregate Medicare 
expenditures for physicians' services, and the allowed and actual 
expenditures for physicians' services. A more detailed discussion of 
the calculation of the CF, the SGR, and the MEI appears in the PFS 
final rule with comment period for each calendar year (the most recent 
begins on 77 FR 69131).
    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 MP x GPCI 
MP)] x CF
3. Separate Fee Schedule Methodology for Anesthesia Services
    Section 1848(b)(2)(B) of the Act specifies that the fee schedule 
amounts for anesthesia services are to be based on a uniform relative 
value guide, with appropriate adjustment of an anesthesia conversion 
factor, in a manner to assure that fee schedule amounts for anesthesia 
services are consistent with those for other services of comparable 
value. Therefore, there is a separate fee schedule methodology for 
anesthesia services. Specifically, we establish a separate conversion 
factor for anesthesia services and we utilize the uniform relative 
value guide, or base units, as well as time units, to calculate the fee 
schedule amounts for anesthesia services. Since anesthesia services are 
not valued using RVUs, a separate methodology for locality adjustments 
is also necessary. This involves an adjustment to the national 
anesthesia CF for each payment locality.
4. Most Recent Changes to the Fee Schedule
    The CY 2013 PFS final rule with comment period (77 FR 68892) 
implemented changes to the PFS and other Medicare Part B payment 
policies. It also finalized many of the CY 2012 interim RVUs and 
established interim RVUs for new and revised codes for CY 2013 to 
ensure that our payment system is updated to reflect changes in medical 
practice, coding changes, and the relative values of services. It also 
implemented certain statutory provisions including provisions of the 
Affordable Care Act (Pub. L. 111-148) and the Middle Class Tax Relief 
and Jobs Creation Act (MCTRJCA) (Pub. L. 112-96), including claims-
based data reporting requirements for therapy services.
    In the CY 2013 PFS final rule with comment period, we announced the 
following for CY 2013: The total PFS update of -26.5 percent; the 
initial estimate for the sustainable growth rate (SGR) of -19.7 
percent; and the CY 2013 CF of $25.0008. These figures were calculated 
based on the statutory provisions in effect on November 1, 2012, when 
the CY 2013 PFS final rule with comment period was issued.
    On January 2, 2013, the American Taxpayer Relief Act (ATRA) of 2012 
(Pub. L. 112-240) was signed into law. Section 601(a) of the ATRA 
specified a zero percent update to the PFS CF for CY 2013. As a result, 
the CY 2013 PFS conversion factor was revised to $34.0320. In addition, 
the ATRA extended and added several provisions affecting Medicare 
services furnished in CY 2013, including:
     Section 602--extending the 1.0 floor on the work 
geographic practice cost index through CY 2013;
     Section 603--extending the exceptions process for 
outpatient therapy caps through CY 2013, extending the application of 
the cap and manual medical review threshold to services furnished in 
the hospital outpatient department (OPD) through CY 2013, and requiring 
the counting of a proxy amount for therapy services

[[Page 43286]]

furnished in a Critical Access Hospital (CAH) toward the cap and 
threshold during CY 2013.

In addition to the changes effective for CY 2013, section 635 of ATRA 
revised the equipment utilization rate assumption for advanced imaging 
services furnished on or after January 1, 2014.
    On March 5, 2013, we submitted to the Medicare Payment Advisory 
Committee (MedPAC) an estimate of the SGR and CF applicable to Medicare 
payments for physicians' services for CY 2014, as required by section 
1848(d)(1)(E) of the Act. The actual values used to compute physician 
payments for CY 2014 will be based on later data and are scheduled to 
be published by November 1, 2013 as part of the CY 2014 PFS final rule 
with comment period.

II. Provisions of the Proposed Rule for PFS

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

1. Overview
    Practice expense (PE) is the portion of the resources used in 
furnishing a 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, amended section 
1848(c)(2)(C)(ii) of the Act to require us 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 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 otherwise 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 explanation of the PE methodology.
2. Practice Expense Methodology
a. Direct Practice Expense
    We determine the direct PE for a specific service by adding the 
costs of the direct resources (that is, the clinical staff, equipment, 
and supplies) typically involved with furnishing that service. The 
costs of the resources are calculated using the refined direct PE 
inputs assigned to each CPT code in our PE database, which are based on 
our review of recommendations received from the AMA RUC. For a detailed 
explanation of the 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 PEs incurred per hour worked 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). The 
AMA administered a new survey in CY 2007 and CY 2008, the Physician 
Practice Expense Information Survey (PPIS). The PPIS is a 
multispecialty, nationally representative, PE survey of both physicians 
and nonphysician practitioners (NPPs) paid under the PFS using a 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 health care professional 
groups. We believe the PPIS is the most comprehensive source of PE 
survey information available. We used the PPIS data to update the PE/HR 
data for the CY 2010 PFS for almost all of the Medicare-recognized 
specialties that participated in the survey.
    When we began using the PPIS data 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 transitioned its use over a 4-year period (75 percent old/25 
percent new for CY 2010, 50 percent old/50 percent new for CY 2011, 25 
percent old/75 percent new for CY 2012, and 100 percent new for CY 
2013) from the previous PE RVUs to the PE RVUs developed using the new 
PPIS data. As provided in the CY 2010 PFS final rule with comment 
period (74 FR 61751), the transition to the PPIS data was complete in 
CY 2013. Therefore, the CY 2014 PE RVUs are developed based entirely on 
the PPIS data, except as noted in this section.
    Section 1848(c)(2)(H)(i) of the Act 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 
survey 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 independent 
diagnostic testing facilities (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 developed from their supplemental survey data.
    Consistent with our past practice, the previous indirect PE/HR 
values from the supplemental surveys for these specialties were updated 
to CY 2006 using the MEI to put them on a comparable basis with the 
PPIS data.
    We also do not use the PPIS data for reproductive endocrinology and 
spine surgery since these specialties currently are not separately 
recognized by Medicare, nor do we have a method to blend the PPIS data 
with Medicare-recognized specialty data.
    We do not use the PPIS data for sleep medicine since there is not a 
full year of Medicare utilization data for that specialty given the 
specialty code was only available beginning in October 1, 2012. We 
anticipate using the PPIS data to create PE/HR for sleep medicine for 
CY 2015 when we will have a full year of data to make the calculations.
    Previously, we 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

[[Page 43287]]

for which we previously used a crosswalked PE/HR, we instead used 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.
    For registered dietician services, the resource-based PE RVUs have 
been calculated in accordance with the final policy that crosswalks the 
specialty to the ``All Physicians'' PE/HR data, as adopted in the CY 
2010 PFS final rule with comment period (74 FR 61752) and discussed in 
more detail in the CY 2011 PFS final rule with comment period (75 FR 
73183).
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.
(1) 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 involved with furnishing each 
of 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.
(2) 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 allocated 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 incorporated the survey data described earlier in the PE/HR 
discussion. The general approach to developing the indirect portion of 
the PE RVUs is described as follows:
     For a given service, we use the direct portion of the PE 
RVUs calculated as previously described and the average percentage that 
direct costs represent of total costs (based on survey data) across the 
specialties that furnish the service to determine an initial indirect 
allocator. In other words, the initial indirect allocator is calculated 
so that the direct costs equal the average percentage of direct costs 
of those specialties furnishing the service. For example, if the direct 
portion of the PE RVUs for a given service is 2.00 and direct costs, on 
average, represented 25 percent of total costs for the specialties that 
furnished the service, the initial indirect allocator would be 
calculated so that it equals 75 percent of the total PE RVUs. Thus, in 
this example the initial indirect allocator would equal 6.00, resulting 
in a total PE RVUs of 8.00 (2.00 is 25 percent of 8.00 and 6.00 is 75 
percent of 8.00).
     Next, we 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 4.00 (since the 4.00 work RVUs are greater than the 1.50 
clinical labor portion) to the initial indirect allocator of 6.00 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.
     Next, we incorporate the specialty-specific indirect PE/HR 
data into the calculation. In our example, if based on the survey data, 
the average indirect cost of the specialties furnishing the first 
service with an allocator of 10.00 was half of the average indirect 
cost of the specialties furnishing the second service with an indirect 
allocator of 5.00, 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. 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 in calculating the 
PE RVUs for services furnished in a facility, we do not include 
resources that would generally not be provided by physicians when 
furnishing the service in a facility, the facility PE RVUs are 
generally lower than the nonfacility PE RVUs. Medicare makes a separate 
payment to the facility for its costs of furnishing a service.
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). The PC and 
TC may be furnished independently or by different providers, or they 
may be furnished together as a ``global'' service. When services have 
PC and TC components that can be billed separately, the payment for the 
global service 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 service, TCs, 
and PCs; that is, we apply the same weighted average indirect 
percentage factor to allocate indirect expenses to the global service, 
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. 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).
(1) 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 calculated from 
the surveys.
(2) 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. For CY 2014, we adjusted the 
direct cost pool to match the new PE share of the MEI, as discussed in 
section II.D. of this rule.

[[Page 43288]]

    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 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.
(3) 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 service.
    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 Table 5, 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 RVU, clinical labor PE 
RVU, 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. For CY 
2014, we adjusted the indirect cost pool to match the new PE share of 
the MEI, as discussed in section II.D. of this rule.
    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 furnished 
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 service, 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 service.)
    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.
(4) 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 
and the MEI revision adjustment.
    The final PE BN adjustment is calculated by comparing the results 
of Step 18 to the current pool of PE RVUs (prior to the MEI revision 
adjustment and the OPPS/ASC cap redistribution). This final BN 
adjustment is required to redistribute RVUs from step 18 to all PE RVUs 
in the PFS, and 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'' later in this 
section.) As discussed in section II.D. of this proposed rule, we are 
revising the Medicare Economic Index (MEI) for CY 2014.
    Step 19: Consistent with the proposed policy addressed in section 
II.A.4. of this proposed rule, apply the OPPS/ASC cap to codes subject 
to the cap and redistribute the RVU reduction to the PE RVUs for all 
other services.
    (5) 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 43289]]



       Table 1--Specialties Excluded From Ratesetting Calculation
------------------------------------------------------------------------
    Specialty code                    Specialty description
------------------------------------------------------------------------
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[dash]orthotist.
54....................  Medical supply company not included in 51, 52,
                         or 53.
55....................  Individual certified orthotist.
56....................  Individual certified prosthestist.
57....................  Individual certified prosthetist[dash]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.
97....................  Physician assistant.
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 consistent with current payment policy as 
implemented in claims processing. 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. Similarly, for those services to which volume 
adjustments are made to account for the payment modifiers, time 
adjustments are applied as well. For time adjustments to surgical 
services, the intraoperative portion in the physician time file is 
used; where it is not present, the intraoperative percentage from the 
payment files used by contractors to process Medicare claims is used 
instead. Where neither is available, we use the payment adjustment 
ratio to adjust the time accordingly. Table 2 details the manner in 
which the modifiers are applied.

                         Table 2--Application of Payment Modifiers to Utilization Files
----------------------------------------------------------------------------------------------------------------
               Modifier                      Description           Volume adjustment         Time adjustment
----------------------------------------------------------------------------------------------------------------
80, 81, 82...........................  Assistant at Surgery...  16%....................  Intraoperative portion.
AS...................................  Assistant at Surgery--   14% (85% * 16%)........  Intraoperative portion.
                                        Physician Assistant.
50 or LT and RT......................  Bilateral Surgery......  150%...................  150% of physician time.
51...................................  Multiple Procedure.....  50%....................  Intraoperative portion.
52...................................  Reduced Services.......  50%....................  50%.
53...................................  Discontinued Procedure.  50%....................  50%.
54...................................  Intraoperative Care      Preoperative +           Preoperative +
                                        only.                    Intraoperative           Intraoperative
                                                                 Percentages on the       portion.
                                                                 payment files used by
                                                                 Medicare contractors
                                                                 to process Medicare
                                                                 claims.

[[Page 43290]]

 
55...................................  Postoperative Care only  Postoperative            Postoperative portion.
                                                                 Percentage on the
                                                                 payment files used by
                                                                 Medicare contractors
                                                                 to process Medicare
                                                                 claims.
62...................................  Co-surgeons............  62.5%..................  50%.
66...................................  Team Surgeons..........  33%....................  33%.
----------------------------------------------------------------------------------------------------------------

    We also make adjustments to volume and time that correspond to 
other payment rules, including special multiple procedure endoscopy 
rules and multiple procedure payment reductions (MPPR). We note that 
section 1848(c)(2)(B)(v) of the Act exempts certain reduced payments 
for multiple imaging procedures and multiple therapy services from the 
BN calculation under section 1848(c)(2)(B)(ii)(II) of the Act. These 
MPPRs are not included in the development of the RVUs.
    For anesthesia services, we do not apply adjustments to volume 
since the average allowed charge is used when simulating RVUs, and 
therefore, includes all adjustments. A time adjustment of 33 percent is 
made only for medical direction of two to four cases since that is the 
only situation where time units are duplicative.
     Work RVUs: The setup file contains the work RVUs from this 
proposed rule with comment period.
(6) 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)[caret] 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 = variable, see discussion below.
price = price of the particular piece of equipment.
life of equipment = useful life of the particular piece of 
equipment.
maintenance = factor for maintenance; 0.05.
interest rate = variable, see discussion below.

    Usage: We currently use an equipment utilization rate assumption of 
50 percent for most equipment, with the exception of expensive 
diagnostic imaging equipment. For expensive diagnostic imaging 
equipment, which is equipment priced at over $1 million (for example, 
computed tomography (CT) and magnetic resonance imaging (MRI) 
scanners), we use an equipment utilization rate assumption of 75 
percent. Section 1848(b)(4)(C) of the Act, as modified by section 635 
of the America Taxpayer Relief Act of 2012 (Pub. L. 112-240, enacted on 
January 2, 2013) (ATRA), requires that for fee schedules established 
for CY 2014 and subsequent years, in the methodology for determining PE 
RVUs for expensive diagnostic imaging equipment, the Secretary shall 
use a 90 percent assumption. The provision also requires that the 
reduced expenditures attributable to this change in the utilization 
rate for CY 2014 and subsequent years shall not be taken into account 
when applying the BN limitation on annual adjustments described in 
section 1848(c)(2)(B)(ii)(II) of the Act. We are applying the 90 
percent utilization rate assumption in CY 2014 to all of the services 
to which the 75 percent equipment utilization rate assumption applied 
in CY 2013. These services are listed in a file called ``CY 2014 CPT 
Codes Subject to 90 Percent Usage Rate,'' available on the CMS Web site 
under downloads for the CY 2014 PFS proposed rule at http://www.cms.gov/physicianfeesched/downloads/. These codes are also 
displayed in Table 3.

   Table 3--CPT Codes Subject to 90 Percent Equipment Utilization Rate
                               Assumption
------------------------------------------------------------------------
             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.
70496............................  Ct angiography, head.
70498............................  Ct angiography, neck.
70540............................  Mri orbit/face/neck w/o dye.
70542............................  Mri orbit/face/neck w/dye.
70543............................  Mri orbit/face/neck w/o & w/dye.
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.
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.
71275............................  Ct angiography, chest.
71550............................  Mri chest w/o dye.
71551............................  Mri chest w/dye.
71552............................  Mri chest w/o & w/dye.
71555............................  Mri angio chest w/or w/o 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.
72159............................  Mr angio spone w/o&w/dye.
72191............................  Ct angiography, pelv 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.
72198............................  Mri angio pelvis w/or w/o dye.
73200............................  Ct upper extremity w/o dye.
73201............................  Ct upper extremity w/dye.
73202............................  Ct upper extremity w/o & w/dye.
73206............................  Ct angio upper extr 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.
73225............................  Mr angio upr extr w/o&w/dye.
73700............................  Ct lower extremity w/o dye.
73701............................  Ct lower extremity w/dye.

[[Page 43291]]

 
73702............................  Ct lower extremity w/o & w/dye.
73706............................  Ct angio lower ext w/o & w/dye.
73718............................  Mri lower extremity w/o dye.
73719............................  Mri lower extremity w/dye.
73720............................  Mri lower ext w/& w/o dye.
73721............................  Mri joint of lwr extre w/o dye.
73722............................  Mri joint of lwr extr w/dye.
73723............................  Mri joint of lwr extr w/o & w/dye.
73725............................  Mr angio lower ext w or w/o dye.
74150............................  Ct abdomen w/o dye.
74160............................  Ct abdomen w/dye.
74170............................  Ct abdomen w/o & w/dye.
74174............................  Ct angiography, abdomen and pelvis w/
                                    o & w/dye.
74175............................  Ct angiography, abdom w/o & w/dye.
74176............................  Ct abdomen and pelvis w/o dye.
74177............................  Ct abdomen and pelvis w/dye.
74178............................  Ct abdomen and pelvis w/and w/o dye.
74181............................  Mri abdomen w/o dye.
74182............................  Mri abdomen w/dye.
74183............................  Mri abdomen w/o and w/dye.
74185............................  Mri angio, abdom w/or w/o 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.
75565............................  Card mri vel flw map add-on.
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.
75635............................  Ct angio abdominal arteries.
76380............................  CAT scan follow up study.
77058............................  Mri, one breast.
77059............................  Mri, broth breasts.
77078............................  Ct bone density, axial.
77084............................  Magnetic image, bone marrow.
------------------------------------------------------------------------

    Interest Rate: In the CY 2013 final rule with comment period (77 FR 
68902), we updated the interest rates used in developing an equipment 
cost per minute calculation. The interest rate was based on the Small 
Business Administration (SBA) maximum interest rates for different 
categories of loan size (equipment cost) and maturity (useful life). 
The interest rates are listed in Table 4. See 77 FR 68902 for a 
thorough discussion of this issue.

                   Table 4--SBA Maximum Interest Rates
------------------------------------------------------------------------
                                                               Interest
               Price                       Useful life           rate
                                                              (percent)
------------------------------------------------------------------------
<$25K..............................  <7 Years..............         7.50
$25K to $50K.......................  <7 Years..............         6.50
>$50K..............................  <7 Years..............         5.50
<$25K..............................  7+ Years..............         8.00
$25K to $50K.......................  7+ Years..............         7.00
>$50K..............................  7+ Years..............         6.00
------------------------------------------------------------------------
See 77 FR 68902 for a thorough discussion of this issue.


[[Page 43292]]


                                                              Table 5--Calculation of PE RVUs Under Methodology for Selected Codes
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     99213       33533
                                                                                                    Office       CABG,       71020     71020-TC    71020-26   93000 ECG,  93005 ECG,  93010 ECG,
                                           Step                Source              Formula        visit, est   arterial,   Chest x-    Chest x-    Chest x-    complete     tracing   report non-
                                                                                                     non-       single     ray non-    ray non-    ray non-      non-        non-      facility
                                                                                                   facility    facility    facility    facility    facility    facility    facility
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Labor cost (Lab).............  Step 1.............  AMA................  ...................       13.32       77.52        5.74        5.74        0.00        6.12        6.12        0.00
(2) Supply cost (Sup)............  Step 1.............  AMA................  ...................        2.98        0.00        3.39        3.39        0.00        1.19        1.19        0.00
(3) Equipment cost (Eqp).........  Step 1.............  AMA................  ...................        0.17        0.58        7.24        7.24        0.00        0.11        0.11        0.00
(4) Direct cost (Dir)............  Step 1.............  ...................  =(1)+(2)+(3).......       16.48       78.10       16.38       16.38        0.00        7.42        7.42        0.00
(5) Direct adjustment (Dir. Adj.)  Steps 2-4..........  See footnote*......  ...................      0.5427      0.5427      0.5427      0.5427      0.5427      0.5427      0.5427      0.5427
(6) Adjusted Labor...............  Steps 2-4..........  =Labor * Dir Adj...  =(1)*(5)...........        7.23       42.07        3.11        3.11        0.00        3.32        3.32        0.00
(7) Adjusted Supplies............  Steps 2-4..........  =Eqp * Dir Adj.....  =(2)*(5)...........        1.62        0.00        1.84        1.84        0.00        0.65        0.65        0.00
(8) Adjusted Equipment...........  Steps 2-4..........  =Sup * Dir Adj.....  =(3)*(5)...........        0.09        0.32        3.93        3.93        0.00        0.06        0.06        0.00
(9) Adjusted Direct..............  Steps 2-4..........  ...................  =(6)+(7)+(8).......        8.94       42.39        8.89        8.89        0.00        4.03        4.03        0.00
(10) Conversion Factor (CF)......  Step 5.............  PFS................  ...................     34.0230     34.0230     34.0230     34.0230     34.0230     34.0230     34.0230     34.0230
(11) Adj. labor cost converted...  Step 5.............  =(Lab * Dir Adj)/CF  =(6)/(10)..........        0.21        1.24        0.09        0.09        0.00        0.10        0.10        0.00
(12) Adj. supply cost converted..  Step 5.............  =(Sup * Dir Adj)/CF  =(7)/(10)..........        0.05        0.00        0.05        0.05        0.00        0.02        0.02        0.00
(13) Adj. equipment cost           Step 5.............  =(Eqp * Dir Adj)/CF  =(8)/(10)..........        0.00        0.01        0.12        0.12        0.00        0.00        0.00        0.00
 converted.
(14) Adj. direct cost converted..  Step 5.............  ...................  =(11)+(12)+(13)....        0.26        1.25        0.26        0.26        0.00        0.12        0.12        0.00
(15) Work 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............  ...................        0.31        0.18        0.31        0.31        0.31        0.31        0.31        0.31
(17) Ind--pct....................  Steps 6,7..........  Surveys............  ...................        0.69        0.82        0.69        0.69        0.69        0.69        0.69        0.69
(18) Ind. Alloc. Formula (1st      Step 8.............  See Step 8.........  ...................      ((14)/      ((14)/      ((14)/      ((14)/      ((14)/      ((14)/      ((14)/      ((14)/
 part).                                                                                            (16)*(17)   (16)*(17)   (16)*(17)   (16)*(17)   (16)*(17)   (16)*(17)   (16)*(17)   (16)*(17)
(19) Ind. Alloc.(1st part).......  Step 8.............  ...................  See 18.............        0.79        5.87        0.64        0.64        0.00        0.29        0.29        0.00
(20) Ind. Alloc. Formula (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        0.31        0.09        0.22        0.27        0.10        0.17
(22) Indirect Allocator (1st +     Step 8.............  ...................  =(19)+(21).........        1.76       39.62        0.95        0.73        0.22        0.56        0.39        0.17
 2nd).
(23) Indirect Adjustment (Ind.     Steps 9-11.........  See Footnote**.....  ...................      0.3826      0.3826      0.3826      0.3826      0.3826      0.3826      0.3826      0.3826
 Adj.).
(24) Adjusted Indirect Allocator.  Steps 9-11.........  =Ind Alloc * Ind     ...................        0.67       15.16        0.36        0.28        0.08        0.21        0.15        0.07
                                                         Adj.
(25) Ind. Practice Cost Index      Steps 12-16........  ...................  ...................        1.08        0.77        0.93        0.93        0.93        0.91        0.91        0.91
 (IPCI).
(26) Adjusted Indirect...........  Step 17............  = Adj.Ind Alloc *    =(24)*(25).........        0.73       11.60        0.34        0.26        0.08        0.19        0.14        0.06
                                                         PCI.
(27) Pre-Cap PE RVU..............  Step 18............  =(Adj Dir + Adj      =((14)+(26)) *             0.98       12.78        0.61        0.53        0.08        0.32        0.26        0.06
                                                         Ind) * Other Adj.    Other Adj)***.
(28) OPPS/ASC Cap Adj............  Step 19............  PFS................  ...................       1.016       1.016       1.016       1.016       1.016       1.016       1.016       1.016
(29) Final PE RVU................  Step 19............  PE RVU * OPPS/ASC    (27)*(28)..........        1.00       12.99        0.62        0.54        0.08        0.32        0.26        0.06
                                                         Cap Adj.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: PE RVUs in Table 5, row 28, 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]
*** The other adjustment includes adjustments for the changes in the equipment utilization rate for certain services and the MEI revisions.
Note: The use of any particular conversion factor (CF) in Table 5 to illustrate the PE calculation has no effect on the resulting RVUs.


[[Page 43293]]

3. Changes to Direct PE Inputs for Specific Services
    In this section, we discuss other CY 2014 proposals and revisions 
related to direct PE inputs for specific services. The proposed 
revisions are included in the proposed rule CY 2014 direct PE database, 
which is available on the CMS Web site under the supporting data files 
for the CY 2014 PFS proposed rule with comment period at www.cms.gov/PhysicianFeeSched/.
a. Anomalous Supply Inputs
    In the CY 2013 PFS final rule with comment period, we established 
interim final direct PE inputs based on acceptance, with refinement, of 
recommendations submitted by the AMA RUC. Although we generally address 
public comments on the prior year's interim final direct PE inputs in 
the following year's final rule with comment period, several commenters 
raised an issue regarding anomalous supply items that we believe is 
best addressed through proposed revisions to the direct PE inputs.
    For the CY 2013 interim final direct PE inputs for a series of 
codes that describe six levels of surgical pathology services (CPT 
codes 88300, 88302, 88304, 88305, 88307, 88309), we did not accept the 
AMA RUC recommendation to create two new direct PE supply inputs 
because we did not consider these items to be disposable supplies (77 
FR 69074). The recommended new items were called ``specimen, solvent, 
and formalin disposal cost,'' and ``courier transportation costs.'' In 
the CY 2013 PFS final rule with comment period, we explained that 
neither the specimen and supply disposal nor courier costs for 
transporting specimens are appropriately considered disposable medical 
supplies. Instead, we stated these costs are incorporated into the PE 
RVUs for these services through the indirect PE allocation. We also 
noted that the current direct PE inputs for these and similar services 
across the PFS do not include these kinds of costs as disposable 
supplies.
    Several commenters noted that, contrary to our assertion in the 
final rule with comment period, there are a few items incorporated in 
the direct PE input database as ``supplies'' that are no more 
disposable supplies than the new items recommended by the AMA RUC for 
the surgical pathology codes. These commenters identified seven supply 
inputs in particular that they believe are analogous to the items that 
we did not accept in establishing CY 2013 interim final direct PE 
inputs. These items and their associated HCPCS codes are listed in 
Table 6.

                 Table 6--Items Identified by Commenters
------------------------------------------------------------------------
   CMS supply code        Item description        Associated CPT codes
------------------------------------------------------------------------
SK106...............  device shipping cost....  93271, 93229, 93268.
SK112...............  Federal Express cost      64650, 88363, 64653.
                       (average across all
                       zones).
SK113...............  communication, wireless   93229.
                       per service.
SK107...............  fee, usage, cycletron/    77423, 77422.
                       accelerator,
                       gammaknife, Lincac SRS
                       System.
SK110...............  fee, image analysis.....  96102, 96101, 99174.
SK111...............  fee, licensing,           96102, 96101, 96103,
                       computer, psychology.     96120.
SD140...............  bag system, 1000ml (for   93451, 93452, 93453,
                       angiography waste         93454, 93455, 93456,
                       fluids).                  93457, 93458, 93459,
                                                 93460, 93461.
------------------------------------------------------------------------

    We reviewed each of these items for consistency with the general 
principles of the PE methodology regarding the consistent 
categorization of all costs. Within the PE methodology, all costs other 
than clinical labor, disposable supplies, and medical equipment are 
considered indirect costs. For six of the items contained in Table 6, 
we agree with the commenters that the items should not be considered 
disposable supplies. We believe that these items are more appropriately 
categorized as indirect PE costs, which are reflected in the allocation 
of indirect PE RVUs rather than direct PE. Therefore, we are proposing 
to remove the following six items from the direct PE input database for 
CY 2014: ``device shipping cost'' (SK106); ``Federal Express cost 
(average across all zones)'' (SK112); ``communication, wireless per 
service'' (SK113); ``fee, usage, cycletron/accelerator, gammaknife, 
Lincac SRS System'' (SK107); ``fee, image analysis'' (SK110); and 
``fee, licensing, computer, psychology'' (SK111). The CY 2014 proposed 
direct PE input database and Addendum B of this proposed rule reflect 
these proposed revisions.
    In the case of the supply item called ``bag system, 1000ml (for 
angiography waste fluids)'' (SD140), we do not agree with the 
commenters that this item is analogous to the specimen disposal costs 
recommended for the surgical pathology codes. This supply input 
represents only the costs of the disposable material items associated 
with the removal of waste fluids that typically result from a 
particular procedure. In contrast, the item recommended by the AMA RUC 
for surgical pathology consisted of an amortized portion of a specimen 
disposal contract that includes costs for resources such as labor and 
transportation. Furthermore, we do not believe that the specimen 
disposal contract is attributable to individual procedures within the 
established PE methodology. We believe that a disposable supply is one 
that is attributable, in its entirety, to an individual patient for a 
particular service. An amortized portion of a specimen disposal 
contract does not meet these criteria. Accordingly, as stated in the CY 
2013 final rule with comment period, we did not accept the AMA RUC 
recommendation to create a new supply item related to specimen disposal 
costs. We believe that many physician offices and other nonfacility 
settings where Medicare beneficiaries receive services incur costs 
related to waste management or other service contracts, but none of 
these costs are currently incorporated into the PE methodology as 
disposable supplies. Instead, these costs are appropriately categorized 
as indirect costs and are reflected in the PE RVUs through the 
allocation of indirect PE. We are clarifying that we believe that 
supply costs related to specimen disposal attributable to individual 
services may be appropriately categorized as disposable supplies, but 
that specimen disposal costs related to an allocated portion of service 
contracts that cannot be attributed to individual services should not 
be incorporated into the direct PE input database as disposable 
supplies.

[[Page 43294]]

    Moreover, because do not agree with commenters that the ``bag 
system, 1000ml (for angiography waste fluids)'' (SD140) is analogous to 
a specimen disposal contract for the reasons state above, we continue 
to believe that SD140 is a direct expense. Accordingly, we are not 
removing SD140 from the direct PE input database. Additionally, we 
anticipate responding to these and other aspects of the comments 
regarding the direct PE inputs for the surgical pathology services in 
the CY 2014 PFS final rule with comment period.
b. Direct PE Input Refinements based on Routine Data Review
    In reviewing the direct PE input database, we have identified 
several discrepancies that we believe should be addressed for CY 2014. 
In the following paragraphs, we identify the nature of these 
discrepancies, the affected codes, and the refinements displayed in the 
CY 2014 proposed direct PE input database. As part of our internal 
review of information in the direct PE input database, we identified 
supply items that appeared without quantities for CPT code 51710 
(Change of cystostomy tube; complicated). Upon reviewing these items we 
believe that the codes should include the items at the quantities 
listed in Table 7.

         Table 7--Supply Items and Quantities for CPT Code 51710
------------------------------------------------------------------------
                                                                   NF
        Supply code              Description of supply item     quantity
------------------------------------------------------------------------
SA069......................  tray, suturing...................       1.0
SB007......................  drape, sterile barrier 16in x           1.0
                              29in.
SC029......................  needle, 18-27g...................       1.0
SC051......................  syringe 10-12ml..................       1.0
SD024......................  catheter, Foley..................       1.0
SD088......................  Guidewire........................       1.0
SF036......................  suture, nylon, 3-0 to 6-0, c.....       1.0
SG055......................  gauze, sterile 4in x 4in.........       1.0
SG079......................  tape, surgical paper 1in                6.0
                              (Micropore).
SH075......................  water, sterile inj...............       3.0
SJ032......................  lubricating jelly (K-Y) (5gm uou)       1.0
SJ041......................  povidone soln (Betadine).........      20.0
------------------------------------------------------------------------

    Upon reviewing the direct PE inputs for CPT code 51710 and the 
related code 51705 (Change of cystostomy tube; simple), we also noted 
that the direct PE input database includes an anomalous 0.5 minutes of 
clinical labor time in the post-service period. We believe that this 
small portion of clinical labor time is the result of a rounding error 
in our data and should be removed from the direct PE input database.
    During our review of the data, we noted an invalid supply code 
(SM037) that appears in the direct PE input database for CPT codes 
88312 and 88313. Upon review of the code, we believe that the supply 
item called ``wipes, lens cleaning (per wipe) (Kimwipe)'' (SM027) 
should be included in the code instead of the invalid code. The CY 2014 
proposed direct PE input database reflects these proposed revisions.
    Additionally, we conducted a routine review of the codes valued in 
the nonfacility setting for which moderate sedation is inherent in the 
procedure. Consistent with the standard moderate sedation package 
finalized in the CY 2012 PFS final rule with comment period (76 FR 
73043), we have made minor adjustments to the nurse time and equipment 
time of 18 of these codes. These codes appear in Table 8, and the CY 
2014 proposed direct PE input database reflects the proposed refined 
inputs for moderation sedation.

    Table 8--Codes With Minor Adjustments to Moderate Sedation Inputs
------------------------------------------------------------------------
             CPT code                            Descriptor
------------------------------------------------------------------------
31629.............................  Bronchoscopy/needle bx each.
31645.............................  Bronchoscopy clear airways.
31646.............................  Bronchoscopy reclear airway.
32405.............................  Percut bx lung/mediastinum.
32550.............................  Insert pleural cath.
35471.............................  Repair arterial blockage.
37183.............................  Remove hepatic shunt (tips).
37210.............................  Embolization uterine fibroid.
43453.............................  Dilate esophagus.
43458.............................  Dilate esophagus.
44394.............................  Colonoscopy w/snare.
45340.............................  Sig w/balloon dilation.
47000.............................  Needle biopsy of liver.
47525.............................  Change bile duct catheter.
49411.............................  Ins mark abd/pel for rt perq.
50385.............................  Change stent via transureth.
50386.............................  Remove stent via transureth.
57155.............................  Insert uteri tandem/ovoids.
93312.............................  Echo transesophageal.
93314.............................  Echo transesophageal.
G0341.............................  Percutaneous islet celltrans.
------------------------------------------------------------------------

c. Adjustments to Pre-Service Clinical Labor Minutes
    We recently received a recommendation from the AMA RUC regarding 
appropriate pre-service clinical labor minutes in the facility setting 
for codes with 000 day global periods. In general, the AMA RUC has 
recommended that codes with 000 day global period include a maximum of 
30 minutes of clinical labor time in the pre-service period in the 
facility setting. The AMA RUC identified 48 codes that currently 
include more clinical labor time than this recommended maximum and 
provided us with recommended pre-service clinical labor minutes in the 
facility setting of 30 minutes or fewer for these 48 codes. We reviewed 
the AMA RUC's recommendation and agree that the recommended reductions 
would be appropriate to maintain relativity with other 000 day global 
codes. Therefore, we propose to amend the pre-service clinical labor 
minutes for the codes listed in Table 9, consistent with the AMA RUC 
recommendation. The proposed CY 2014 direct PE input database reflects 
this proposal.

  Table 9--000-Day Global Codes with Proposed Changes to Pre-Service CL
                                  Time
------------------------------------------------------------------------
                                   Existing CL
                                   pre-service   Proposed CL pre-service
   CPT code    Short descriptor     facility       facility minutes (AMA
                                     minutes       RUC  recommendation)
------------------------------------------------------------------------
20900........  Removal of bone               60                       30
                for graft.
20902........  Removal of bone               60                       30
                for graft.
33224........  Insert pacing                 35                       30
                lead & connect.
33226........  Reposition l                  35                       30
                ventric lead.
36800........  Insertion of                  60                        0
                cannula.
36861........  Cannula                       37                        0
                declotting.
37202........  Transcatheter                 45                        0
                therapy infuse.
50953........  Endoscopy of                  60                       30
                ureter.

[[Page 43295]]

 
50955........  Ureter endoscopy              60                       30
                & biopsy.
51726........  Complex                       41                       30
                cystometrogram.
51785........  Anal/urinary                  34                       30
                muscle study.
52250........  Cystoscopy and                37                       30
                radiotracer.
52276........  Cystoscopy and                32                       30
                treatment.
52277........  Cystoscopy and                37                       30
                treatment.
52282........  Cystoscopy                    31                       30
                implant stent.
52290........  Cystoscopy and                31                       30
                treatment.
52300........  Cystoscopy and                36                       30
                treatment.
52301........  Cystoscopy and                36                       30
                treatment.
52334........  Create passage                31                       30
                to kidney.
52341........  Cysto w/ureter                42                       30
                stricture tx.
52342........  Cysto w/up                    42                       30
                stricture tx.
52343........  Cysto w/renal                 42                       30
                stricture tx.
52344........  Cysto/uretero                 55                       30
                stricture tx.
52345........  Cysto/uretero w/              55                       30
                up stricture.
52346........  Cystouretero w/               55                       30
                renal strict.
52351........  Cystouretero &                45                       30
                or pyeloscope.
52352........  Cystouretero w/               50                       30
                stone remove.
52353........  Cystouretero w/               50                       30
                lithotripsy.
52354........  Cystouretero w/               50                       30
                biopsy.
52355........  Cystouretero w/               50                       30
                excise tumor.
54100........  Biopsy of penis.              33                       30
61000........  Remove cranial                60                       15
                cavity fluid.
61001........  Remove cranial                60                       15
                cavity fluid.
61020........  Remove brain                  60                       15
                cavity fluid.
61026........  Injection into                60                       15
                brain canal.
61050........  Remove brain                  60                       15
                canal fluid.
61055........  Injection into                60                       15
                brain canal.
61070........  Brain canal                   60                       15
                shunt procedure.
62268........  Drain spinal                  36                       30
                cord cyst.
67346........  Biopsy eye                    42                       30
                muscle.
68100........  Biopsy of eyelid              32                       30
                lining.
93530........  Rt heart cath                 35                       30
                congenital.
93531........  R & l heart cath              35                       30
                congenital.
93532........  R & l heart cath              35                       30
                congenital.
93533........  R & l heart cath              35                       30
                congenital.
93580........  Transcath                     35                       30
                closure of asd.
93581........  Transcath                     35                       30
                closure of vsd.
------------------------------------------------------------------------

d. Price Adjustment for Laser Diode
    It has come to our attention that the price associated with the 
equipment item called ``laser, diode, for patient positioning (Probe)'' 
(ER040) in the direct PE input database is $7,678 instead of $18,160 as 
listed in the CY 2013 PFS final rule with comment period (77 FR 68922). 
The CY 2014 proposed direct PE input database reflects the updated 
price for the equipment item.
e. Direct PE Inputs for Stereotactic Radiosurgery (SRS) Services (CPT 
Codes 77372 and 77373)
    Since 2001, Medicare has used HCPCS G-codes, in addition to the CPT 
codes, for stereotactic radiosurgery (SRS) to distinguish robotic and 
non-robotic methods of delivery. Based on our review of the current SRS 
technology, it is our understanding that most services currently 
furnished with linac-based SRS technology, including services currently 
billed using the non-robotic codes, incorporate some type of robotic 
feature. Therefore, we believe that it is no longer necessary to 
continue to distinguish robotic versus non-robotic linac-based SRS 
through the HCPCS G-codes. For purposes of the hospital outpatient 
prospective payment system (OPPS), CMS is proposing to replace the 
existing four SRS HCPCS G-codes G0173 (Linear accelerator based 
stereotactic radiosurgery, complete course of therapy in one session), 
G0251 (Linear accelerator based stereotactic radiosurgery, delivery 
including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, maximum five sessions per course 
of treatment), G0339 (Image-guided robotic linear accelerator-based 
stereotactic radiosurgery, complete course of therapy in one session or 
first session of fractionated treatment), and G0340 (Image-guided 
robotic linear accelerator-based stereotactic radiosurgery, delivery 
including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, second through fifth sessions, 
maximum five sessions per course of treatment), with the SRS CPT codes 
77372 (Radiation treatment delivery, stereotactic radiosurgery (SRS), 
complete course of treatment of cranial lesion(s) consisting of 1 
session; linear accelerator based) and 77373 (Stereotactic body 
radiation therapy, treatment delivery, per fraction to 1 or more 
lesions, including image guidance, entire course not to exceed 5 
fractions) that do not distinguish between robotic and non-robotic 
methods of delivery. We refer readers to section II.C.3 of the CY 2014 
OPPS proposed rule for more discussion of that proposal. We also refer 
readers to the CY 2007 OPPS final rule (71 FR 68023 through 68026) for 
a

[[Page 43296]]

detailed discussion of the history of the SRS codes.
    Two of the four current SRS G-codes are paid in the nonfacility 
setting through the PFS. These two codes, G0339 and G0340, describe 
robotic SRS treatment delivery and are contractor-priced. CPT codes 
77372 and 77373, which describe SRS treatment delivery without regard 
to the method of delivery, are currently paid in the nonfacility 
setting based on resource-based RVUs developed through the standard PE 
methodology. If the CY 2014 OPPS proposal is implemented, it would 
appear that there would no longer be a need for G-codes to describe 
robotic SRS treatment and delivery. Prior to eliminating the 
contractor-priced G-codes and using the existing CPT code for PFS 
payment of services previously reported using G-codes, we believe that 
it would be appropriate to ensure that the direct PE inputs used to 
develop PE RVUs for CPT codes 77372 and 77373 accurately reflect the 
typical resources used in furnishing the services that would be 
reported in the non-facility setting in the absence of the robotic G-
codes. Therefore, for CY 2014, we are not proposing to replace the 
contractor-priced G-codes for PFS payment. We are seeking comment from 
the public and stakeholders, including the AMA RUC, regarding whether 
or not the direct PE inputs for CPT codes 77372 and 77373 would 
continue to accurately estimate the resources used in furnishing 
typical SRS delivery were there no coding distinction between robotic 
and non-robotic methods of delivery.
3. Using OPPS and ASC Rates in Developing PE RVUs
    As we explain in section II.A.2.d of this proposed rule, we 
typically establish two PE RVUs for procedures that can be furnished in 
either a nonfacility setting, like a physician's office, or facility 
setting, like a hospital. The nonfacility RVUs reflect all of the 
direct and indirect practice expenses of providing a particular service 
when the entire service is furnished in a nonfacility setting. The 
facility RVUs are designed to reflect the direct and indirect practice 
expenses typically associated with furnishing a particular service in a 
setting, such as a hospital or ASC where those facilities incur a 
portion or all of the costs. Thus, the difference between the facility 
and nonfacility RVUs is because Medicare makes a separate payment to 
the facility for its costs of furnishing a service when a service is 
furnished in a facility.
    When services are furnished in the facility setting, such as a 
hospital outpatient department (OPD) or an ambulatory surgical center 
(ASC), the total Medicare payment (made to the facility and the 
professional combined) typically exceeds the Medicare payment made for 
the same service when furnished in the physician office or other 
nonfacility setting. We believe that this payment difference generally 
reflects the greater costs that facilities incur than those incurred by 
practitioners furnishing services in offices and other non-facility 
settings. For example, hospitals incur higher overhead costs because 
they maintain the capability to furnish services 24 hours a day and 7 
days per week, furnish services to higher acuity patients than those 
who receive services in physician offices, and have additional legal 
obligations such as complying with the Emergency Medical Treatment and 
Active Labor Act (EMTALA). Additionally, hospitals and ASCs must meet 
Medicare conditions of participation and conditions for coverage, 
respectively.
    However, we have found that for some services, the total Medicare 
payment when the service is furnished in the physician office setting 
exceeds the total Medicare payment when the service is furnished in an 
OPD or an ASC. When this occurs, we believe it is not the result of 
appropriate payment differentials between the services furnished in 
different settings. Rather, we believe it is due to anomalies in the 
data we use under the PFS and in the application of our resource-based 
PE methodology to the particular services.
    The PFS PE RVUs rely heavily on the voluntary submission of 
information by individuals furnishing the service and who are paid at 
least in part based on the data provided. Currently, we have little 
means to validate whether the information is accurate or reflects 
typical resource costs. Furthermore, in the case of certain direct 
costs, like the price of high-cost disposable supplies and expensive 
capital equipment, even voluntary information has been very difficult 
to obtain. In some cases the PE RVUs are based upon single price quotes 
or one paid invoice. We have addressed these issues extensively in 
previous rulemaking (75 FR 73252) and again in section II.A.3.e of this 
proposed rule. Such incomplete, small sample, potentially biased or 
inaccurate resource input costs may distort the resources used to 
develop nonfacility PE RVUs used in calculating PFS payment rates for 
individual services.
    In addition to the accuracy issues with some of the physician PE 
resource inputs, the data used in the PFS PE methodology can often be 
outdated. As we have previously noted (77 FR 68921) there is no 
practical means for CMS or stakeholders to engage in a complete 
simultaneous review of the input resource costs for all HCPCS codes 
paid under the PFS on an annual or even regular basis. Thus, the 
information used to estimate PE resource costs for PFS services is not 
routinely updated. Instead, we strive to maintain relativity by 
reviewing the work RVUs, physician time, and direct PE inputs for a 
code at the same time and reviewing all codes within families where 
appropriate. Nonetheless, outdated resource input costs may distort 
RVUs used to develop nonfacility PFS payment rates for individual 
services. In the case of new medical devices for which high growth in 
volume of a service as it diffuses into clinical practice may lead to a 
decrease in the cost of expensive items, outdated price inputs can 
result in significant overestimation of resource costs.
    Such inaccurate resource input costs may distort the nonfacility PE 
RVUs used to calculate PFS payment rates for individual services. As we 
have previously noted, OPPS payment rates are based on auditable 
hospital data and are updated annually. Given the differences in the 
validity of the data used to calculate payments under the PFS and OPPS, 
we believe that the nonfacility PFS payment rates for procedures that 
exceed those for the same procedure when in a facility result from 
inadequate or inaccurate direct PE inputs, especially in price or time 
assumptions, as compared to the more accurate OPPS data. On these 
bases, we are proposing a change in the PE methodology beginning in CY 
2014 and subsequent years. To improve the accuracy of PFS nonfacility 
payment rates for each calendar year, we are proposing to use the 
current year OPPS or ASC rates as a point of comparison in establishing 
PE RVUs for services under the PFS. In setting PFS rates, we would 
compare the PFS payment rate for a service furnished in an office 
setting to the total Medicare payment to practitioners and facilities 
for the same service when furnished in a hospital outpatient setting. 
For services on the ASC list, we would make the same comparison except 
we would use the ASC rate as the point of comparison instead of the 
OPPS rate.
    We are proposing to limit the nonfacility PE RVUs for individual 
codes so that the total nonfacility PFS payment amount would not exceed 
the total combined amount Medicare would pay for the same code in the 
facility setting. That is, if the nonfacility PE RVUs for a code would 
result in a higher payment than the corresponding

[[Page 43297]]

OPPS or ASC payment rate and PFS facility PE RVUs (when applicable) for 
the same code, we would reduce the nonfacility PE RVU rate so that the 
total nonfacility payment does not exceed the total Medicare payment 
made for the service in the facility setting. To maintain the greatest 
consistency and transparency possible, we are proposing to use the 
current year PFS conversion factor, as reflected in Figure B1. 
Similarly, we are proposing to use current year OPPS or ASC rates in 
the comparison.
[GRAPHIC] [TIFF OMITTED] TP19JY13.000

    For services with no work RVUs, we are proposing to compare the 
total nonfacility PFS payment to the OPPS payment rates directly since 
no PFS payment is made for these services when furnished in the 
facility setting.
    We are proposing to exempt the following services from this policy:
    Services Without Separate OPPS Payment rates: We are proposing to 
exclude services without separately payable OPPS rates from this 
methodical change since there would be no OPPS rate to which we could 
compare the PFS nonfacility PE RVUs. We note that there would also be 
no ASC rate for these services since ASCs are only approved to furnish 
a subset of OPPS services.
    Codes Subject to the DRA Imaging Cap: We are proposing to exclude 
services capped at the OPPS payment rate by the Deficit Reduction Act 
of 2005 (DRA) (Pub. L. 109-171) from this policy. The DRA provision 
limits PFS payment for most imaging procedures to the amount paid under 
the OPPS system. This policy applies to the technical component of 
imaging services, including X-ray, ultrasound, nuclear medicine, MRI, 
CT, and fluoroscopy services. Screening and diagnostic mammograms are 
exempt. Since payment for these procedures is capped by statute we are 
excluding them from this policy.
    Codes with Low Volume in the OPPS or ASC: We are proposing to 
exclude any service for which 5% percent or less of the total number of 
services are furnished in the OPPS setting relative to the total number 
of PFS/OPPS allowed services.
    Codes with ASC Rates Based on PFS Payment Rates: To avoid issues of 
circularity, we are proposing to exclude ASC services subject to the 
``office-based'' procedure payment policies for which payment rates are 
based on the PFS nonfacility PE RVUs. We direct interested readers to 
the CY 2013 OPPS final rule (77 FR 68444) for additional information 
regarding this payment policy.
    Codes Paid in the Facility at Nonfacility PFS Rates: To avoid 
issues of circularity, we are also proposing to exclude services that 
are paid in the facility setting at nonfacility payment rates. This 
would include certain professional-only services where the resource 
costs for practitioners are assumed to be similar in both settings.
    Codes with PE RVUs Developed Outside the PE Methodology: We are 
also proposing to exclude services with PE RVUs established outside the 
PE Methodology through notice and comment rulemaking.
    Addendum B of this proposed rule with comment period displays the 
PE RVUs that would result from implementation of this proposed change 
in the PE methodology.
    In discussing resource input issues, some stakeholders have 
previously suggested that the direct costs (for example, clinical 
labor, disposable supplies and medical equipment) involved in 
furnishing a service are similar in both the nonfacility and facility 
settings. Others have suggested that facilities, like hospitals, have 
greater purchasing power for medical equipment and disposable supplies 
so that the direct costs for a facility to furnish a service can be 
lower than costs for a physician practice furnishing the same service. 
This proposed policy does not assume that the direct costs to furnish a 
service in the nonfacility setting are always lower than in the 
facility setting. Medicare payment methodologies, including both OPPS 
and the PFS PE methodology, incorporate both direct and indirect costs 
(administrative labor, office expenses, and all other expenses). This 
proposed policy is premised on the idea that there are significantly 
greater indirect resource costs that are carried by facilities even in 
the event that the direct costs involved in furnishing a service in the 
office and facility settings are comparable.
    We believe this proposal provides a reliable means for Medicare to 
set upper payment limits for office-based procedures based on 
relatively more

[[Page 43298]]

reliable cost information available for the same procedures when 
furnished in a facility setting where the cost structure would be 
expected to be somewhat, if not significantly, higher than the office 
setting. We believe that the current basis for estimating the resource 
costs involved in furnishing a PFS service is significantly encumbered 
by our current inability to obtain accurate information regarding 
supply and equipment prices, as well as procedure time assumptions. We 
believe that this policy will mitigate the negative impact of these 
difficulties on both the appropriate relativity of PFS services and 
overall Medicare spending. A wide range of stakeholders and public 
commenters have pointed to the nonfacility setting as the most cost-
effective location for services. Given the significantly higher cost 
structure of facilities (as discussed above) we believe that this 
presumption is accurate. In its March 2012 report to Congress, MedPAC 
recommended that Medicare should seek to pay similar amounts for 
similar services across payment settings, taking into account 
differences in the definitions of services and patient severity. 
(MedPAC March 2012 Report to Congress, page 46) We believe that the 
proposed change to our PFS PE methodology will more appropriately 
reflect resource costs in the nonfacility setting.
b. Ultrasound Equipment Recommendations
    In the CY 2012 PFS proposed rule (76 FR 42796), we asked the AMA 
RUC to review the ultrasound equipment described in the direct PE input 
database. We specifically asked for review of the ultrasound equipment 
items described in the direct PE input database and whether the 
ultrasound equipment listed for specific procedure codes is clinically 
necessary.
    In response, the AMA RUC recommended creating several new equipment 
inputs in addition to the revision of current equipment inputs for 
ultrasound services. The AMA RUC also forwarded pricing information for 
new and existing equipment items from certain medical specialty 
societies that represent the practitioners who furnish these services. 
In the following paragraphs, we summarize the AMA RUC recommendations, 
address our review of the provided information, and describe proposed 
changes to the direct PE inputs used in developing PE RVUs for these 
services.
(1) Equipment Rooms
    The AMA RUC made a series of recommendations regarding the 
ultrasound equipment items included in direct PE input equipment 
packages called ``rooms.'' Specifically, the AMA RUC recommended adding 
several new equipment items to the equipment packages called ``room, 
ultrasound, general'' (EL015) and ``room, ultrasound, vascular'' 
(EL016). The AMA RUC also recommended creating a similar direct PE 
input equipment package called ``room, ultrasound, cardiovascular.'' In 
considering these recommendations, we identified a series of new 
concerns regarding the makeup of these equipment packages and because 
there are several different ways to handle these concerns, we are 
seeking public comment from additional stakeholders prior to proposing 
to implement any of these recommended changes through future 
rulemaking.
    We note that the existing ``rooms'' for ultrasound technology 
include a greater number of individual items than the ``rooms'' for 
other kinds of procedures. For example, the equipment package for the 
``room, basic radiology'' (EL012) contains only two items: An x-ray 
machine and a camera. Ordinarily under the PFS, direct PE input 
packages for ``rooms'' include only equipment items that are typically 
used in furnishing every service in that room. When equipment items 
beyond those included in a ``room'' are typically used in furnishing a 
particular procedure, the additional equipment items for that procedure 
are separately reflected in the direct PE input database in addition to 
the ``room'' rather than being included in the room. When handled in 
this way, the room includes only those inputs that are common to all 
services furnished in that room type, and thus the direct PE inputs are 
appropriate for the typical case of each particular service. When 
additional equipment items are involved in furnishing a particular 
service, they are included as an individual PE input only for that 
particular service.
    In contrast, the equipment items currently included in the ``room, 
ultrasound, general'' are: the ultrasound system, five different 
transducers, two probe starter kits, two printers, a table, and various 
other items. We do not believe that it is likely that all of these 
items would be typically used in furnishing each service. For example, 
we do not believe that the typical ultrasound study would require the 
use of five different ultrasound transducers. However, the costs of all 
of these items are incorporated into the resource inputs for every 
service for which the ultrasound room is a direct PE input, regardless 
of whether each of those items is typically used in furnishing the 
particular service. This increases the resource cost for every service 
that uses the room regardless of whether or not each of the individual 
items is typically used in furnishing a particular procedure.
    Instead of incorporating the AMA RUC's recommendation to add more 
equipment items to these ultrasound equipment ``room'' packages, we 
believe that we should continue to consider the appropriateness of the 
full number of items in the ultrasound ``rooms'' in the context of 
maintaining appropriate relativity with other services across the PFS. 
We seek comment from stakeholders, including the AMA RUC, on the items 
included in the ultrasound rooms, especially as compared to the items 
included in other equipment ``rooms.'' We believe that it would be 
appropriate to consider these comments in future rulemaking. 
Specifically we seek comment on whether equipment packages called 
``rooms'' should include all of the items that might be included in an 
actual room, just the items typically used for every service in such a 
room, or all of the items typically used in typical services furnished 
in the room. We believe that it would be most appropriate to propose 
changes to the ``room, ultrasound, general'' (EL015) and ``room, 
ultrasound, vascular'' (EL016) in the context of considering comments 
on this broader issue. We also believe that consideration of the 
broader issue will help determine whether it would be appropriate to 
create a ``room, ultrasound, cardiovascular,'' and if so, what items 
would be included in this equipment package.
    In addition to the concerns regarding the contents of the 
ultrasound ``room'' packages, we are also concerned about the pricing 
information submitted through the AMA RUC to support its recommendation 
to add equipment to the ultrasound room packages. The highest-price 
item used in pricing the existing equipment input called ``room, 
ultrasound, general'' (EL015), is a ``GE Logic 9 ultrasound system,'' 
currently priced at $220,000. As part of a current AMA RUC 
recommendation, a medical specialty society recommended increasing the 
price of that item to $314,500. However, that recommendation did not 
include documentation to support the pricing level, such as a copy of a 
paid invoice for the equipment. Furthermore, the recommended price 
conflicts with certain publicly available information. For example, the 
Milwaukee Sentinel-Journal reported in a February 9, 2013 article that 
the price for GE ultrasound equipment ranges from ``$7,900 for a hand-
held ultrasound to $200,000 for its

[[Page 43299]]

most advanced model.'' The same article points to an item called the 
``Logiq E9'' as the ultrasound machine most used by radiologists and 
priced from $150,000 to $200,000. http://www.jsonline.com/business/ge-sees-strong-future-with-its-ultrasound-business-uj8mn79-190533061.html
    At this time, are unsure how to best reconcile the information 
disclosed by the manufacturer to the press and the prices submitted by 
the medical specialty society for use in updating the direct PE input 
prices. We believe discrepancies, such as these, exemplify the 
potential problem with updating prices for particular items based 
solely on price quotes or information other than copies of paid 
invoices. However, copies of paid invoices must also be evaluated 
carefully. The information presented in the article regarding the price 
for hand-held ultrasound devices raises questions about the adequacy of 
paid invoices, too, in determining appropriate input costs. The direct 
PE input described in the database as ``ultrasound unit, portable'' 
(EQ250) is currently priced at $29,999 based on a submitted invoice, 
while the article cites that GE sells a portable unit for as low as 
$7,900. We are seeking comment on the appropriate price to use as the 
typical cost for portable ultrasound units.
    Additionally, we are not proposing to revise the equipment items, 
or to change the prices of items, included in these rooms. Instead, 
pending our receipt and consideration of additional information, the 
proposed direct PE input database continues to include the current 
prices for the ``room, ultrasound, general'' (EL015), ``room, 
ultrasound, vascular'' (EL016), and ``ultrasound unit, portable'' 
(EQ250).
(2) New Equipment Inputs and Price Updates
    Ultrasound Unit, portable, breast procedures. The AMA RUC 
recommended that a new direct PE input, ``ultrasound unit, portable, 
breast procedures,'' be created for breast procedures that are 
performed in a surgeon's office and where ultrasound imaging is 
included in the code descriptor. These services are described by CPT 
codes 19105 (Ablation, cryosurgical, of fibroadenoma, including 
ultrasound guidance, each fibroadenoma), 19296 (Placement of 
radiotherapy afterloading expandable catheter (single or multichannel) 
into the breast for interstitial radioelement application following 
partial mastectomy, includes imaging guidance; on date separate from 
partial mastectomy), and 19298 (Placement of radiotherapy afterloading 
brachytherapy catheters (multiple tube and button type) into the breast 
for interstitial radioelement application following (at the time of or 
subsequent to) partial mastectomy, includes imaging guidance). We are 
creating this input. The pricing information submitted for this item is 
a paid invoice and two price quotes. As we have previously stated, we 
believe that copies of paid invoices are more likely to reflect actual 
resource costs associated with equipment and supply items than quotes 
or other information. Therefore, we are proposing a price of $33,930, 
which reflects the price displayed on the submitted copy of the paid 
invoice. We are not using the quotes as we do not believe that quotes 
provide reliable information about the prices that are actually paid 
for medical equipment.
    Endoscopic Ultrasound Processor. The AMA RUC recommended creating a 
new direct PE input called ``endoscopic ultrasound processor,'' for use 
in furnishing the service described by CPT code 31620 (Endobronchial 
ultrasound (EBUS) during bronchoscopic diagnostic or therapeutic 
intervention(s) (List separately in addition to code for primary 
procedure[s])). We are creating this equipment item to use as an input 
in the proposed direct PE input database. The price associated with the 
``endoscopic ultrasound processor'' will be $59,925, which reflects the 
price documented on the copy of the paid invoice submitted with the 
recommendation.
    Bronchofibervideoscope. The AMA RUC recommended creating a new 
direct PE input called ``Bronchofibervideoscope,'' for use in 
furnishing the service described by CPT code 31620 (Endobronchial 
ultrasound (EBUS) during bronchoscopic diagnostic or therapeutic 
intervention(s) (List separately in addition to code for primary 
procedure[s])). We are creating this new equipment item to use as an 
input in the proposed direct PE input database. However, this item has 
no price associated with it in the proposed direct PE input database 
because we did not receive any information that would allow us to price 
the item accurately. Consequently, we seek copies of paid invoices for 
this equipment item so that we can price the item accurately in the 
future.
    Endoscope, ultrasound probe, drive (ES015). The AMA RUC forwarded 
pricing information to us regarding the existing input called 
``endoscope, ultrasound probe, drive'' (ES015). This information 
included a copy of a paid invoice. Based on this information, we are 
proposing to change the price associated with ES015 to $13,256.25, 
which reflects the price documented on the submitted copy of the paid 
invoice.
(3) Ultrasound Equipment Input Recommendations for Particular Services
    The AMA RUC made recommendations regarding the typical ultrasound 
items used in furnishing particular services. In general, the AMA RUC 
recommended that the existing equipment items accurately described the 
typical equipment used in furnishing particular services. However, for 
some CPT codes the AMA RUC recommended changing the associated 
equipment inputs that appear in the direct PE input database. Based on 
our review of these recommendations, we have generally agreed with the 
AMA RUC regarding these recommended changes, and these changes are 
reflected in the proposed direct PE input database. Table 10 displays 
the codes with proposed changes to ultrasound equipment. However, for 
certain codes we do not agree with the recommendations of the AMA RUC. 
The following paragraphs address the changes we are proposing that 
differ from the recommendations of the AMA RUC.
    For a series of cardiovascular services that include ultrasound 
technology, the AMA RUC recommended removing certain equipment items 
and replacing those items with a new item called ``room, ultrasound, 
cardiovascular.'' As we described in the preceding paragraphs, we are 
not proposing to create the ``room, ultrasound, cardiovascular'' and 
therefore will not propose to add this ``room'' an input for these 
services. However, we note that the newly recommended equipment package 
incorporates many of the same kinds of items as the currently existing 
``room, ultrasound, vascular'' (EL016). We agree with the AMA RUC's 
suggestion that the existing equipment inputs for the relevant services 
listed in Table 10 do not reflect typical resource costs of furnishing 
the services. We believe that, pending our further consideration of the 
ultrasound ``room'' equipment packages, it would be appropriate to use 
the existing ``room, ultrasound, vascular'' (EL016) as a proxy for 
resource costs for these services. Therefore, the proposed direct PE 
input database reflects this proposed change.
    In the case of CPT code 76942 (Ultrasonic guidance for needle 
placement (eg, biopsy, aspiration, injection, localization device), 
imaging supervision and interpretation), we agree with the AMA RUC's

[[Page 43300]]

recommendation to replace the current equipment input of the ``room, 
ultrasound, general'' (EL015) with ``ultrasound unit, portable'' 
(EQ250). We note that this service is typically reported with other 
codes that describe the needle placement procedures and that the 
recommended change in equipment from a room to a portable device 
reflects a change in the typical kinds of procedures reported with this 
image guidance service. Given this change, we believe that it is 
appropriate to reconsider the procedure time assumption currently used 
in establishing the direct PE inputs for this code is 45 minutes, which 
we believe is inaccurate. We reviewed the services reported with CPT 
code 76942 to identify the most common procedures furnished with this 
image guidance. The code most frequently reported with CPT code 76942 
is CPT 20610 (Arthrocentesis, aspiration and/or injection; major joint 
or bursa (eg, shoulder, hip, knee joint, subacromial bursa). The 
assumed procedure time for this service is five minutes. The vast 
majority of other procedures frequently reported with CPT code 76942 
range in procedure time assumptions from 5 to 20 minutes. Therefore, in 
addition to proposing the recommended change in equipment inputs 
associated with the code, we are also proposing to change the procedure 
time assumption used in establishing direct PE inputs for the service 
from 45 to 10 minutes, based on our analysis of thirty needle placement 
procedures most frequently reported with CPT code 76942. We note that 
this will reduce the clinical labor and equipment minutes associated 
with the code from 58 to 23 minutes. This change is reflected in the 
proposed direct PE input database. We also note that this code has been 
proposed as a potentially misvalued code in section II.B.3.b.1.

                    Table 10--Codes With Proposed Changes to Ultrasound Equipment for CY 2014
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed CY 2014   Proposed CY 2014
    CPT code          Descriptor         CY 2013 CMS    CY 2013  Equipment    Equipment CMS        Equipment
                                       Equipment code       description           code            description
----------------------------------------------------------------------------------------------------------------
19105...........  Cryosurg ablate fa  EQ250             ultrasound unit,    NEW               ultrasound unit,
                   each.                                 portable.                             portable, breast
                                                                                               procedures.
19296...........  Place po breast     EL015             room, ultrasound,   NEW               ultrasound unit,
                   cath for rad.                         general.                              portable, breast
                                                                                               procedures.
19298...........  Place breast rad    EL015             room, ultrasound,   NEW               ultrasound unit,
                   tube/caths.                           general.                              portable, breast
                                                                                               procedures.
                                     ---------------------------------------------------------------------------
31620...........  Endobronchial us                     n/a                  NEW               Bronchofibervideos
                   add-on.                                                                     cope.
                                     ---------------------------------------------------------------------------
                                                       n/a                  NEW               Endoscopic
                                                                                               ultrasound
                                                                                               processor.
                                     ---------------------------------------------------------------------------
52649...........  Prostate laser      EQ255             ultrasound,         EQ250             ultrasound unit,
                   enucleation.                          noninvasive                           portable.
                                                         bladder scanner w-
                                                         cart.
                                                                           -------------------------------------
76376...........  3d render w/o       EL015             room, ultrasound,               Remove input.
                   postprocess.                          general.
                                                                           -------------------------------------
76775...........  Us exam abdo back   EL015             room, ultrasound,   EQ250             ultrasound unit,
                   wall lim.                             general.                              portable.
76820...........  Umbilical artery    EQ249             ultrasound color    EL015             room, ultrasound,
                   echo.                                 doppler,                              general.
                                                         transducers and
                                                         vaginal probe.
76857...........  Us exam pelvic      EL015             room, ultrasound,   EQ250             ultrasound unit,
                   limited.                              general.                              portable.
76870...........  Us exam scrotum...  EL015             room, ultrasound,   EQ250             ultrasound unit,
                                                         general.                              portable.
76872...........  Us transrectal....  EL015             room, ultrasound,   EQ250             ultrasound unit,
                                                         general.                              portable.
76942...........  Echo guide for      EL015             room, ultrasound,   EQ250             ultrasound unit,
                   biopsy.                               general.                              portable.
93303...........  Echo guide for      EQ253             ultrasound,         EL016             room, ultrasound,
                   biopsy.                               echocardiography                      vascular.
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
                                      EQ252             ultrasound,
                                                         echocardiography
                                                         analyzer software
                                                         (ProSolv).
93304...........  Echo transthoracic  EQ252             ultrasound,         EL016             room, ultrasound,
                                                         echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93306...........  Tte w/doppler       EQ253             ultrasound,         EL016             room, ultrasound,
                   complete.                             echocardiography                      vascular.
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
                                      EQ252             ultrasound,
                                                         echocardiography
                                                         analyzer software
                                                         (ProSolv).
93307...........  Tte w/o doppler     EQ252             ultrasound,         EL016             room, ultrasound,
                   complete.                             echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).

[[Page 43301]]

 
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93308...........  Tte f-up or lmtd..  EQ252             ultrasound,         EL016             room, ultrasound,
                                                         echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93312...........  Echo                EQ253             ultrasound,         EL016             room, ultrasound,
                   transesophageal.                      echocardiography                      vascular.
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ252             ultrasound,
                                                         echocardiography
                                                         analyzer software
                                                         (ProSolv).
                                      EQ256             ultrasound,
                                                         transducer (TEE
                                                         Omniplane II).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93314...........  Echo                EQ254             ultrasound,         EL016             room, ultrasound,
                   transesophageal.                      echocardiography                      vascular.
                                                         w-4 transducers
                                                         (Sequoia C256).
                                      EQ256             ultrasound,
                                                         transducer (TEE
                                                         Omniplane II).
                                      EQ252             ultrasound,
                                                         echocardiography
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
93320...........  Doppler echo exam   EQ252             ultrasound,         EL016             room, ultrasound,
                   heart.                                echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93321...........  Doppler echo exam   EQ252             ultrasound,         EL016             room, ultrasound,
                   heart.                                echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93325...........  Doppler color flow  EQ252             ultrasound,         EL016             room, ultrasound,
                   add-on.                               echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93350...........  Stress tte only...  EQ252             ultrasound,         EL016             room, ultrasound,
                                                         echocardiography                      vascular.
                                                         analyzer software
                                                         (ProSolv).
                                      EQ253             ultrasound,
                                                         echocardiography
                                                         digital
                                                         acquisition (Novo
                                                         Microsonics,
                                                         TomTec).
                                      EQ254             ultrasound,
                                                         echocardiography
                                                         w-4 transducers
                                                         (Sequoia C256).
93351...........  Stress tte          EQ254             ultrasound,         EL016             room, ultrasound,
                   complete.                             echocardiography                      vascular.
                                                         w-4 transducers
                                                         (Sequoia C256).
93980...........  Penile vascular     EL015             room, ultrasound,   EQ249             ultrasound color
                   study.                                general.                              doppler,
                                                                                               transducers and
                                                                                               vaginal probe.
93981...........  Penile vascular     EL015             room, ultrasound,   EQ249             ultrasound color
                   study.                                general.                              doppler,
                                                                                               transducers and
                                                                                               vaginal probe.
----------------------------------------------------------------------------------------------------------------

4. Collecting Data on Services Furnished in Off-Campus Hospital 
Provider-Based Departments
    In recent years, the research literature and popular press have 
documented the increased trend toward hospital acquisition of physician 
practices, integration of those practices as a department of the 
hospital, and the resultant increase in the furnishing of physicians' 
services in a hospital outpatient setting (for example, see Ostrom, 
Carol M. ``Why you might pay twice for one visit to a doctor,'' Seattle 
Times. November 3, 2012, and O'Malley, Ann, Amelia M. Bond, and Robert 
Berenson. Rising hospital employment of physicians: better quality, 
higher costs? Issue Brief No. 136, Center for Studying Health System 
Change. August 2011). When a Medicare

[[Page 43302]]

beneficiary receives outpatient services in a hospital, Medicare 
generally pays more in total than when the beneficiary receives those 
same services in a freestanding clinic or physician office. As more 
physician practices become hospital-based, news articles have 
highlighted beneficiary liability for the additional coinsurance for 
the ``facility fee,'' which is the payment in addition to the physician 
payment when services are furnished in a hospital. MedPAC has 
questioned the appropriateness of increased Medicare payment and 
beneficiary cost-sharing when physician offices become hospital 
outpatient departments, and has recommended that Medicare pay selected 
hospital outpatient services at physician fee schedule rates (MedPAC 
March 2012 Report to Congress).
    The total l payment (including both Medicare program payment and 
beneficiary cost-sharing) generally is higher when outpatient services 
are furnished in the hospital outpatient setting rather than a 
physician office. Both the PFS and the hospital outpatient prospective 
payment system (OPPS) establish payment based on the relative resources 
involved in furnishing a service. As described in section II.B.1.b. of 
this proposed rule, the relative values for services furnished in the 
physician office setting under the PFS reflect not only payment for the 
practitioner's work, but also the direct expenses (clinical labor, 
medical equipment, and medical supplies) and the indirect expenses 
(administrative labor, office expense, and all other expenses) 
typically involved in furnishing the service. Under section 1833(t) of 
the Act, Medicare provides separate payment through the OPPS to 
hospitals for certain items and services furnished to registered 
hospital outpatients that are based on the relativity of the resource 
costs (labor and capital) involved in furnishing those hospital 
services. In general, we expect hospitals to have higher overall 
resource requirements than physician offices because hospitals are 
required to meet conditions of participation, to maintain standby 
capacity for emergency situations, and to be available to address a 
wide variety of complex medical needs in a community. When services are 
furnished in the hospital setting, such as in off-campus provider based 
departments, Medicare pays the physician under the PFS at a typically 
lower facility payment rate but then also pays the hospital under the 
OPPS for the facility resources required to furnish the service. The 
beneficiary pays coinsurance for both the physician PFS payment and the 
hospital OPPS payment. The term ``facility fee'' refers to this 
additional hospital outpatient payment.
    Upon acquisition of a physician practice, hospitals frequently 
treat the practice locations as off-campus provider-based departments 
of the hospital and bill Medicare for services furnished at those 
locations under the OPPS (for further information on the provider-based 
regulations at Sec.  413.65, see http://www.gpo.gov/fdsys/pkg/CFR-2010-title42-vol2/pdf/CFR-2010-title42-vol2-sec413-65.pdf). Since October 1, 
2002, we have not required hospitals to seek from CMS a determination 
of provider-based status for a facility that is located off campus. We 
also do not have a formal process for gathering information on the 
frequency, type, and payment for services furnished in off-campus 
provider-based departments of the hospital.
    To better understand the growing trend toward hospital acquisition 
of physician offices and subsequent treatment of those locations as 
off-campus provider-based outpatient departments, we are considering 
collecting information that would allow us to analyze the frequency, 
type, and payment for services furnished in off-campus provider-based 
hospital departments. We have considered several potential methods. 
Claims-based approaches could include (1) creating a new place of 
service code for off-campus departments of a provider under 42 CFR 
413.65(g)(2) as part of item 24B of the CMS-1500 claim form, comparable 
to current place of service codes such as ``22 Outpatient'' and ``23 
Emergency Room-Hospital'' when physician services are furnished in an 
off-campus provider-based department, or (2) creating a HCPCS modifier 
that could be reported with every code for services furnished in an 
off-campus provider-based department of a hospital on the CMS-1500 
claim form for physician services and the UB-04 (CMS form 1450) for 
hospital outpatient claims. In addition, we also have considered asking 
hospitals to break out the costs and charges for their provider-based 
departments as outpatient service cost centers on the Medicare hospital 
cost report, form 2552-10. We note that some hospitals already break 
out these costs voluntarily or because of cost reporting requirements 
for the 340B Drug Discount program but this practice is not consistent 
or standardized. We welcome public comment on the best means for 
collecting information on the frequency, type, and payment for services 
furnished in off-campus provider-based departments of hospitals.

B. Misvalued Codes

1. Valuing Services Under the PFS
    Section 1848(c) of the Act requires the Secretary to determine 
relative values for physicians' services based on three components: 
work; PE; and malpractice. 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.'' 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.'' 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.'' (See section I.A.2. for more detail on 
the PE component.) Section 1848(c)(1)(C) of the Act defines the 
malpractice component as ``the portion of the resources used in 
furnishing the service that reflects malpractice expenses in furnishing 
the service.'' Sections 1848 (c)(2)(C)(ii) and (iii) of the Act specify 
that PE and malpractice expense RVUs shall be determined based on the 
relative PE/malpractice expense resources involved in furnishing the 
service.
    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. Section 3134(a) of the Affordable Care Act 
added a new section 1848(c)(2)(K) to 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 Affordable 
Care Act also added a new section 1848(c)(2)(L) to the Act which, 
requires the Secretary to develop a process to validate the RVUs of 
certain potentially misvalued codes under the PFS, identified using the 
same criteria used to identify potentially misvalued codes, and to make 
appropriate adjustments.
    As discussed in section II.A.1. of this proposed rule, each year we 
develop and propose appropriate adjustments to the RVUs, taking into 
account the recommendations provided by the

[[Page 43303]]

American Medical Association/Specialty Society Relative Value Scale 
Update Committee (AMA RUC), the Medicare Payment Advisory Commission 
(MedPAC), and others. For many years, the AMA RUC has provided us with 
recommendations on the appropriate relative values for new, revised, 
and potentially misvalued PFS services. We review these recommendations 
on a code-by-code basis and consider these recommendations in 
conjunction with analyses of other data, such as claims data, to inform 
the decision-making process as authorized by the law. We may also 
consider analyses of physician time, work RVUs, or direct PE inputs 
using other data sources, such as Department of Veteran Affairs (VA), 
National Surgical Quality Improvement Program (NSQIP), the Society for 
Thoracic Surgeons (STS) National Database, and the Physician Quality 
Reporting Initiative (PQRI) databases. In addition to considering the 
most recently available data, we also assess the results of physician 
surveys and specialty recommendations submitted to us by the AMA RUC. 
We conduct a clinical review to assess the appropriate RVUs in the 
context of contemporary medical practice. 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. In accordance with section 1848(c) of the Act, we determine 
appropriate adjustments to the RVUs, explain the basis of these 
adjustments, and respond to public comments in the PFS proposed and 
final rules.
2. Identifying, Reviewing, and Validating the RVUs of Potentially 
Misvalued Services
a. Background
    In its March 2006 Report to the 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. MedPAC stated, ``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 
often required to furnish that service. Over time, the work required 
for certain services would be expected to decline as physicians become 
more familiar with the service and more efficient in furnishing it.'' 
We believe services can also become overvalued when PEs decline. This 
can happen when the costs of equipment and supplies fall, or when 
equipment is used more frequently than is estimated in the PE 
methodology, reducing its cost per use. Likewise, services can become 
undervalued when physician work increases or PEs rise. In the ensuing 
years since MedPAC's 2006 report, additional groups of potentially 
misvalued services have been identified by the Congress, CMS, MedPAC, 
the AMA RUC, and other stakeholders.
    In recent years, CMS and the AMA RUC have taken increasingly 
significant steps to identify and 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(a) of the Affordable Care Act) directed the 
Secretary to specifically examine, as determined appropriate, 
potentially misvalued services in the following seven categories:
     Codes and families of codes for which there has been the 
fastest growth;
     Codes and families of codes that have experienced 
substantial changes in PEs;
     Codes that are recently established for new technologies 
or services;
     Multiple codes that are frequently billed in conjunction 
with furnishing a single service;
     Codes with low relative values, particularly those that 
are often billed multiple times for a single treatment;
     Codes which have not been subject to review since the 
implementation of the RBRVS (the so-called `Harvard-valued codes'); and
     Other codes determined to be appropriate by the Secretary.
    Section 1848(c)(2)(K)(iii) of the Act 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 also 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. 
Additionally, this section provides that the Secretary may coordinate 
the review and adjustment of any RVU with the periodic review described 
in section 1848(c)(2)(B) of the Act. Finally, section 
1848(c)(2)(K)(iii)(V) of the Act specifies that the Secretary may make 
appropriate coding revisions (including using existing processes for 
consideration of coding changes) that 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
    To fulfill our statutory mandate, we have identified and reviewed 
numerous potentially misvalued codes in all seven of the categories 
specified in section 1848(c)(2)(K)(ii) of the Act, and we plan to 
continue our work examining potentially misvalued codes in these areas 
over the upcoming years. In the current process, we identify 
potentially misvalued codes for review, and request recommendations 
from the AMA RUC and other public commenters on revised work RVUs and 
direct PE inputs for those codes. The AMA RUC, through its own 
processes, also identifies potentially misvalued codes for review. 
Through our public nomination process for potentially misvalued codes 
established in the CY 2012 PFS final rule with comment period, other 
individuals and stakeholder groups submit nominations for review of 
potentially misvalued codes as well.
    Since CY 2009, as a part of the annual potentially misvalued code 
review and Five-Year Review process, we have reviewed more than 1,000 
potentially misvalued codes to refine work RVUs and direct PE inputs. 
We have adopted appropriate work RVUs and direct PE inputs for these 
services as a result of these reviews. A more detailed discussion of 
the extensive prior reviews of potentially misvalued codes is included 
in the CY 2012 PFS final rule with comment period (76 FR 73052 through 
73055). In the CY 2012 PFS proposed rule, we proposed to identify and 
review potentially misvalued codes in the category of ``Other codes 
determined to be appropriate by the Secretary,'' referring to a list of 
the highest PFS expenditure services, by specialty, that had not been 
recently reviewed (76 FR 73059 through 73068).
    In the CY 2012 final rule with comment period, we finalized our 
policy to consolidate the review of physician work and PE at the same 
time

[[Page 43304]]

(76 FR 73055 through 73958), and established a process for the annual 
public nomination of potentially misvalued services.
    One of the priority categories for review of potentially misvalued 
codes is services that have not been subject to review since the 
implementation of the PFS (the so-called ``Harvard-valued codes''). In 
the CY 2009 PFS proposed rule, 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). 
For the Fourth Five-Year Review (76 FR 32410), we requested that the 
AMA RUC review services that have not been reviewed since the original 
implementation of the PFS with annual utilization greater than 30,000 
(Harvard-valued--Utilization > 30,000). In the CY 2013 final rule with 
comment period, we identify for review the potentially misvalued codes 
for Harvard-valued services with annual allowed charges that total at 
least $10,000,000 (Harvard-valued--Allowed charges >=$10,000,000).
    In addition to the Harvard-valued codes, in the same rule we 
finalized for review a list of potentially misvalued codes that have 
stand-alone PE (codes with physician work and no listed physician time 
and codes with no physician work and have listed physician time).
c. Validating RVUs of Potentially Misvalued Codes
    In addition to identifying and reviewing potentially misvalued 
codes, section 3134(a) of the Affordable Care Act added section 
1848(c)(2)(L) of the Act, which specifies that the Secretary shall 
establish a formal process to validate RVUs 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, as part of the 
validation, 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) of the Act. 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.
    In the CY 2011 PFS proposed rule (75 FR 40068) and CY 2012 PFS 
proposed rule (76 FR 42790), we solicited public comments on possible 
approaches, methodologies, and data sources that we should consider for 
a validation process. A summary of the comments along with our 
responses are included in the CY 2011 PFS final rule with comment 
period (75 FR 73217) and the CY 2012 PFS final rule with comment period 
(73054 through 73055).
    We have entered into two contracts with outside entities to develop 
validation models for RVUs. During a 2-year project, the RAND 
Corporation will use available data to build a validation model to 
predict work RVUs and the individual components of work RVUs, time and 
intensity. The model design will be informed by the statistical 
methodologies and approach used to develop the initial work RVUs and to 
identify potentially misvalued procedures under current CMS and AMA RUC 
processes. RAND will use a representative set of CMS-provided codes to 
test the model. RAND will consult with a technical expert panel on 
model design issues and the test results.
    The second contract is with the Urban Institute. Given the central 
role of time in establishing work RVUs and the concerns that have been 
raised about the current time values, a key focus of the project is 
collecting data from several practices for services selected by the 
contractor. The data will be used to develop time estimates. Urban 
Institute will use a variety of approaches to develop objective time 
estimates, depending on the type of service, which will be a very 
resource-intensive part of the project. Objective time estimates will 
be compared to the current time values used in the fee schedule. The 
project team will then convene groups of physicians from a range of 
specialties to review the new time data and their potential 
implications for work and the ratio of work to time.
3. CY 2014 Identification and Review of Potentially Misvalued Services
a. Public Nomination of Potentially Misvalued Codes
    In the CY 2012 PFS final rule with comment period, we finalized a 
process for the public to nominate potentially misvalued codes (76 FR 
73058). The public and stakeholders may nominate potentially misvalued 
codes for review by submitting the code with supporting documentation 
during the 60-day public comment period following the release of the 
annual PFS final rule with comment period. Supporting documentation for 
codes nominated for the annual review of potentially misvalued codes 
may include the following:
     Documentation in the peer reviewed medical literature or 
other reliable data that there have been changes in physician work due 
to one or more of the following: technique; knowledge and technology; 
patient population; site-of-service; length of hospital stay; and 
physician time.
     An anomalous relationship between the code being proposed 
for review and other codes.
     Evidence that technology has changed physician work, that 
is, diffusion of technology.
     Analysis of other data on time and effort measures, such 
as operating room logs or national and other representative databases.
     Evidence that incorrect assumptions were made in the 
previous valuation of the service, such as a misleading vignette, 
survey, or flawed crosswalk assumptions in a previous evaluation.
     Prices for certain high cost supplies or other direct PE 
inputs that are used to determine PE RVUs are inaccurate and do not 
reflect current information.
     Analyses of physician time, work RVU, or direct PE inputs 
using other data sources (for example, Department of Veteran Affairs 
(VA) National Surgical Quality Improvement Program (NSQIP), the Society 
for Thoracic Surgeons (STS) National Database, and the Physician 
Quality Reporting System (PQRS) databases).
     National surveys of physician time and intensity from 
professional and management societies and organizations, such as 
hospital associations.
    After we receive the nominated codes during the 60-day comment 
period following the release of the annual PFS final rule with comment 
period, we evaluate the supporting documentation and assess whether the 
nominated codes appear to be potentially misvalued codes appropriate 
for review under the annual process. In the following year's PFS 
proposed rule, we publish the list of nominated codes and indicate 
whether we are proposing each nominated code as a potentially misvalued 
code.
    We did not receive publicly nominated potentially misvalued codes 
for inclusion in this proposed rule. We look forward to receiving new 
code nominations for inclusion in the CY 2015 proposed rule to continue 
with our efforts to identify potentially misvalued codes.

[[Page 43305]]

b. Potentially Misvalued Codes
(1) Contractor Medical Director Identified Potentially Misvalued Codes
    After publishing the CY final rule with comment period, we began 
considering additional ways to broaden participation in the process of 
identifying potentially misvalued codes. We solicited the input of 
Medicare contractor medical directors (CMDs) in developing a list of 
potentially misvalued codes. CMDs offer a unique perspective on the 
Medicare program. Medicare Administrative Contractors administer the 
Medicare program in their assigned geographic area and each has at 
least one CMD that serves as its director. As a group, CMDs represent a 
variety of medical specialties, which makes them a diverse group of 
physicians capable of providing opinions across the vast scope of 
services covered under the PFS. In addition to being physicians, they 
are on the front line of administering the Medicare program; and their 
offices often serve as the first point of contact for any provider with 
questions regarding coverage, coding and claims processing. CMDs spend 
a significant amount of time communicating directly with providers and 
the health care industry discussing more than just the broad aspects of 
the Medicare program but also engaging in and facilitating specific 
discussions around individual services. Through their development of 
evidence-based local coverage determinations (LCDs), CMDs also have 
experience developing policy based on research. In consultation with 
our CMDs, we have identified the following list of codes that we are 
proposing as potentially misvalued. We include a brief discussion of 
the reasons for proposing these codes as potentially misvalued.

   Table 11--Codes Identified in Consultation With CMDs as Potentially
                                Misvalued
------------------------------------------------------------------------
             CPT code                         Short descriptor
------------------------------------------------------------------------
17311.............................  Mohs 1 stage h/n/hf/g.
17313.............................  Mohs 1 stage t/a/l.
21800.............................  Treatment of rib fracture.
22035.............................  Closed tx spine process fx.
27193.............................  Treat pelvic ring fracture.
33960.............................  External circulation assist.
33961.............................  External circulation assist, each
                                     subsequent day.
47560.............................  Laparoscopy w/cholangio.
47562.............................  Laparoscopic cholecystectomy.
47563.............................  Laparo cholecystectomy/graph.
55845.............................  Extensive prostate surgery.
55866.............................  Laparo radical prostatectomy.
64566.............................  Neuroeltrd stim post tibial.
76942.............................  Echo guide for biopsy.
------------------------------------------------------------------------

    CPT codes 17311 (Mohs micrographic technique, including removal of 
all gross tumor, surgical excision of tissue specimens, mapping, color 
coding of specimens, microscopic examination of specimens by the 
surgeon, and histopathologic preparation, head, neck, hands, feet 
genitalia, or any location with surgery directly involving muscle, 
cartilage, bone, tendon, major nerves, or vessels; first stage, up to 5 
tissue blocks) and 17313 (Mohs micrographic technique, including 
removal of all gross tumor, surgical excision of tissue specimens, 
mapping, color coding of specimens, microscopic examination of 
specimens by the surgeon, and histpathologic preparation including 
routine stains(s) of the trunk, arms, or legs; first stage, up to 5 
tissue blocks) are proposed as potentially misvalued codes because 
based on CMD comments, we believe that the code may be overvalued.
    CPT codes 21800 (Closed treatment of rib fracture, uncomplicated, 
each), 22305 (Closed treatment of vertebral process fracture(s)) and 
27193 (Closed treatment of pelvic ring fracture, dislocation, diastasis 
or subluxation, without manipulation) is proposed for review. We are 
considering the appropriateness of having a 90-day global surgical 
package for a procedure that is performed in settings other than the 
inpatient setting 33 percent of the time. We believe it is unlikely 
that it is appropriate for a procedure performed outside of the 
inpatient hospital setting at this frequency to have such a long global 
period. CPT codes 33960 (Prolonged extracorporeal circulation for 
cardiopulmonary insufficiency; initial day) and 33961 (Each subsequent 
day) are being proposed for review because CMDs were concerned about 
their current valuation of physician work. The CMD comment states that 
the service was originally valued when it was used primarily in 
premature neonates; but the service is now being furnished to adults 
with severe influenza, pneumonia and respiratory distress syndrome. We 
are concerned that, while the code currently includes 523 minutes of 
total physician time with 133 minutes of intraservice time, physicians 
are not typically furnishing the service over that entire time 
interval; rather, hospital-employed pump technicians are furnishing 
much of the work.
    CPT codes 47560 (Laparoscopy, surgical; with guided transhepatic 
cholangiography, without biopsy), 47562 (Cholecystectomy) and 47563 
(Cholecystectomy with cholangiography) we are proposing these codes as 
potentially misvalued because the more extensive code has lower work 
RVUs than the less extensive codes.
    CPT codes 55845 (Prostatectomy, retropubic radical with or without 
nerve sparing with bilateral pelvic lymphadenectomy, including external 
iliac, hypogastric, and obturator nodes) and 55866 (Laparoscopy, 
surgical prostatectomy, retropubic radial, including nerve sparing, 
includes robotic assistance when performed) we are proposing as 
potentially misvalued because the RVUs for the laparoscopic procedure 
are higher than for the open procedure and, in general, a laparascopic 
procedure would not require greater resources than the open procedure.
    We are proposing CPT 64566 (Posterior tibial neurostimulation, 
percutaneous needle electrode, single treatment, includes programming) 
as a potentially misvalued code because we think that the procedure 
typically is furnished by support staff with supervision as opposed to 
being furnished by the physician. We are concerned that the current 
valuation is based on the procedure being furnished by a physician.
    We are proposing CPT code 76942 (Ultrasonic guidance for needle 
placement (for example, biopsy, aspiration, injection, localization 
device), imaging supervision and interpretation) as a potentially 
misvalued code because of the high frequency with which it is billed 
with CPT code 20610 (Arthrocentesis aspiration and/or injection; major 
joint or bursa (for example, shoulder, hip, knee joint, subacromial 
bursa) in the CMD's geographic region. The CMD noted that some 
providers within the contractor's geographic area bill CPT code 76942 
with every injection or aspiration of the knee. One CMD suggests that 
the payment for CPT code 76942 and CPT code 20610 should be combined to 
reduce the incentive for providers to always provide and bill 
separately for ultrasound guidance. We note that we are making a 
proposal regarding the direct PE inputs for CPT code 76942. Our claims 
data show that the procedure time assumption for CPT code 76942 is 
longer than the typical procedure with which the code is billed (for 
example, CPT code 20610). The proposed changes relating to CPT code 
76942 are addressed in detail in section II.A.4.b.3. of this proposed 
rule. We believe that the discrepancy in procedure times and the 
resulting potentially inaccurate payment raises a fundamental concern 
regarding the incentive to furnish ultrasound guidance. However, we 
believe this

[[Page 43306]]

concern spans more than just an individual code for ultrasound 
guidance. Accordingly, we have proposed additional ultrasound guidance 
codes as potentially misvalued in Table 12. We are seeking public 
comment on including these codes as potentially misvalued codes. We are 
also seeking public comment on any similar codes that should be 
included on this list.

               Table 12--CPT Codes for Ultrasound Guidance
------------------------------------------------------------------------
             CPT code                         Short descriptor
------------------------------------------------------------------------
76930.............................  Echo guide cardiocentesis.
76932.............................  Echo guide for heart biopsy.
76936.............................  Echo guide for artery repair.
76940.............................  US guide tissue ablation.
76948.............................  Echo guide ova aspiration.
76950.............................  Echo guidance radiotherapy.
76965.............................  Echo guidance radiotherapy.
------------------------------------------------------------------------

(2) Improving the Valuation of the Global Surgical Package, Measuring 
Post-Operative Work
    In the CY 2013 proposed rule, we sought comments on methods of 
obtaining accurate and current data on E/M services furnished as part 
of a global surgical package. Commenters provided a variety of 
suggestions including setting the all surgical services to a 0-day 
global period, requiring all E/M services to be separately billed, 
validating the global surgical packages with the hospital Diagnosis-
Related Group length of stay data, and setting documentation standards 
for post-operative E/M services that could be audited. In addition to 
receiving the broader comments on measuring post-operative work, we 
also received a comment from the AMA RUC noting that the hospital and 
discharge day management services included in the global period for 
many surgical procedures may have been inadvertently removed from the 
time file in 2007. With its comment letter, the AMA RUC sent us a time 
file with updated post-operative visits for the services that arguably 
we incorrectly displayed with zero visits in the CMS time file. We said 
in the CY 2013 final rule with comment period that we would review this 
file and, if appropriate, propose modifications to the physician time 
file in the CY 2014 PFS proposed rule. We noted in the CY 2013 final 
rule with comment period that if time had been removed from the 
physician time file inadvertently, it would not have affected the 
physician work RVUs or direct PE inputs for these services. It would 
have a small impact on the indirect allocation of PE at the specialty 
level, which we would review when we explore this potential time file 
change.
    After extensive review, we believe that the data were deleted from 
the time file due to an inadvertent error as noted by the AMA RUC. 
Thus, we are proposing to replace the missing post-operative hospital 
E/M visit information and time for the 117 codes that were identified 
by the AMA-RUC and displayed in Table 13. We believe this proposal 
would populate the physician time file with data that, absent the 
inadvertent error, would have been present in the time file.

                Table 13--Proposed Physician Time Changes for CY 2014 Potentially Misvalued Codes
----------------------------------------------------------------------------------------------------------------
                                                  AMA RUC-recommended visits                         AMA RUC-
      CPT code           Short descriptor    ------------------------------------     CY 2013       recommended
                                               99231    99232    99238    99291   physician time  physician time
----------------------------------------------------------------------------------------------------------------
19368...............  Breast reconstruction.        4  .......        1  .......             712             770
19369...............  Breast reconstruction.        3  .......        1  .......             657             690
20100...............  Explore wound neck....        2  .......        1  .......             218             266
20816...............  Replantation digit            5  .......        1  .......             671             697
                       complete.
20822...............  Replantation digit            3  .......        1  .......             587             590
                       complete.
20824...............  Replantation thumb            5  .......        1  .......             646             690
                       complete.
20827...............  Replantation thumb            4  .......        1  .......             610             625
                       complete.
20838...............  Replantation foot             8  .......        1  .......             887             986
                       complete.
20955...............  Fibula bone graft             6  .......        1        1             867             957
                       microvasc.
20969...............  Bone/skin graft               8  .......        1  .......           1,018           1,048
                       microvasc.
20970...............  Bone/skin graft iliac         8  .......        1  .......             958             988
                       crest.
20973...............  Bone/skin graft great         5  .......        1  .......           1,018             988
                       toe.
21139...............  Reduction of forehead.        1  .......        1  .......             400             466
21151...............  Reconstruct midface           2  .......        1        1             567             686
                       lefort.
21154...............  Reconstruct midface           3  .......        1        2             664             853
                       lefort.
21155...............  Reconstruct midface           2  .......        1        2             754             939
                       lefort.
21175...............  Reconstruct orbit/      .......        1        1        2             549             767
                       forehead.
21182...............  Reconstruct cranial     .......        1        1        2             619             856
                       bone.
21188...............  Reconstruction of             1  .......        1  .......             512             572
                       midface.
22100...............  Remove part of neck           2  .......        1  .......             397             372
                       vertebra.
22101...............  Remove part thorax            3  .......        1  .......             392             387
                       vertebra.
22110...............  Remove part of neck           6  .......        1  .......             437             479
                       vertebra.
22112...............  Remove part thorax            7  .......        1  .......             507             530
                       vertebra.
22114...............  Remove part lumbar            7  .......        1  .......             517             530
                       vertebra.
22210...............  Revision of neck spine        7  .......        1  .......             585             609
22212...............  Revision of thorax            7  .......        1  .......             610             640
                       spine.
22214...............  Revision of lumbar            7  .......        1  .......             585             624
                       spine.
22220...............  Revision of neck spine        7  .......        1  .......             565             585
22222...............  Revision of thorax            8  .......        1  .......             630             651
                       spine.
22224...............  Revision of lumbar            8  .......        1  .......             620             666
                       spine.
22315...............  Treat spine fracture..        1  .......        1  .......             257             252
22325...............  Treat spine fracture..        6  .......        1  .......             504             528
22326...............  Treat neck spine              6  .......        1  .......             452             480
                       fracture.
22327...............  Treat thorax spine            9  .......        1  .......             505             604
                       fracture.
22548...............  Neck spine fusion.....        8  .......        1        1             532             673
22556...............  Thorax spine fusion...        3  .......        1        1             525             557
22558...............  Lumbar spine fusion...        2  .......        1        1             502             525

[[Page 43307]]

 
22590...............  Spine & skull spinal          3  .......        1  .......             532             501
                       fusion.
22595...............  Neck spinal fusion....        6  .......        1  .......             492             521
22600...............  Neck spine fusion.....        6  .......        1  .......             437             490
22610...............  Thorax spine fusion...        8  .......        1  .......             468             549
22630...............  Lumbar spine fusion...        3  .......        1  .......             501             487
22800...............  Fusion of spine.......        7  .......        1  .......             517             571
22802...............  Fusion of spine.......        4  .......        1  .......             552             538
22804...............  Fusion of spine.......        5  .......        1  .......             630             595
22808...............  Fusion of spine.......        5  .......        1  .......             553             530
22810...............  Fusion of spine.......        5  .......        1  .......             613             595
22812...............  Fusion of spine.......        8  .......        1  .......             666             700
31582...............  Revision of larynx....        8  .......        1  .......             489             654
32650...............  Thoracoscopy w/               2  .......        1  .......             322             290
                       pleurodesis.
32656...............  Thoracoscopy w/               3  .......        1  .......             419             377
                       pleurectomy.
32658...............  Thoracoscopy w/sac fb         1  .......        1  .......             362             330
                       remove.
32659...............  Thoracoscopy w/sac            2  .......        1  .......             414             357
                       drainage.
32661...............  Thoracoscopy w/               1  .......        1  .......             342             300
                       pericard exc.
32664...............  Thoracoscopy w/th nrv         1  .......        1  .......             362             330
                       exc.
32820...............  Reconstruct injured           4  .......        1        5             631             854
                       chest.
33236...............  Remove electrode/             4  .......        1  .......             258             346
                       thoracotomy.
33237...............  Remove electrode/             5  .......        1  .......             378             456
                       thoracotomy.
33238...............  Remove electrode/             5  .......        1  .......             379             472
                       thoracotomy.
33243...............  Remove eltrd/                 5  .......        1  .......             504             537
                       thoracotomy.
33321...............  Repair major vessel...        8  .......        1  .......             751             754
33332...............  Insert major vessel           8  .......        1  .......             601             604
                       graft.
33401...............  Valvuloplasty open....        8  .......        1  .......             830             661
33403...............  Valvuloplasty w/cp            8  .......        1  .......             890             638
                       bypass.
33417...............  Repair of aortic valve        3  .......        1        3             740             750
33472...............  Revision of pulmonary         1  .......        1        5             665             780
                       valve.
33502...............  Coronary artery               3  .......        1        3             710             688
                       correction.
33503...............  Coronary artery graft.        6  .......        1        3             890             838
33504...............  Coronary artery graft.        5  .......        1        3             740             789
33600...............  Closure of valve......        6  .......        1  .......             800             628
33602...............  Closure of valve......        6  .......        1  .......             770             628
33606...............  Anastomosis/artery-           8  .......        1  .......             860             728
                       aorta.
33608...............  Repair anomaly w/             5  .......        1  .......             800             668
                       conduit.
33690...............  Reinforce pulmonary           3  .......        1        3             620             636
                       artery.
33702...............  Repair of heart               1  .......        1        4             663             751
                       defects.
33722...............  Repair of heart defect        5  .......        1  .......             770             608
33732...............  Repair heart-vein             5  .......        1  .......             710             578
                       defect.
33735...............  Revision of heart             3  .......        1        4             740             770
                       chamber.
33736...............  Revision of heart             5  .......        1  .......             710             548
                       chamber.
33750...............  Major vessel shunt....        2  .......        1        3             680             722
33764...............  Major vessel shunt &          2  .......        1        4             710             750
                       graft.
33767...............  Major vessel shunt....        5  .......        1  .......             800             608
33774...............  Repair great vessels          1  .......        1        7             845             998
                       defect.
33788...............  Revision of pulmonary         3  .......        1        3             770             736
                       artery.
33802...............  Repair vessel defect..        3  .......        1        2             558             556
33803...............  Repair vessel defect..        3  .......        1        2             618             586
33820...............  Revise major vessel...        1  .......        1        1             430             414
33824...............  Revise major vessel...        1  .......        1        3             588             615
33840...............  Remove aorta                  2  .......        1        3             588             639
                       constriction.
33845...............  Remove aorta                  1  .......        1        3             710             726
                       constriction.
33851...............  Remove aorta                  2  .......        1        3             603             700
                       constriction.
33852...............  Repair septal defect..        2  .......        1        3             663             719
33853...............  Repair septal defect..        8  .......        1  .......             800             668
33917...............  Repair pulmonary              5  .......        1  .......             740             608
                       artery.
33920...............  Repair pulmonary              6  .......        1  .......             800             658
                       atresia.
33922...............  Transect pulmonary            5  .......        1  .......             618             546
                       artery.
33974...............  Remove intra-aortic           1  .......        1  .......             406             314
                       balloon.
34502...............  Reconstruct vena cava.        6  .......        1  .......             793             741
35091...............  Repair defect of             11  .......        1        2             597             790
                       artery.
35694...............  Arterial transposition        2  .......        1  .......             468             456
35901...............  Excision graft neck...        4  .......        1  .......             484             482
35903...............  Excision graft                3  .......        1  .......             408             416
                       extremity.
47135...............  Transplantation of           23  .......        1  .......           1,501           1,345
                       liver.
47136...............  Transplantation of           28  .......        1  .......           1,301           1,329
                       liver.
49422...............  Remove tunneled ip            1  .......        1  .......             154             182
                       cath.
49429...............  Removal of shunt......        6  .......        1  .......             249             317
50320...............  Remove kidney living          4  .......        1  .......             480             524
                       donor.

[[Page 43308]]

 
50845...............  Appendico-vesicostomy.        5  .......        1  .......             685             613
56632...............  Extensive vulva               7  .......        1  .......             835             683
                       surgery.
60520...............  Removal of thymus             2  .......        1        2             406             474
                       gland.
60521...............  Removal of thymus             5  .......        1  .......             457             445
                       gland.
60522...............  Removal of thymus             7  .......        1  .......             525             533
                       gland.
61557...............  Incise skull/sutures..        3  .......        1  .......             529             510
63700...............  Repair of spinal              3  .......        1  .......             399             401
                       herniation.
63702...............  Repair of spinal              3  .......        1  .......             469             463
                       herniation.
63704...............  Repair of spinal              8  .......        1  .......             534             609
                       herniation.
63706...............  Repair of spinal              8  .......        1  .......             602             679
                       herniation.
----------------------------------------------------------------------------------------------------------------

(3) Codes With Higher Total Medicare Payments in Office Than in 
Hospital or ASC
    We are proposing to address nearly 200 codes that we believe have 
misvalued resource inputs. These are codes for which the total PFS 
payment when furnished in an office or other nonfacility setting would 
exceed the total Medicare payment (the combined payment to the facility 
and the professional) when the service is furnished in a facility, 
either a hospital outpatient department or an ASC.
    For services furnished in a facility setting we would generally 
expect the combined payment to the facility and the practitioner to 
exceed the PFS payment made to the professional when the service is 
furnished in the nonfacility setting. This payment differential is 
expected because it reflects the greater costs we would expect to be 
incurred by facilities relative to physicians furnishing services in 
offices and other non-facility settings. These greater costs are due to 
higher overhead resulting from differences in regulatory requirements 
and for facilities, such as hospitals, maintaining the capacity to 
furnish services 24 hours per day and 7 days per week. However, when we 
analyzed such payments, we identified nearly 300 codes that would 
result in greater Medicare payment in the nonfacility setting than in 
the facility setting. We believe these anomalous site-of-service 
payment differentials are the result of inaccurate resource input data 
used to establish rates under the PFS.
    In this proposed rule, we are proposing to address these misvalued 
codes. Specifically, we are proposing to refine the PE methodology to 
limit the nonfacility PE RVUs for individual codes so that the total 
nonfacility PFS payment amount would not exceed the total combined 
payment under the PFS and the OPPS (or the ASC payment system) when the 
service is furnished in the facility setting. We believe this is an 
efficient way to address these significant anomalies within the PE 
methodology and more appropriately value these services. We discuss 
this proposal in more detail in section II.A.4.b.3.
4. The Multiple Procedure Payment Reduction Policy
    Medicare has long employed multiple procedure payment reduction 
(MPPR) policies to adjust payment to more appropriately reflect reduced 
resources involved with furnishing services that are frequently 
furnished together. Under these policies, we reduce payment for the 
second and subsequent services within the same MPPR category furnished 
in the same session or same day. These payment reductions reflect 
efficiencies that typically occur in either the PE or professional work 
or both when services are furnished together. With the exception of a 
few codes that are always reported with another code, the PFS values 
services independently to recognize relative resources involved when 
the service is the only one furnished in a session. Although some of 
our MPPR policies precede the Affordable Care Act, MPPRs can address 
the fourth category of potentially misvalued codes identified in 
section 1848(c)(2)(K) of the Act, as added by the Affordable Care Act, 
which is ``multiple codes that are frequently billed in conjunction 
with furnishing a single service'' (see 75 FR 73216). We are not 
proposing any new MPPRs in this proposed rule, but the following 
sections describe the history of MPPRs and the services currently 
covered by MPPRs.
a. Background
    Medicare has a longstanding policy to reduce payment by 50 percent 
for the second and subsequent surgical procedures furnished to the same 
beneficiary by a single physician, or physicians in the same group 
practice, 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 MPPR policy, with this 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 the Congress on Medicare Payment Policy, for CY 2006 PFS, we 
extended the MPPR policy to the TC of certain diagnostic imaging 
procedures furnished on contiguous areas of the body in a single 
session (70 FR 70261). This MPPR policy recognizes that for the second 
and subsequent imaging procedures furnished in the same session, there 
are some efficiencies in clinical labor, supplies, and equipment time. 
In particular, certain clinical labor activities and supplies are not 
duplicated for subsequent imaging services in the same session and, 
because equipment time and indirect costs are allocated based on 
clinical labor time, we also reduced those accordingly.
    The imaging MPPR policy originally applied 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, and only applied to procedures furnished in a single session 
involving contiguous body areas within a family of codes. Additionally, 
this MPPR policy originally applied to TC-only services and to the TC 
of global services, but not to professional component (PC) services.
    There have been several revisions to this policy since it was 
originally adopted. Under the current imaging

[[Page 43309]]

MPPR policy, full payment is made for the TC of the highest paid 
procedure, and payment for the TC is reduced by 50 percent for each 
additional procedure subject to this MPPR policy. We originally planned 
to phase in the imaging 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, section 5102(b) of the Deficit Reduction Act of 
2005 (DRA) (Pub. L. 109-171, enacted on December 20, 2006) amended the 
statute to place a cap on the PFS payment amount for most imaging 
procedures at the amount paid under the hospital outpatient prospective 
payment system (OPPS). In view of this new OPPS payment cap, we decided 
in the CY 2006 PFS final rule with comment period that it would be 
prudent to retain the imaging 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 imaging MPPR policy 
from the PFS budget neutrality provision. Effective July 1, 2010, 
section 1848(b)(4)(C) of the Act 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. Section 
1848(c)(2)(B)(v)(IV) of the Act exempted the reduced expenditures 
attributable to this further change from the PFS budget neutrality 
provision.
    In the July 2009 U.S. Government Accountability Office (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 
furnished by the same physician to the same beneficiary on the same 
day. The GAO report recommended the following: (1) Expanding the 
existing imaging MPPR policy for certain services 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 furnished together. The GAO report 
also encouraged us to focus on service pairs that have the most impact 
on Medicare spending.
    In its 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 CY 2009 and CY 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.
    Section 1848(c)(2)(K) of the Act 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, in the CY 2010 final rule 
with comment period, we implemented a limited expansion of the imaging 
MPPR policy to additional combinations of imaging services.
    Effective January 1, 2011, the imaging MPPR applies regardless of 
code family; that is, the policy applies to multiple imaging services 
furnished within the same family of codes or across families. This 
policy is consistent with the standard PFS MPPR policy for surgical 
procedures that does not group procedures by body region. The current 
imaging MPPR policy applies to CT and CTA, MRI and MRA, and ultrasound 
procedures furnished to the same beneficiary in the same session, 
regardless of the imaging modality, and is not limited to contiguous 
body areas.
    As we noted in the CY 2011 PFS final rule with comment period (75 
FR 73228), although section 1848(c)(2)(B)(v)(VI) of the Act specifies 
that reduced expenditures attributable to the increase in the imaging 
MPPR from 25 to 50 percent (effective for fee schedules established 
beginning with 2010 and for services furnished on or after July 1, 
2010) are excluded from the PFS budget neutrality adjustment, it does 
not apply to reduced expenditures attributable to our policy change 
regarding additional code combinations across code families 
(noncontiguous body areas) that are subject to budget neutrality under 
the PFS. The complete list of codes subject to the CY 2011 MPPR policy 
for diagnostic imaging services is included in Addendum F.
    As a further step in applying the provisions of section 
1848(c)(2)(K) of the Act, on January 1, 2011, we implemented an MPPR 
for therapy services. The MPPR applies to separately payable ``always 
therapy'' services, that is, services that are only paid by Medicare 
when furnished under a therapy plan of care. As we explained in the CY 
2011 PFS final rule with comment period (75 FR 73232), the therapy MPPR 
does not apply to contractor-priced codes, bundled codes, or add-on 
codes.
    This MPPR for therapy services was first proposed in the CY 2011 
proposed rule (75 FR 44075) as 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 beneficiary in a 
single day. It applies to services furnished by an individual or group 
practice or ``incident to'' a physician's service. However, in response 
to public comments, in the CY 2011 PFS final rule with comment period 
(75 FR 73232), we adopted a 25 percent payment reduction to the PE 
component of the second and subsequent therapy services for multiple 
``always therapy'' services furnished to a single beneficiary in a 
single day.
    Subsequent to publication of the CY 2011 PFS final rule with 
comment period, section 3 of the Physician Payment and Therapy Relief 
Act of 2010 (PPTRA) (Pub. L. 111-286) revised the payment reduction 
percentage from 25 percent to 20 percent for therapy services for which 
payment is made under a fee schedule under section 1848 of the Act 
(which are services furnished in office settings, or non-institutional 
services). The payment reduction percentage remained at 25 percent for 
therapy services furnished in institutional settings. Section 4 of the 
PPTRA exempted the reduced expenditures attributable to the therapy 
MPPR policy from the PFS budget neutrality provision. Section 633 of 
the ATRA revised the reduction to 50 percent of the PE component for 
all settings, effective April 1, 2013. Therefore, full payment is made 
for the service or unit with the highest PE and payment for the PE 
component for the second and subsequent procedures or additional units 
of the same service is reduced by 50 percent for both institutional and 
non-institutional services.
    This MPPR policy applies to multiple units of the same therapy 
service, as well as to multiple different ``always therapy'' services, 
when furnished to the same beneficiary on the same day. The MPPR 
applies when multiple therapy services are billed on the same date of 
service for one beneficiary by the same practitioner or facility under 
the same National Provider Identifier (NPI), regardless of whether the 
services are furnished in one therapy discipline or multiple 
disciplines, including physical therapy, occupational therapy, or 
speech-language pathology.

[[Page 43310]]

    The MPPR policy applies in all settings where outpatient therapy 
services are paid under Part B. This includes both services that are 
furnished in the office setting and paid under the PFS, as well as 
institutional services that are furnished by outpatient hospitals, home 
health agencies, comprehensive outpatient rehabilitation facilities 
(CORFs), and other entities that are paid for outpatient therapy 
services at rates based on the PFS.
    In its June 2011 Report to Congress, MedPAC highlighted continued 
growth in ancillary services subject to the in-office ancillary 
services exception. The in-office ancillary exception to the general 
prohibition under section 1877 of the Act as amended by the Ethics in 
Patient Referrals Act, also known as the Stark law, allows physicians 
to refer Medicare beneficiaries for designated health services, 
including imaging, radiation therapy, home health care, durable medical 
equipment, clinical laboratory tests, and physical therapy, to entities 
with which they have a financial relationship under specific 
conditions. MedPAC recommended that we apply a MPPR to the PC of 
diagnostic imaging services furnished by the same practitioner in the 
same session as one means to curb excess self-referral for these 
services. The GAO already had made a similar recommendation in its July 
2009 report.
    In continuing to apply the provisions of section 1848(c)(2)(K) of 
the Act regarding potentially misvalued codes that result from 
``multiple codes that are frequently billed in conjunction with 
furnishing a single service,'' in the CY 2012 final rule (76 FR 73071), 
we expanded the MPPR to the PC of Advanced Imaging Services (CT, MRI, 
and Ultrasound), that is, the same list of codes to which the MPPR on 
the TC of advanced imaging already applied. Thus, this MPPR policy now 
applies to the PC and the TC of certain diagnostic imaging codes. 
Specifically, we expanded the payment reduction currently applied to 
the TC to apply also to the PC of the second and subsequent advanced 
imaging services furnished by the same physician (or by two or more 
physicians in the same group practice) to the same beneficiary in the 
same session on the same day. However, in response to public comments, 
in the CY 2012 PFS final rule with comment period, we adopted a 25 
percent payment reduction to the PC component of the second and 
subsequent imaging services.
    Under this policy, full payment is made for the PC of the highest 
paid advanced imaging service, and payment is reduced by 25 percent for 
the PC for each additional advanced imaging service furnished to the 
same beneficiary in the same session. This policy was based on the 
expected efficiencies in furnishing multiple services in the same 
session due to duplication of physician work, primarily in the pre- and 
post-service periods, but with some efficiencies in the intraservice 
period.
    This policy 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 
1848(c)(2)(K) of the Act. This policy is also consistent with our 
longstanding policies on surgical and nuclear medicine diagnostic 
procedures, under which we apply a 50 percent payment reduction to 
second and subsequent procedures. Furthermore, it was responsive to 
continued concerns about significant growth in imaging spending, and to 
MedPAC (March 2010 and June 2011) and GAO (July 2009) recommendations 
regarding the expansion of MPPR policies under the PFS to account for 
additional efficiencies.
    In the CY 2013 final rule (77 FR 68933), we expanded the MPPR to 
the TC of certain cardiovascular and ophthalmology diagnostic tests. 
Although we proposed a 25 percent reduction for both diagnostic 
cardiovascular and ophthalmology services, we adopted a 20 percent 
reduction for ophthalmology services in the final rule with comment 
period (77 FR 68941) in response to public comments. For diagnostic 
cardiovascular services, full payment is made for the procedure with 
the highest TC payment, and payment is reduced by 25 percent for the TC 
for each additional procedure furnished to the same patient on the same 
day. For diagnostic ophthalmology services, full payment is made for 
the procedure with the highest TC payment, and payment is reduced by 20 
percent for the TC for each additional procedure furnished to the same 
patient on the same day.
    Although we are not proposing any new MPPR policies for CY 2014, we 
continue to look at expanding the MPPR based on efficiencies when 
multiple procedures are furnished together. Any specific proposals 
would be presented in future rulemaking and subject to further public 
comment.''
    The complete list of services subject to the MPPRs on diagnostic 
imaging services, therapy services, diagnostic cardiovascular services 
and diagnostic ophthalmology services is shown in Addenda F through J.

C. Malpractice RVUs

    Section 1848(c) of the Act requires that each service paid under 
the PFS be composed 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, which amended 
section 1848(c) of the Act, 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).
    As explained in the CY 2011 PFS final rule with comment period (75 
FR 73208), malpractice RVUs for new and revised codes effective before 
the next five-year review of malpractice RVUs (for example, effective 
CY 2011 through CY 2014, assuming that the next review of malpractice 
RVUs occurs for CY 2015) are determined either by a direct crosswalk 
from a similar source code or by 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 (or ``scale'') the 
malpractice RVU for the new/revised code to reflect the difference in 
work RVU between the source code and the new/revised work value (or, if 
greater, the clinical labor portion of the fully implemented PE RVU) 
for the new code. For example, if the proposed work RVU for a revised 
code is 10 percent higher than the work RVU for its source code, the 
malpractice RVU for the revised code would be increased by 10 percent 
over the source code malpractice RVU. This approach presumes the same 
risk factor for the new/revised code and source code but

[[Page 43311]]

uses the work RVU for the new/revised code to adjust for the difference 
in risk attributable to the variation in work between the two services.
    For CY 2014, we will continue our current approach for determining 
malpractice RVUs for new/revised codes. We will publish a list of new/
revised codes and the malpractice crosswalks used for determining their 
malpractice RVUs in the final rule with comment period. The CY 2014 
malpractice RVUs for new/revised codes will be implemented in the CY 
2014 PFS final rule with comment period. These RVUs will be subject to 
public comment. They will then be finalized in the CY 2015 PFS final 
rule with comment period.

D. Medicare Economic Index (MEI)

1. Revising of the Medicare Economic Index (MEI)
a. Background
    The Medicare Economic Index (MEI) is authorized under 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 
involved in furnishing 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) Physicians' own time; and (2) 
physicians' practice expense (PE).
    The current form of the MEI was described 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 MEI has been updated or revised on 
four instances. 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 with comment period (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. Fourth, the MEI was rebased in 2011 
(75 FR 73262), which moved the cost structure of the index from 2000 
data to 2006 data.
    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. For CY 2014, we are proposing to revise the MEI 
based on the recommendations of the MEI Technical Advisory Panel (TAP). 
We are not rebasing the MEI and will continue to use the data from 2006 
to estimate the cost weights, since these are the most recently 
available, relevant, and complete data we have available to develop 
these weights. In the following sections of this proposed rule, we 
detail our proposals regarding reorganization of cost categories, our 
rationale for selecting the price proxies in the MEI, and the results 
of the proposed revisions to the MEI based on the MEI TAP 
recommendations.
b. MEI Technical Advisory Panel (TAP) Recommendations
    In the CY 2011 PFS final rule (77 FR 68892), we proposed to convene 
a MEI TAP that would review all aspects of the MEI, including the 
inputs, input weights, price-measurement proxies, and productivity 
adjustment. The MEI TAP was to assess the relevance and accuracy of 
these inputs to current physician practices. The MEI TAP's analysis and 
recommendations would be considered in future rulemaking to ensure that 
the MEI accurately and appropriately meets its intended statutory 
purpose.
    The MEI TAP was established by the Secretary under 42 U.S.C. 217a 
and was governed by the provisions of the Federal Advisory Committee 
Act (FACA) (Pub. L. 92-463, enacted on October 6, 1972), as amended, 5 
U.S.C. App. The Panel's deliberations were made in accordance with the 
FACA, which means that the meetings were conducted in public and 
stakeholders were given the opportunity to share their evidence and 
views with panel members.
    The MEI TAP consisted of five members and held three meetings in 
2012: May 21; June 25; and July 11. It produced 8 findings and 13 
recommendations for consideration by CMS. Background on the MEI TAP 
members, meeting transcripts for all three meetings, and the MEI TAP's 
final report, including all findings and recommendations are available 
at http://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/MEITAP.html. It is possible to implement some of the recommendations 
immediately, while more in-depth research is required to implement 
several of the recommendations.
    For CY 2014, we are proposing to implement 10 of the 13 
recommendations made by the MEI TAP. These proposed changes only 
involve revising the MEI categories, cost shares, and price proxies. 
Again, we are not proposing to rebase the MEI at this time since the 
MEI TAP concluded that there is not a reliable, ongoing source of data 
to maintain the MEI. After acknowledging that there are no additional 
data to support further rebasing of the MEI at this time, the MEI TAP 
recommended that CMS' Office of the Actuary (OACT) identify and 
evaluate additional data sources that may allow for more frequent 
updates to the MEI's cost categories and their respective weights. Some 
of the possible data sources the MEI TAP suggested we consider are:
     The Medical Group Management Association's (MGMA) Cost 
Survey
     The Bureau of the Census Services Annual Survey (SAS)
     Pending feasibility, a CMS survey, possibly conducted 
jointly with the American Medical Association, that focuses exclusively 
on physician expenses as they relate to the MEI. The Panel notes that 
the lead time to conceive, develop, fund, and administer such a survey 
would likely be considerable.
     Alternatively, and again pending feasibility, CMS could 
obtain more robust data by means of detailed formal cost reports based 
on a methodologically sound sample of physician practices. Whether the 
degree of improvement in the MEI would warrant the cost associated with 
the process would be an important consideration.
    As such, we will continue to investigate possible data sources, 
including an assessment of whether using self-employed physician data 
for the MEI cost weights, continues to be the most appropriate 
approach.
c. Overview of Proposed Revisions
    The MEI was last rebased and revised in the CY 2011 PFS final rule 
with comment period (75 FR 73262-73275). The current base year for the 
MEI is 2006, which means that the cost weights in the index reflect 
physicians' expenses in 2006. The details of the methodology used to 
determine the 2006 cost shares were provided in the CY 2011 PFS

[[Page 43312]]

proposed rule and finalized in the CY 2011 PFS final rule with comment 
period (75 FR 40087 and 75 FR 73262, respectively). We are proposing to 
make the following revisions to the 2006-based MEI:
(1) Reclassify and Revise Certain Cost Categories
     Reclassify expenses for non-physician clinical personnel 
that can bill independently from non-physician compensation to 
physician compensation.
     Revise the physician wage and benefit split so that the 
cost weights are more in line with the definitions of the price proxies 
used for each category.
     Add an additional subcategory under non-physician 
compensation for health-related workers.
     Create a new cost category called ``All Other Professional 
Services'' that includes expenses covered in the current MEI 
categories: ``All Other Services'' and ``Other Professional Expenses.'' 
The proposed ``All Other Professional Services'' category would be 
further disaggregated into appropriate occupational subcategories.
     Create an aggregate cost category called ``Miscellaneous 
Office Expenses'' that would include the expenses for ``Rubber and 
Plastics,'' ``Chemicals,'' ``All Other Products,'' and ``Paper.''
(2) Revise Price Proxies
     Revise the price proxy for physician wages and salaries 
from the Average Hourly Earnings (AHE) for the Total Private Nonfarm 
Economy for Production and Nonsupervisory Workers to the ECI for Wages 
and Salaries, Professional and Related Occupations, Private Industry.
     Revise the price proxy for physician benefits from the ECI 
for Benefits for the Total Private Industry to the ECI for Benefits, 
Professional and Related Occupations, Private Industry.
     Use the ECI for Wages and Salaries and the ECI for 
Benefits of Hospital, Civilian workers (private industry) as the price 
proxies for the new category of non-physician health-related workers.
     Use ECIs to proxy the Professional Services occupational 
subcategories that reflect the type of professional services purchased 
by physicians' offices.
     Revise the price proxy for the fixed capital category from 
the CPI for Owners' Equivalent Rent of Residences to the PPI for 
Lessors of Nonresidential Buildings (NAICS 53112).
d. Revising Expense Categories in the MEI
    The MEI is used as part of the Sustainable Growth Rate (SGR) 
methodology to update the PFS and represents the price component of 
that update. The proposed expense categories in the MEI, along with 
their respective weights, are primarily derived from data collected in 
the 2006 AMA Physician Practice Information Survey (PPIS) for self-
employed physicians representing 42 medical specialties and selected 
self-employed non-Medical Doctor (non-MD) specialties. Data for non-MD 
specialties were collected in a supplemental survey of the PPIS survey 
questionnaire. We included the data from the following non-medical 
specialties in the MEI cost weight calculations (optometrists, oral 
surgeons, podiatrists, and chiropractors) specialties in the MEI cost 
weight calculations 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 are not 
proposing to change the data source we used to establish the major MEI 
cost weights, and therefore, we propose to continue to use of the 2006 
AMA PPIS physician expense data at this time. Data for the dental 
medicine specialty are not included in the weights since the PPIS 
supplemental collection effort did not survey this specialty.
    We are not proposing any changes in the methodology for estimating 
the cost shares as finalized in the CY 2011 PFS final rule with comment 
period (75 FR 73263-73267). For CY 2014, we are proposing to revise the 
classification of certain expenses within the 2006-based MEI. The 
following sections describe the details of the proposed revisions for 
each of the categories and the rationale for the proposed changes. We 
also provide the Panel recommendation that is the impetus for each of 
the proposed revisions.
(1) Overall MEI Cost Weights
    Table 14 lists the set of mutually exclusive and exhaustive cost 
categories and weights that make up the proposed revised MEI as 
compared to the current MEI cost categories.
    The physician compensation cost weight under the proposed revised 
MEI is 2.600 percentage points higher than the physician compensation 
weight in the current MEI. This occurs because of the proposed 
reclassification of expenses for non-physician clinical staff that can 
bill independently from non-physician compensation to physician 
compensation. This change lowers the PE cost weight by 2.600 percent as 
well, all of which comes from a lower weight for non-physician 
compensation. The remaining MEI cost weights are unchanged.
    The proposed revised MEI includes four new detailed cost categories 
and two new sub-aggregate cost categories. The proposed new detailed 
cost categories are:
     Health-related, non-physician wages and salaries.
     Professional, scientific, and technical services.
     Administrative support and waste management services.
     All other services.
    The proposed new sub-aggregate categories are:
     Non-health, non-physician wages.
     Miscellaneous office expenses.
    The proposed revised MEI excludes two sub-aggregate categories that 
were included in the current 2006-based MEI. The sub-aggregate 
categories we propose to remove are:
     Office expenses.
     Drugs & supplies.

    Table 14--Proposed Revised 2006 MEI Cost Categories and, Weights
      Compared to the Current 2006 MEI Cost Categories and Weights
------------------------------------------------------------------------
Current MEI (2006 = 100), finalized in the  Proposed revised MEI (2006 =
           CY2011 PFS final rule              100), CY2014 PFS proposed
-------------------------------------------             rule
                                           -----------------------------
                                 Current      Revised
        Cost category            weights      weights      Revised cost
                                (percent)    (percent)       category
------------------------------------------------------------------------
Physician Compensation.......       48.266       50.866  Physician
                                                          Compensation.
Wages and Salaries...........       43.881       43.641  Wages and
                                                          Salaries.

[[Page 43313]]

 
Benefits.....................        4.386        7.225  Benefits.
Practice Expense.............       51.734       49.134  Practice
                                                          Expense.
Non-physician compensation...       19.153       16.553  Non-physician
                                                          compensation.
Non-physician wages..........       13.752       11.885  Non-physician
                                                          wages.
                                                  7.249  Non-health, non-
                                                          physician
                                                          wages.
P&T..........................        6.006        0.800  Professional
                                                          and Related.
Management...................        1.446        1.529  Management.
Clerical.....................        4.466        4.720  Clerical.
Services.....................        1.834        0.200  Services.
                                                  4.636  Health related,
                                                          non-physician
                                                          wages.
Non-physician benefits.......        5.401        4.668  Non-physician
                                                          benefits.
Other Practice Expense.......       26.308       32.581  Other Practice
                                                          Expense.
Office expenses..............       20.035
Utilities....................        1.266        1.266  Utilities.
                                                  2.478  Miscellaneous
                                                          Office
                                                          Expenses.
Chemicals....................        0.723        0.723  Chemicals.
Paper........................        0.656        0.656  Paper.
Rubber & Plastics............        0.598        0.598  Rubber &
                                                          Plastics.
                                                  0.500  All other
                                                          products.
Telephone....................        1.501        1.501  Telephone.
Postage......................        0.898        0.898  Postage.
All other services...........        3.581        8.095  All Other
                                                          professional
                                                          services.
                                                  2.592  Professional,
                                                          scientific, &
                                                          technical
                                                          services.
                                                  3.052  Administrative
                                                          support &
                                                          waste
                                                          management.
                                                  2.451  All other
                                                          services.
All other products...........        0.500
Capital......................       10.310       10.310  Capital.
Fixed Capital................        8.957        8.957  Fixed Capital.
Moveable Capital.............        1.353        1.353  Moveable
                                                          Capital.
Professional Liability               4.295        4.295  Professional
 Insurance.                                               Liability
                                                          Insurance.
Medical Equipment............        1.978        1.978  Medical
                                                          Equipment.
Drugs and Supplies...........        1.760
Prescription Drugs...........        0.000
Medical supplies.............        1.760        1.760  Medical
                                                          supplies.
Other Professional Expenses..        4.513
All other....................        4.513
                              ------------------------------------------
    Total MEI................      100.000      100.000  Total MEI.
------------------------------------------------------------------------
* The term (2006 = 100) refers to the base year of the MEI

(2) Physician Compensation (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 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. Expenses for 
employed physician compensation are combined with expenses for self-
employed physician compensation to obtain an aggregate Physician 
Compensation cost weight. Based on this methodology, the Physician 
Compensation cost weight in the current MEI is 48.266 percent.
    As discussed in the CY 2011 PFS final rule with comment period (75 
FR 73265), when determining this weight, we classified the expenses for 
non-physician clinical staff that can bill Medicare independently under 
non-physician compensation, which is where these expenses have 
historically been apportioned in the MEI. The AMA PPIS survey question 
that collected the data for the clinical personnel who can 
independently bill, such as nurse practitioners, physician assistants, 
and other clinical personnel, captured these expenses under non-
physician compensation. Additionally, prior AMA surveys captured these 
expenses as non-physician compensation costs.
    The Panel reviewed this methodology and Recommendation 3.2 was 
that:
    ``OACT evaluate the appropriate classification of the expenses 
associated with non-physician clinical staff who can bill Medicare 
independently. Among the factors OACT should consider are:
     Any definition of `physicians' that exists under current 
law in relation to the Medicare PFS and whether these definitions might 
limit OACT's ability to make changes;
     Whether time for non-physician staff who can bill 
independently is included among the inputs to the PE RVU methodology 
under the Medicare PFS (that is, is the treatment of this input under 
the PE RVU methodology consistent with that under the MEI);
     Whether there is any evidence these staff do not spend the 
majority of their time providing `physicians' services' as defined by 
Medicare; and
     The extent to which those who can bill independently 
actually do so.''

[[Page 43314]]

    We are proposing to reclassify these expenses to physician 
compensation for several reasons:
     These types of practitioners furnish services that are 
similar to those furnished by physicians.
     If billing independently, these practitioners would be 
paid at a percentage of the physicians' services or in certain cases at 
the same rate as physicians.
     The expenses related to the work components for the RVUs 
would include work from clinical staff that can bill independently. 
Therefore, it would improve consistency with the RVU payments to 
include these expenses as physician compensation in the MEI.
    The effect of moving the expenses related to clinical staff that 
can bill independently is to increase the physician compensation cost 
share by 2.600 percentage points and reduces non-physician compensation 
costs by the same amount. The physician compensation cost share for the 
proposed revised MEI is 50.866 percent compared to the physician 
compensation cost share of 48.266 percent in the current MEI.
    Within the physician compensation cost weight, the MEI includes a 
separate weight for wages and salaries and a separate weight for 
benefits. Under the current 2006-based MEI, the ratio for wages and 
salaries, and benefits was calculated using data from the PPIS. Self-
employed physician wages and salaries accounted for 92.3 percent of 
physician earnings while physician benefits accounted for the remaining 
7.8 percent. For employed physician payroll, the distributions for 
wages and salaries, and benefits for 2006 were 85.8 percent and 14.2 
percent, respectively. This ratio was determined by calculating a 
weighted average of available IRS Statistics of Income (SOI) data for 
partnerships, corporations, and S-corporations specific to physicians 
and outpatient care centers. Combining the information on self-employed 
and employed physicians produced a physician wages & salaries cost 
weight of 43.880 percent and a physician benefits cost weight of 4.386 
percent, in the current MEI.
    Recommendation 3.1 stated:

    The Panel recommends that OACT revise the Physician Wages and 
Salaries and Physician Benefit cost weights in the 2006-based MEI. 
OACT should determine the cost weights for wages and benefits to 
ensure they are consistent with the definitions in the Employment 
Cost Index. Specifically, OACT should consider estimating the 
proportion of the Physician Wages and Salaries cost weight 
associated with physicians' retirement benefits, and reclassifying 
that percentage into the Physician Benefits cost weight to be 
consistent with the costs included in the ECI for Wages and Salaries 
and the ECI for Benefits price proxies. Evaluation of the PPIS data 
determined that retirement benefits were included in the Physician 
Wages and Salaries cost weight while the associated price change is 
currently reflected in the ECI for Benefits.

    We are proposing to revise the wage and benefit split used for 
physician compensation. Specifically, we are proposing to apply the 
distribution from the SOI data to both self-employed and employed 
physician compensation. In reviewing the detailed AMA PPIS survey 
questions, it was clear that self-employed physician benefits were 
mainly comprised of insurance costs while other benefits such as 
physician retirement, paid leave, and payroll taxes were likely 
included in physician wages and salaries.
    By definition, the price proxy used for physician benefits, which 
is an Employment Cost Index (ECI) concept, includes retirement savings. 
Thus, using the AMA PPIS data produces a definitional inconsistency 
between the cost weight and the price proxy. Therefore, we propose to 
use the data on wages and salaries, and employee benefits from the SOI 
for Offices of Physicians and Dentists for partnerships and 
corporations for both self-employed and employed physicians. From the 
SOI data, benefit expenses were estimated by summing the partnership 
data for retirement plans and employee benefit programs with 
corporation data for pension, profit-sharing plans and employee benefit 
programs. For 2006, the split between wages and salaries, and benefits 
was 85.8 percent and 14.2 percent, respectively. Retirement/pension 
plans account for about 60 percent of total benefits. The SOI data do 
not classify paid leave and supplemental pay as a benefit.
    Combining the impact of classifying compensation for non-physicians 
that can bill independently as physician compensation with the use of 
the SOI data, the physician wages and salary cost share in the proposed 
revised MEI is lower than the current MEI by 0.240 percentage points. 
These two methodological changes result in an increase in the physician 
benefit cost share in the proposed revised MEI of 2.839 percentage 
points. As a result, the physician wages and salary cost share for the 
proposed revised MEI is 43.641 percent and the physician benefit cost 
share for the proposed revised MEI is 7.225 percent.
(3) Physician's Practice Expenses
    To determine the PE cost weights, we use mean expense data from the 
2006 PPIS survey. The derivation of the weights and categories for 
practice expenses is the same as finalized in the CY 2011 PFS final 
rule with comment period (75 FR 73264-73267), except where noted below.
(a) Non-physician Employee Compensation
    The cost weight for Non-physician Employee Compensation was 
developed using the 2006 AMA PPIS mean expenses for these costs. As 
discussed previously, for CY 2014 we are proposing to exclude the 
expenses related to non-physician clinical staff that can bill 
independently from this cost category. Moving the expenses related to 
the clinical staff that can bill independently out of non-physician 
compensation costs decreases the share by 2.600 percentage points. The 
non-physician compensation cost share for the proposed revised MEI is 
16.553 percent compared to the current physician compensation cost 
share of 19.153 percent.
    We are proposing to use the same method as finalized in the CY 2011 
PFS final rule to split the non-physician compensation between wages 
and benefits. For reference, we use 2006 BLS Employer Costs for 
Employee Compensation (ECEC) data for the Health Care and Social 
Assistance (private industry). 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 non-
physician wage and benefit cost shares for the proposed revised MEI are 
11.885 percent and 4.668 percent, respectively; for the current MEI, 
the non-physician wage and benefit cost shares are 13.752 percent and 
5.401 percent, respectively.
    The current 2006-based MEI further disaggregated the non-physician 
wages into four occupational subcategories, the details of this method 
can be found in 75 FR 73264-73265. The MEI TAP Recommendation 4.4 
stated:

    ``The Panel recommends the disaggregation of the Non-Physician 
Compensation costs to include an additional category for health-
related workers. This disaggregation would allow for health-related 
workers to be separated from non-health-related workers. CMS should 
rely directly on PPIS data to estimate the health-related non-
physician compensation cost weights. The non-health, non-physician 
wages should be further disaggregated based on the Current 
Population Survey and Occupational Employment Statistics data.''

    We propose to implement this recommendation using expenses reported 
on the AMA PPIS for non-

[[Page 43315]]

physician, non-health-related workers. The survey question asks for the 
expenses for: ``Non-clinical personnel involved primarily in 
administrative, secretarial or clerical activities (Including 
transcriptionists, medical records personnel, receptionists, schedulers 
and billing staff, coding staff, information technology staff, and 
custodial personnel).'' The non-physician, non-health-related wage cost 
share for the proposed revised MEI is 7.249 percent.
    For wage costs of non-physician, health-related workers, the survey 
question asks for the expenses for: ``Other clinical staff, including 
RNs, LPNs, physicists, lab technicians, x-ray technicians, medical 
assistants, and other clinical personnel who cannot independently 
bill.'' The non-physician, health-related wage cost share for the 
proposed revised MEI is 4.636 percent. Together the non-health and 
health-related, non-physician wage costs sum to be equal to the total 
non-physician wage share in the proposed revised MEI of 11.885 percent.
    We are proposing to disaggregate the non-physician, non-health-
related wage cost weight of 7.249 percent into four occupational 
subcategories. The methodology is similar to that finalized in the CY 
2011 PFS final rule with comment period (75 FR 73264), in that 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 non-physician, non-health-related 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 occupational categories 
(Professional & Related (P&R) workers, Managers, Clerical workers, and 
Service workers), we determined annual earnings for each using the 
Standard Occupational Classification (SOC) system. We then determined 
the overall share of the total for each. The occupational distribution 
in the proposed revised MEI as well as the distribution for the 2006-
based MEI is presented in Table 15.

    Table 15--Percent Distribution of Nonphysician Payroll Expense by
  Occupational Group: Proposed Revised 2006-Based MEI and Current 2006-
                                Based MEI
------------------------------------------------------------------------
Current MEI (2006 = 100), finalized in the   Proposed MEI (2006 = 100),
            CY11 PFS final rule                CY14 PFS proposed rule
------------------------------------------------------------------------
                                 Current      Revised
        Cost Category             MEI06        MEI06       Revised cost
                                (percent)    (percent)       category
------------------------------------------------------------------------
Non-physician compensation...       19.153       16.553  Non-physician
                                                          compensation.
Non-physician wages..........       13.752       11.885  Non-physician
                                                          wages.
                               ...........        7.249  Non-health, non-
                                                          phys. wages.
P&T..........................        6.006        0.800  Professional
                                                          and Related.
Management...................        1.446        1.529  Management.
Clerical.....................        4.466        4.720  Clerical.
Services.....................        1.834        0.200  Services.
                               ...........        4.636  Health related,
                                                          non-phys.
                                                          Wages.
Non-physician benefits.......        5.401        4.668  Non-physician
                                                          benefits.
------------------------------------------------------------------------

    The health-related workers were previously included mainly in the 
Professional and Technical and Service Categories. These proposed 
changes allow for health-related workers to be proxied by a health-
specific ECI rather than an ECI for more general occupations.
(b) Other Practice Expense
    The remaining expenses in the MEI are categorized as Other Practice 
Expenses. In the current 2006-based MEI we had classified other PEs in 
one of the following subcategories: Office Expenses; Drugs and 
Supplies; and All Other Professional Expenses. For CY 2014, we are 
proposing to disaggregate these expenses in a way consistent with the 
MEI TAP's recommendations, as detailed below.
    We rely on the 2006 AMA PPIS data to determine the cost share for 
Other Practice Expenses. These expenses are the total of office 
expenses, medical supplies, medical equipment, Professional Liability 
Insurance (PLI), and all other professional expenses.
    For the proposed revised 2006-based MEI, we propose to disaggregate 
Other Practice Expenses into 15 detailed subcategories as shown in 
Table 16.

      Table 16--Revised Cost Categories for Other Practice Expense
------------------------------------------------------------------------
                                                               Revised
                   Revised cost category                        MEI06
                                                              (percent)
------------------------------------------------------------------------
Other Practice Expense.....................................       32.581
Utilities..................................................        1.266
Miscellaneous Office Expenses..............................        2.478
Chemicals..................................................        0.723
Paper......................................................        0.656
Rubber & Plastics..........................................        0.598
All other products.........................................        0.500
Telephone..................................................        1.501
Postage....................................................        0.898
All Other professional services............................        8.095
Professional, Scientific, and Tech. Svcs...................        2.592
Administrative and support & waste.........................        3.052
All Other Services.........................................        2.451
Capital....................................................       10.310
Fixed......................................................        8.957
Moveable...................................................        1.353
Professional Liability Insurance...........................        4.295
Medical Equipment..........................................        1.978
Medical supplies...........................................        1.760
------------------------------------------------------------------------

    For most of these categories, we use the same method as finalized 
in the CY 2011 PFS final rule with comment period to estimate the cost 
shares. In particular, the cost shares for the following categories are 
derived directly from expense data reported on the 2006 AMA PPIS: PLI; 
Medical Equipment; and Medical Supplies. In each case, the cost shares 
remain the same as in the current MEI. Additionally, we continue to use 
the Bureau of Economic Analysis (BEA) 2002--Benchmark I/O data aged to 
2006 to determine the cost weights for other expenses not collected 
directly from the AMA PPIS. The BEA 2002-Benchmark I/O data can be 
accessed at the following link: http://www.bea.gov/industry/io_benchmark.htm#2002data.
    The derivation of the cost weight for each of the detailed 
categories under Other Practice Expenses is provided below.
     Utilities: The Utilities cost weight includes 
expenses classified in the fuel, oil and gas, water and sewage, and 
electricity industries. The proposed cost weight for utilities is 1.266 
percent, the same cost share as in the current MEI.

[[Page 43316]]

     Miscellaneous Office Expenses: We are proposing 
to include an aggregate category of detailed office expenses that were 
stand-alone categories in the current 2006-based MEI. During the CY 
2011 PFS proposed rule comment period, several commenters expressed 
confusion as to the relevance of these categories to their practice 
costs. The MEI TAP discussed the degree of granularity needed in both 
the calculation and reporting of the MEI. The MEI TAP concluded that it 
might be prudent to collapse some of the non-labor PE categories with 
other categories for presentation purposes. In particular, 
Recommendation 3.4 was that:
    ``OACT report more aggregated costs under the Office Expenses cost 
category. In particular, reported costs associated with Rubber and 
Plastics, Chemicals, All Other Products, and Paper should be combined. 
However, the Panel believes that OACT should maintain separately the 
underlying details and calculations associated with these aggregated 
costs when applying price proxies and calculating the overall MEI and 
its subcomponents.'' Based on this recommendation, we are proposing to 
add an aggregate category to the MEI that includes the expenses for 
paper, chemicals, rubber and plastics, and all other products. The cost 
shares for paper, chemicals, rubber and plastics, and all other 
products remain the same for the proposed revised MEI as in the current 
MEI.''
     Telephone: The telephone cost weight includes 
expenses classified in the telecommunications (accounting for the 
majority of the telephone expenses) and cable industries. The cost 
weight for Telephone services is 1.501 percent in the proposed revised 
MEI, the same cost share as in the current MEI.
     Postage: The Postage cost weight includes postal 
service expenses. The cost weight for Postage is 0.898 percent in the 
proposed revised MEI, the same cost share as in the current MEI.
     All Other Services: We propose to combine the 
All Other Services cost weight and All Other Professional Expenses into 
a single cost category. The proposed weight for the All Other 
Professional Services category is 8.095 percent, which is the sum of 
the current MEI weight for All Other Services (3.581 percent) and All 
Other Professional Expenses (4.513 percent), is more in line with the 
GPCI Purchased Services index as finalized in the CY2012 PFS final rule 
with comment period (76 FR 73085). The TAP Recommendation 3.3 was that

    ``OACT create a new cost category entitled Professional Services 
that should consist of the All Other Services cost category (and its 
respective weight) and the Other Professional Expenses cost category 
(and its respective weight). The Panel further recommends that this 
category be disaggregated into appropriate occupational categories 
consistent with the relevant price proxies.''

    We propose to combine the ``Other Professional Expenses'' and ``All 
Other Services'' cost weights of the 2006-based MEI and further 
disaggregate the 8.095 percent of expenses into more detail based on 
the BEA I-O data, allowing for specific cost weights for services such 
as contract billing services, accounting, and legal services. We 
considered various levels of aggregation; however, in considering the 
level of aggregation, the available corresponding price proxies must be 
considered. Given the price proxies that are available from the ECI, we 
propose to disaggregate these expenses into three categories:
     NAICS 54 (Professional, Scientific, and Technical 
Services): The Professional, Scientific, and Technical Services sector 
comprises establishments that specialize in performing professional, 
scientific, and technical activities for others. These activities 
require a high degree of expertise and training. The establishments in 
this sector specialize according to expertise and provide these 
services to clients in a variety of industries, including but not 
limited to: legal advice and representation; accounting, and payroll 
services; computer services; management consulting services; and 
advertising services and have a 2.592 percent weight.
     NAICS 56 (Administrative and Support and Waste Management 
and Remediation Services): The Administrative and Support and Waste 
Management and Remediation Services sector comprises establishments 
performing routine support activities for the day-to-day operations of 
other organizations. The establishments in this sector specialize in 
one or more of these support activities and provide these services to 
clients in a variety of industries including but not limited to: office 
administration; temporary help services; security services; cleaning 
and janitorial services; and trash collection services. These services 
have a 3.052 percent weight.
     All Other Services, a residual category of these expenses: 
The residual All Other Services cost category is mostly comprised of 
expenses associated with service occupations, including but not limited 
to: Lab and blood specimen transport; catering and food services; 
collection company services; and dry cleaning services and have a 2.451 
percent weight.
    ++ Fixed Capital: The Fixed Capital cost weight includes expenses 
for building leases and depreciation. The cost weight for Fixed Capital 
is 8.957 percent in the proposed revised MEI, the same cost share as in 
the current MEI.
    ++ 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 cost weight for 
Moveable Capital is 1.353 percent in the proposed revised MEI, the same 
cost share as in the current MEI.
    ++ Professional Liability Insurance (PLI): 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. The cost 
weight for PLI is 4.295 percent in the proposed revised MEI, the same 
cost share as in the current MEI.
    ++ Medical Equipment Expenses: The proposed weight for Medical 
Equipment was calculated using the 2006 AMA PPIS mean expense data. The 
cost weight for Medical Equipment Expenses is 1.978 percent in the 
proposed revised MEI, the same cost share as in the current MEI.
    ++ Medical Supplies Expenses: The proposed weight for Medical 
Supplies was calculated using the 2006 AMA PPIS mean expense data. The 
cost weight for Medical Supplies Expenses is 1.760 percent in the 
proposed revised MEI, the same cost share as in the current MEI.
2. Selection of Price Proxies for Use in the MEI
    After developing the cost category weights for the proposed revised 
2006-based MEI, we reviewed all the price proxies based on the 
recommendations from the MEI TAP. As was the case in the development of 
the current 2006-based MEI, most of the proxy measures we considered 
are based on BLS data and are grouped into one of the following four 
categories:
     Producer Price Indices (PPIs): PPIs measure price changes 
for goods sold in markets other than retail markets. These fixed-weight 
indexes are measures 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

[[Page 43317]]

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.
     Employment Cost Indices (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.
     Employment Cost Indices (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.
    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.
    Below we discuss the price and wage proxies for each cost category 
of the proposed revised 2006-based MEI (as shown in Table 17). We will 
continue to use the same price proxies as those used in the 2006-based 
MEI except as noted below.
a. Physician Compensation (Physician's Own Time)
(1) Physician Wages and Salaries
    Based on recommendations from the MEI TAP, we are proposing to use 
the ECI for Wages and Salaries for Professional and Related Occupations 
(Private Industry) (BLS series code CIU2020000120000I) to measure price 
growth of this category in the proposed revised 2006-based MEI. The 
current 2006-based MEI used Average Hourly Earnings (AHE) for 
Production and Non-Supervisory Employees for the Private Nonfarm 
Economy.
    The MEI TAP had two recommendations concerning the price proxy for 
physician Wages and Salaries. The first recommendation from the MEI TAP 
was Recommendation 4.1, which was that: ``. . . OACT revise the price 
proxy associated with Physician Wages and Salaries from an Average 
Hourly Earnings concept to an Employment Cost Index concept.'' AHEs are 
calculated by dividing gross payrolls for wages and salaries by total 
hours. The AHE proxy was representative of actual changes in hourly 
earnings for the nonfarm business economy, including shifts in 
employment mix. The recommended alternative, the ECI concept, measures 
the rate of change in employee wage rates per hour worked. ECIs measure 
the pure rate of change in wages by industry and/or occupation and are 
not affected by shifts in employment mix across industries and 
occupations. The MEI TAP thought that the ECI concept better reflected 
physician wage trends compared to the AHE concept.
    The second recommendation related to the price proxy for physician 
wages and salaries was Recommendation 4.2, which was that:

    CMS revise the price proxy associated with changes in Physician 
Wages and Salaries to use the Employment Cost Index for Wages and 
Salaries, Professional and Related, Private Industry. The Panel 
believes this change would maintain consistency with the guidance 
provided in the 1972 Senate Finance Committee report titled `Social 
Security Amendments of 1972,' which stated that the index should 
reflect changes in practice expenses and `general earnings.' In the 
event this change would be determined not to meet the legal 
requirement that the index reflect ``general earnings,'' the Panel 
recommends replacing the current proxy with the Employment Cost 
Index for Wages and Salaries, All Workers, Private Industry. The 
Panel believed this change would maintain consistency with the 
guidance provided in the 1972 Senate Finance Committee report titled 
``Social Security Amendments of 1972,'' which stated that the index 
should reflect changes in practice expenses and ``general 
earnings.'' \1\
---------------------------------------------------------------------------

    \1\ U.S. Senate, Committee on Finance, Social Security 
Amendments of 1972. ``Report of the Committee on Finance United 
States Senate to Accompany H.R. 1,'' September 26, 1972, p. 191.

    We agree that switching the proxy to the ECI for Wages and Salaries 
for Professional and Related Occupations would be consistent with the 
authority provided in the statute and reflect a wage trend more 
consistent with other professionals that receive advanced training. 
Additionally, we believe the ECI is a more appropriate concept than the 
AHE because it can isolate wage trends without being impacted by the 
change in the mix of employment.
(2) Physician Benefits
    The MEI TAP states in Recommendation 4.3 that, ``. . . any change 
in the price proxy for Physician Wages and Salaries be accompanied by 
the selection and incorporation of a Physician Benefits price proxy 
that is consistent with the Physician Wages and Salaries price proxy.'' 
We are proposing to use the ECI for Benefits for Professional and 
Related Occupations (Private Industry) to measure price growth of this 
category in the proposed revised 2006-based MEI. The ECI for Benefits 
for Professional and Related Occupations is derived using BLS's Total 
Compensation for Professional and Related Occupations (BLS series ID 
CIU2010000120000I) and the relative importance of wages and salaries 
within total compensation. We believe this series is technically 
appropriate because it better reflects the benefit trends for 
professionals requiring advanced training. The current 2006-based MEI 
market basket used the ECI for Total Benefits for the Total Private 
Industry.
b. Practice Expense
(1) Non-Physician Employee Compensation
(a) Non-Physician Wages and Salaries
(i) Non-Physician, Non-Health-Related Wages and Salaries
     Professional and Related: We will continue using the ECI 
for Wages and Salaries for Professional and Related Occupation (Private 
Industry) (BLS series code CIU2020000120000I) to measure the price 
growth of this cost category. This is the same proxy used in the 
current 2006-based MEI.
     Management: We will continue using the ECI for Wages and 
Salaries for Management, Business, and Financial (Private Industry) 
(BLS series code CIU2020000110000I) to measure the price growth of this 
cost category. This

[[Page 43318]]

is the same proxy used in the current 2006-based MEI.
     Clerical: We will continue using the ECI for Wages and 
Salaries for Office and Administrative Support (Private Industry) (BLS 
series code CIU2020000220000I) to measure the price growth of this cost 
category. This is the same proxy used in the current 2006-based MEI.
     Services: We will continue using the ECI for Wages and 
Salaries for Service Occupations (Private Industry) (BLS series code 
CIU2020000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the current 2006-based MEI.
(ii) Non-Physician, Health-Related Wages and Salaries
    In Recommendation 4.4, the MEI TAP `` . . . recommend[ed] the 
disaggregation of the Non-Physician Compensation costs to include an 
additional category for health-related workers. This disaggregation 
would allow for health-related workers to be separated from non-health-
related workers. CMS should rely directly on PPIS data to estimate the 
health-related non-physician compensation cost weights. The non-health, 
non-physician wages should be further disaggregated based on the 
Current Population Survey and Occupational Employment Statistics data. 
The new health-related cost category should be proxied by the ECI, 
Wages and Salaries, Hospital (NAICS 622), which has an occupational mix 
that is reasonably close to that in physicians' offices. The Non-
Physician Benefit category should be proxied by a composite benefit 
index reflecting the same relative occupation weights as the non-
physician wages.'' We are proposing to use the ECI for Wages and 
Salaries for Hospital Workers (Private Industry) (BLS series code 
CIU2026220000000I) to measure the price growth of this cost category in 
the proposed revised 2006-based MEI. The ECI for Hospital workers has 
an occupational mix that approximates that in physicians' offices. This 
cost category was not broken out separately in the current 2006-based 
MEI.
(b) Non-Physician Benefits
    We will continue using a composite ECI for non-physician employee 
benefits in the proposed revised 2006-based MEI. However, we are 
proposing to expand the number of occupations from four to five by 
adding detail on Non-Physician Health-Related Benefits. The weights and 
price proxies for the composite benefits index will be revised to 
reflect the addition of the new category. Table 17 lists the five ECI 
series and corresponding weights used to construct the proposed revised 
composite benefit index for non-physician employees in the proposed 
revised 2006-based MEI.

 Table 17--CMS Composite Price Index for Non-Physician Employee Benefits
                 in the Proposed Revised 2006-Based MEI
------------------------------------------------------------------------
                                                             2006 Weight
                         ECI Series                               (%)
------------------------------------------------------------------------
Benefits for Professional and Related Occupation (Private              7
 Industry).................................................
Benefits for Management, Business, and Financial (Private             12
 Industry).................................................
Benefits for Office and Administrative Support (Private               40
 Industry).................................................
Benefits for Service Occupations (Private Industry)........            2
Benefits for Hospital Workers (Private Industry)...........           39
------------------------------------------------------------------------

(3) Other Practice Expense
(a) All Other Professional Services
    As discussed previously, MEI TAP Recommendation 3.3 was that:
    `` . . . OACT create a new cost category entitled Professional 
Services that should consist of the All Other Services cost category 
(and its respective weight) and the Other Professional Expenses cost 
category (and its respective weight). The Panel further recommends that 
this category be disaggregated into appropriate occupational categories 
consistent with the relevant price proxies.'' We are proposing to 
implement this recommendation in the proposed revised 2006-based MEI 
using a cost category titled ``All Other Professional Services.'' 
Likewise, the MEI TAP stated in Recommendation 4.7 that `` . . . price 
changes associated with the Professional Services category be proxied 
by an appropriate blend of Employment Cost Indexes that reflect the 
types of professional services purchased by physician offices.'' We 
agree with this recommendation and are proposing to the use the 
following price proxies for each of the new occupational categories:
     Professional, Scientific, and Technical Services: We are 
proposing to use the ECI for Total Compensation for Professional, 
Scientific, and Technical Services (Private Industry) (BLS series code 
CIU2015400000000I) to measure the price growth of this cost category. 
This cost category was not broken out separately in the current 2006-
based MEI.
     Administrative and Support Services: We are proposing to 
use the ECI for Total Compensation for Administrative, Support, Waste 
Management, and Remediation Services (Private Industry) (BLS series 
code CIU2015600000000I) to measure the price growth of this cost 
category. This cost category was not broken out separately in the 
current 2006-based MEI.
     All Other Services: 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.
(b) Miscellaneous Office Expenses
     Chemicals: We will continue using the PPI for Other Basic 
Organic Chemical Manufacturing (BLS series code PCU32519-
32519) to measure the price growth of this cost category. This is the 
same proxy used in the current 2006-based MEI.
     Paper: We will continue using the PPI for Converted Paper 
and Paperboard (BLS series code WPU0915) to measure the price 
growth of this cost category. This is the same proxy used in the 
current 2006-based MEI.
     Rubber & Plastics: We will continue using the PPI for 
Rubber and Plastic Products (BLS series code WPU07) to measure 
the price growth of this cost category. This is the same proxy used in 
the current 2006-based MEI.
     All Other Products: We will continue using the CPI-U for 
All Products less Food and Energy (BLS series code CUUR0000SA0L1E) to 
measure the price growth of this cost category. This is the same proxy 
used in the current 2006-based MEI.
     Utilities: We will continue using the CPI for Fuel and 
Utilities (BLS series code CUUR0000SAH2) to measure the price growth of 
this cost category. This is the same proxy used in the current 2006-
based MEI.
     Telephone: We will continue using the CPI for Telephone 
Services (BLS series code CUUR0000SEED) to measure the price growth of 
this cost category. This is the same proxy used in the current 2006-
based MEI.
     Postage: We will continue using the CPI for Postage (BLS 
series code CUUR0000SEEC01) to measure the price growth of this cost 
category. This is the same proxy used in the current 2006-based MEI.
     Fixed Capital: In Recommendation 4.5, ``The Panel 
recommends using the Producer Price Index for Lessors of Nonresidential 
Buildings (NAICS 53112) for the MEI Fixed Capital cost category as it 
represents the types of

[[Page 43319]]

fixed capital expenses most likely faced by physicians. The Panel noted 
the volatility in the index, which is greater than the Consumer Price 
Index for Owners' Equivalent Rent of Residences. This relative 
volatility merits ongoing monitoring and evaluation of alternatives.'' 
We are proposing to use the PPI for Lessors of Nonresidential Buildings 
(BLS series code PCU531120531120) to measure the price growth of this 
cost category in the proposed revised 2006-based MEI. The current 2006-
based MEI used the CPI for Owner's Equivalent Rent. We believe the PPI 
for Lessors of Nonresidential Buildings is more appropriate as fixed 
capital expenses in physician offices should be more congruent with 
trends in business office space costs than residential costs.
     Moveable Capital: In Recommendation 4.6, the MEI TAP 
states that ``. . . CMS conduct research into and identify a more 
appropriate price proxy for Moveable Capital expenses. In particular, 
the Panel believes it is important that a proxy reflect price changes 
in the types of non-medical equipment purchased in the production of 
physicians' services, as well as the price changes associated with 
Information and Communication Technology expenses (including both 
hardware and software).'' We intend to continue to investigate possible 
data sources that could be used to proxy the physician expenses related 
to moveable capital in more detail. However, we will continue to use 
the PPI for Machinery and Equipment (series code WPU11) to measure the 
price growth of this cost category in the proposed revised 2006-based 
MEI. This is the same proxy used in the current 2006-based MEI.
     Professional Liability Insurance: Unlike the other price 
proxies based on data from BLS and other public sources, the proxy for 
PLI is based on data collected directly by CMS from a sample of 
commercial insurance carriers. The MEI TAP discussed the methodology of 
the CMS PLI index, as well as considered alternative data sources for 
the PLI price proxy, including information available from BLS and 
through state insurance commissioners. MEI TAP Finding 4.3 states:
    ``The Panel finds the CMS-constructed professional liability 
insurance price index used to proxy changes in professional liability 
insurance premiums in the MEI represents the best currently available 
method for its intended purpose. The Panel also believes the pricing 
patterns of commercial carriers, as measured by the CMS PLI index, are 
influenced by the same driving forces as those observable in policies 
underwritten by physician-owned insurance entities; thus, the Panel 
believes the current index appropriately reflects the price changes in 
premiums throughout the industry.'' Given this finding, we will 
continue using the CMS Physician PLI index to measure the price growth 
of this cost category in the proposed revised 2006-based MEI. This is 
the same proxy used in the current 2006-based MEI.
     Medical Equipment: We will continue using the PPI for 
Medical Instruments and Equipment (BLS series code WPU1562) as the 
price proxy for this category. This is the same proxy used in the 
current 2006-based MEI.
     Medical Materials and Supplies: We will continue using a 
blended index comprised of 50/50 blend of the PPI for Surgical 
Appliances (BLS series code WPU156301) and the CPI-U for Medical 
Equipment and Supplies (BLS series code CUUR0000SEMG). This is the same 
proxy used in the current 2006-based MEI.

 Table 18--Proposed Revised 2006-Based MEI Cost Categories, Weights, and
                              Price Proxies
------------------------------------------------------------------------
                                2006 Weight
         Cost category            (percent)          Price proxy
------------------------------------------------------------------------
Total MEI.....................      100.000
Physician Compensation........       50.866
    Wages and Salaries........       43.641  ECI--Wages and salaries--
                                              Professional and Related
                                              (Private).
    Benefits..................        7.225  ECI--Benefits--Professional
                                              and Related (Private).
Practice Expense..............       49.134
Non-physician Compensation....       16.553
Non-physician Wages...........       11.885
Non-health, non-physician             7.249
 wages.
    Professional and Related..        0.800  ECI--Wages And Salaries--
                                              Professional and Related
                                              (Private).
    Management................        1.529  ECI--Wages And Salaries--
                                              Mgmt., Business, and Finc.
                                              (Private).
    Clerical..................        4.720  ECI--Wages And Salaries--
                                              Office and Admin. Support
                                              (Private).
    Services..................        0.200  ECI--Wages And Salaries--
                                              Service Occupations
                                              (Private).
Health related, non-phys.             4.636  ECI--Wages and Salaries--
 Wages.                                       Hospital (Private).
Non-physician Benefits........        4.668  Composite Benefit Index.
Other Practice Expense........       32.581
Miscellaneous Office Expenses.        2.478
    Chemicals.................        0.723  PPI--Other Basic Organic
                                              Chemical Manufacturing.
    Paper.....................        0.656  PPI--Converted Paper and
                                              Paperboard.
    Rubber and Plastics.......        0.598  PPI--Rubber and Plastic
                                              Products.
    All other products........        0.500  CPI--All Items Less Food
                                              And Energy.
    Telephone.................        1.501  CPI--Telephone.
    Postage...................        0.898  CPI--Postage.
All Other Professional                8.095
 Services.
Prof., Scientific, and Tech.          2.592  ECI--Compensation--Prof.,
 Svcs.                                        Scientific, and Technical
                                              (Private).
Admin. and Support Services...        3.052  ECI--Compensation--Admin.,
                                              Support, Waste Mgmt.
                                              (Private).
All Other Services............        2.451  ECI--Compensation--Service
                                              Occupations (Private).
Capital:
    Fixed Capital.............        8.957  PPI--Lessors of
                                              Nonresidential Buildings.
    Moveable Capital..........        1.353  PPI--Machinery and
                                              Equipment.
Professional Liability                4.295  CMS--Professional Liability
 Insurance.                                   Phys. Prem. Survey.
Medical Equipment.............        1.978  PPI--Medical Instruments
                                              and Equipment.
Medical Supplies..............        1.760  Composite--PPI Surgical
                                              Appliances & CPI-U Medical
                                              Supplies.
------------------------------------------------------------------------


[[Page 43320]]

3. Productivity Adjustment to the MEI
    The MEI has been adjusted for changes in productivity since its 
inception. In the CY 2003 PFS final rule with comment period (67 FR 
80019), we implemented a change in the way the MEI was adjusted to 
account for 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.
    The MEI TAP was asked to review this approach. In Finding 5.1, 
``[t]he Panel reviewed the basis for the current economy-wide 
multifactor productivity adjustment (Private Nonfarm Business 
Multifactor Productivity) in the MEI and finds such an adjustment 
continues to be appropriate. This adjustment prevents `double counting' 
of the effects of productivity improvements, which would otherwise be 
reflected in both (i) the increase in compensation and other input 
price proxies underlying the MEI, and (ii) the growth in the number of 
physician services performed per unit of input resources, which results 
from advances in productivity by individual physician practices.''
    Based on the MEI TAP's finding, we will continue to use the current 
method for adjusting the full MEI for multifactor productivity in the 
proposed revised 2006-based MEI. As described in the CY 2003 PFS final 
rule with comment period, 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.
4. Results of Proposed Revisions on the MEI Update
    Table 19 shows the average calendar year percent change from CY 
2005 to CY 2014 for both the proposed revised 2006-based MEI and the 
current 2006-based MEI. The average annual percent change in the 
proposed revised 2006-based MEI is 0.1 percent lower than the current 
2006-based MEI over the 2005-2013 period. On an annual basis over this 
period, the differences vary by up to plus or minus 0.7 percentage 
points. In the two most recent years (CY 2012 and CY 2013), the annual 
percent change in the proposed revised 2006-based MEI was within 0.1 
percentage point of the percent change in the current 2006-based MEI. 
The majority of these differences over the historical period can be 
attributed to the revised price proxy for physician wages and salaries 
and benefits and the revised price proxy for fixed capital.

 Table 19--Annual Percent Change in the Proposed Revised 2006-Based MEI,
  Not Including Productivity Adjustment and the Current 2006-Based MEI,
                 Not Including Productivity Adjustment *
------------------------------------------------------------------------
                                                  Proposed
                                                  revised      Current
                  Update year                    2006-based   2006-based
                                                 MEI excl.    MEI, excl.
                                                    MFP          MFP
------------------------------------------------------------------------
CY 2005.......................................          3.8          3.1
CY 2006.......................................          4.0          3.3
CY 2007.......................................          3.2          3.2
CY 2008.......................................          3.2          3.4
CY 2009.......................................          2.9          3.1
CY 2010.......................................          2.4          2.8
CY 2011.......................................          0.9          1.6
CY 2012.......................................          1.7          1.8
CY 2013.......................................          1.7          1.8
Avg. Change for CYs 2005-2013.................          2.6          2.7
------------------------------------------------------------------------
* Update year based on historical data through the second quarter of the
  prior calendar year. For example, the 2013 update is based on
  historical data through the second quarter 2012, prior to MFP
  adjustment.

    As shown in Table 20, the projection of the proposed revised 2006-
based MEI for the CY 2014 PFS proposed rule is an increase of 0.7 
percent, 0.1 percentage point lower than the projected increase using 
the current 2006-based MEI. In the CY 2014 PFS final rule with comment 
period, we will incorporate historical data through the second quarter 
of 2013, and therefore, the current estimated increase of 0.7 percent 
for 2014 may differ in the final rule.

    Table 20--Projected Annual Percent Change in the CY 2014 Proposed
         Revised 2006-Based MEI and the Current 2006-Based MEI *
------------------------------------------------------------------------
                                                  Proposed
                                                  revised      Current
                  Update year                    2006-based   2006-based
                                                    MEI          MEI
------------------------------------------------------------------------
CY 2014.......................................          0.7          0.8
------------------------------------------------------------------------
* Based on the 2nd quarter 2013 forecast from IHS Global Insight, with
  historical data through the 1st quarter 2013.

    For the productivity adjustment, the 10-year moving average percent 
change adjustment for CY 2014 is 0.9 percent, which is based on the 
most historical data available from BLS at the time of the proposed 
rule. If more recent historical data of MFP is available at the time of 
the final rule, we will incorporate it into the final MEI update.

 Table 21--Forecasted Annual Percent Change in the Proposed Revised MEI
                               for CY 2014
                            [All Categories]
------------------------------------------------------------------------
                                                  Revised        CY14
    Revised cost category       Revised price   cost weight     update
                                    proxy        (percent)    (percent)
------------------------------------------------------------------------
MEI..........................                       100.000          0.7
MFP..........................  10-yr moving             N/A          0.9
                                average of
                                Private
                                Nonfarm
                                Business
                                Multifactor
                                Productivity.
MEI without productivity                            100.000          1.6
 adjustment.

[[Page 43321]]

 
Physician Compensation.......                        50.866          2.0
Wages and Salaries...........  ECI--Wages and        43.641          1.9
                                salaries--Prof
                                essional and
                                Related
                                (private).
Benefits.....................  ECI--Benefits--        7.225          2.2
                                Professional
                                and Related
                                (private).
Practice Expense.............                        49.134          1.3
Non-physician compensation...                        16.553          1.7
Non-physician wages..........                        11.885          1.7
Non-health, non-physician                             7.249          1.8
 wages.
Professional & Related.......  ECI--Wages And         0.800          1.9
                                Salaries--Prof
                                essional and
                                Related
                                (Private).
Management...................  ECI--Wages And         1.529          1.7
                                Salaries--Mana
                                gers &
                                Administrators
                                (Private).
Clerical.....................  ECI--Wages And         4.720          1.8
                                Salaries--Admi
                                n Support incl
                                Clerical
                                (Private).
Services.....................  ECI--Wages And         0.200          1.5
                                Salaries--Serv
                                ice
                                Occupations
                                (Private).
Health related, non-physician  ECI--Wages and         4.636          1.5
 wages.                         Salaries--Hosp
                                ital
                                (civilian).
Non-physician benefits.......  Composite              4.668          1.7
                                Benefit Index.
Other Practice Expense.......                        32.581          1.1
Utilities....................  CPI Fuels and          1.266          0.7
                                Utilities.
Miscellaneous Office Expenses                         2.478          0.3
Chemicals....................  Other Basic            0.723         -1.2
                                Organic
                                Chemical
                                Manufacturing
                                PPI325190.
Paper........................  PPI for                0.656          1.1
                                converted
                                paper.
Rubber & Plastics............  PPI for rubber         0.598          0.3
                                and plastics.
All other products...........  CPI--All Items         0.500          1.9
                                Less Food And
                                Energy.
Telephone....................  CPI for                1.501          0.1
                                Telephone.
Postage......................  CPI for Postage        0.898          4.9
All Other Professional                                8.095          1.7
 Services.
Professional, Scientific, and  ECI--Compensati        2.592          1.7
 Tech. Svcs.                    on: Prof.
                                scientific,
                                tech.
Administrative and support &   ECI--Compensati        3.052          1.8
 waste.                         on
                                Administrative.
All Other Services...........  ECI                    2.451          1.6
                                Compensation:
                                Services
                                Occupations.
Capital......................                        10.310          0.5
Fixed........................  PPI for Lessors        8.957          0.5
                                of
                                nonresidential
                                buildings.
Moveable.....................  PPI for                1.353          0.8
                                Machinery and
                                Equipment.
Professional Liability         CMS--Prof.             4.295          0.9
 Insurance.                     Liability.
                                Phys. Prem.
                                Survey.
Medical Equipment............  PPI--Med. Inst.        1.978          1.4
                                & Equip.
Medical supplies.............  Composite--PPI         1.760          1.0
                                Surg. Appl. &
                                CPIU Med.
                                Supplies.
                                (CY2006).
------------------------------------------------------------------------
* Based on the 2nd quarter 2013 forecast from IHS Global Insight, with
  historical data through the 1st quarter 2013.

E. 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 (MP)). The 89 total PFS localities are discussed in section 
II.E.3. of this proposed rule. While requiring that the PE and MP GPCIs 
reflect the full relative cost differences, section 1848(e)(1)(A)(iii) 
of the Act requires that the 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 permanent 1.5 work 
GPCI floor for services furnished in Alaska beginning January 1, 2009, 
and section 1848(e)(1)(I) of the Act sets a permanent 1.0 PE GPCI floor 
for services furnished in frontier states (as defined in section 
1848(e)(1)(I) of the Act) beginning January 1, 2011. Additionally, 
section 1848(e)(1)(E) of the Act provided for a 1.0 floor for the work 
GPCIs, which was set to expire at the end of 2012. Section 602 of the 
ATRA amended the statute to extend the 1.0 floor for the work GPCIs 
through CY 2013 (that is, for services furnished no later than December 
31, 2013).
    Section 1848(e)(1)(C) of the Act requires us to review and, if 
necessary, adjust the GPCIs at least every 3 years. Section 
1848(e)(1)(C) of the Act requires that ``if more than 1 year has 
elapsed since the date of the last previous GPCI adjustment, the 
adjustment to be applied in the first year of the next adjustment shall 
be \1/2\ of the adjustment that otherwise would be made.'' Therefore, 
since the previous GPCI update was implemented in CY 2011 and CY 2012, 
we are proposing to phase in \1/2\ of the latest GPCI adjustment in CY 
2014.
    We have completed a review of the GPCIs and are proposing new 
GPCIs, as well as a revision to the cost share weights that correspond 
to all three GPCIs in this proposed rule. We also calculate a 
geographic adjustment factor (GAF) for each PFS locality. The GAFs are 
a weighted composite of each area's work, PE and malpractice expense 
GPCIs using the national GPCI cost share weights. While we do not 
actually use GAFs in computing the fee schedule payment for a specific 
service, they are useful in comparing overall areas costs and payments. 
The actual effect on payment for any actual service will

[[Page 43322]]

deviate from the GAF to the extent that the proportions of work, PE and 
MP RVUs for the service differ from those of the GAF.
    As noted above, section 602 of the ATRA extended the 1.0 work GPCI 
floor only through December 31, 2013. Therefore, the proposed CY 2014 
work GPCIs and summarized GAFs do not reflect the 1.0 work floor. 
However, as required by sections 1848(e)(1)(G) and 1848(e)(1)(I) of the 
Act, the 1.5 work GPCI floor for Alaska and the 1.0 PE GPCI floor for 
frontier states are permanent, and therefore, applicable in CY 2014. 
See Addenda D and E to this proposed rule for the proposed CY 2014 
GPCIs and summarized GAFs available on the CMS Web site under the 
supporting documents section of the CY 2014 PFS proposed rule located 
at http://www.cms.gov/PhysicianFeeSched/.
2. GPCI Update
    The proposed updated GPCI values were calculated by a contractor to 
CMS. There are three GPCIs (work, PE, and MP), and all GPCIs are 
calculated through comparison to a national average for each type. 
Additionally, each of the three GPCIs relies on its own data source(s) 
and methodology for calculating its value as described below. 
Additional information on the CY 2014 GPCI update may be found in our 
contractor's draft report, ``Draft Report on the CY 2014 Update of the 
Geographic Practice Cost Index for the Medicare Physician Fee 
Schedule,'' which is available on the CMS Web site. It is located under 
the supporting documents section of the CY 2014 PFS proposed rule 
located at http://www.cms.gov/PhysicianFeeSched/.
a. Work GPCIs
    The physician work GPCIs are designed to reflect the relative costs 
of physician labor by Medicare PFS locality. As required by statute, 
the physician work GPCI reflects one quarter of the relative wage 
differences for each locality compared to the national average.
    To calculate the physician work GPCIs, we use wage data for seven 
professional specialty occupation categories, adjusted to reflect one-
quarter of the relative cost differences for each locality compared to 
the national average, as a proxy for physicians' wages. Physicians' 
wages are not included in the occupation categories used in calculating 
the work GPCI because Medicare payments are a key determinant of 
physicians' earnings. Including physician wage data in calculating the 
work GPCIs would potentially introduce some circularity to the 
adjustment since Medicare payments typically contribute to or influence 
physician wages. That is, including physicians' wages in the physician 
work GPCIs would, in effect, make the indices, to some extent, 
dependent upon Medicare payments.
    The physician work GPCI updates in CYs 2001, 2003, 2005, and 2008 
were based on professional earnings data from the 2000 Census. However, 
for the CY 2011 GPCI update (75 FR 73252), the 2000 data were outdated 
and wage and earnings data were not available from the more recent 
Census because the ``long form'' was discontinued. Therefore, we used 
the median hourly earnings from the 2006 through 2008 Bureau of Labor 
Statistics (BLS) Occupational Employment Statistics (OES) wage data as 
a replacement for the 2000 Census data. The BLS OES data meet several 
criteria that we consider to be important for selecting a data source 
for purposes of calculating the GPCIs. For example, the BLS OES wage 
and employment data are derived from a large sample size of 
approximately 200,000 establishments of varying sizes nationwide from 
every metropolitan area and can be easily accessible to the public at 
no cost. Additionally, the BLS OES is updated regularly, and includes a 
comprehensive set of occupations and industries (for example, 800 
occupations in 450 industries).
    Because of its reliability, public availability, level of detail, 
and national scope, we believe the BLS OES continues to be the most 
appropriate source of wage and employment data for use in calculating 
the work GPCIs (and as discussed in section II.E.2.b the employee wage 
component and purchased services component of the PE GPCI). Therefore, 
for the proposed CY 2014 GPCI update, we used updated BLS OES data 
(2009 through 2011) as a replacement for the 2006 through 2008 data to 
compute the work GPCIs.
    We note that the Medicare Payment Advisory Commission (MedPAC) was 
required by section 3004 of the MCTRJCA to submit a report to the 
Congress by June 15, 2013 that assesses whether any adjustment under 
section 1848 of the Act to distinguish the difference in work effort by 
geographic area is appropriate and, if so, what that level should be 
and where it should be applied. In the report, MedPAC was required to 
also assess the impact of the work geographic adjustment under the Act, 
including the extent to which the floor on such adjustment impacts 
access to care. We did not have sufficient time to review this report, 
which was issued on June 14, 2013 for this proposed rule. We look 
forward to reviewing the MedPAC report and its recommendations with 
respect to the work GPCI.
b. Practice Expense GPCIs
    The PE GPCIs are designed to measure the relative cost difference 
in the mix of goods and services comprising practice expenses (not 
including malpractice expenses) among the PFS localities as compared to 
the national average of these costs. Whereas the physician work GPCIs 
(and as discussed later in this section, the MP GPCIs) are comprised of 
a single index, the PE GPCIs are comprised of four component indices 
(employee wages; purchased services; office rent; and equipment, 
supplies and other miscellaneous expenses). The employee wage index 
component measures geographic variation in the cost of the kinds of 
skilled and unskilled labor that would be directly employed by a 
physician practice. Although the employee wage index adjusts for 
geographic variation in the cost of labor employed directly by 
physician practices, it does not account for geographic variation in 
the cost of services that typically would be purchased from other 
entities, such as law firms, accounting firms, information technology 
consultants, building service managers, or any other third-party 
vendor. The purchased services index component of the PE GPCI (which is 
a separate index from employee wages) measures geographic variation in 
the cost of contracted services that physician practices would 
typically buy. (For more information on the development of the 
purchased service index, we refer readers to the CY 2012 PFS final rule 
with comment period (76 FR 73084 through 73085).) The office rent index 
component of the PE GPCI measures relative geographic variation in the 
cost of typical physician office rents. For the medical equipment, 
supplies, and miscellaneous expenses component, we believe there is a 
national market for these items such that there is not significant 
geographic variation in costs. Therefore, the ``equipment, supplies and 
other miscellaneous expense'' cost index component of the PE GPCI is 
given a value of 1.000 for each PFS locality.
    For the previous update to the GPCIs (implemented in CY 2011 and CY 
2012) we used 2006 through 2008 BLS OES data to calculate the employee 
wage and purchased services indices for the PE GPCI. As discussed in 
section II.E.2.a., because of its reliability, public availability, 
level of detail, and national scope, we continue to believe the BLS

[[Page 43323]]

OES is the most appropriate data source for collecting wage and 
employment data. Therefore, in calculating the proposed CY 2014 GPCI 
update, we used updated BLS OES data (2009 through 2011) as a 
replacement for the 2006 through 2008 data for purposes of calculating 
the employee wage component and purchased service index of the PE GPCI.
Office Rent Index Discussion
    Since the inception of the PFS, we have used residential rent data 
(primarily the two-bedroom residential apartment rent data produced by 
the Department of Housing and Urban Development (HUD) at the 50th 
percentile) as the proxy to measure the relative cost difference in 
physician office rents. As discussed in the CY 2012 PFS final rule with 
comment period (76 FR 73084), we had concerns with the continued use of 
the HUD rental data because the data were not updated frequently and 
the Census ``long form,'' which was used to collect the necessary base 
year rents for the HUD Fair Market Rent (FMR) data, was discontinued in 
CY 2010 and would no longer be available for future updates. Therefore, 
we examined the suitability of using 3-year (2006-2008) American 
Community Survey (ACS) rental data as a proxy for physician office 
rents to replace the HUD data. We determined that the ACS is one of the 
largest nationally representative surveys of household rents in the 
United States conducted annually by the U.S. Census Bureau, sampling 
approximately 3 million addresses with a recent response rate above 97 
percent, and that it reports rental information for residences at the 
county level. Given that the ACS rental data provided a sufficient 
degree of reliability, is updated annually, and was expected to be 
available for future updates, we used the 2006 through 2008 ACS 3-year 
residential rent data as a replacement for the HUD data to create the 
office rent index for the CY 2012 PFS final rule with comment (76 FR 
73084). For all the same reasons that we used the ACS data for the last 
GPCI update, we propose to use the most recent 3-year ACS residential 
rent data (2008 through 2010) to calculate the office rent component of 
the PE GPCI. We note that when responding to the ACS survey, 
individuals also report whether utilities are included in their rent. 
Thus, the cost of utilities cannot be separated from ``gross rents'' 
since some individuals monthly rent also covers the cost of utilities. 
As discussed in section II.E.2.d. we combined the cost weights for 
fixed capital and utilities when assigning a proposed weight to the 
office rent component of the PE GPCI.
    For many years, we have received requests from physicians and their 
representatives to use commercial rent data instead of residential rent 
data as a proxy to measure the relative cost differences in physician 
office rent. Additionally, in a report entitled ``Geographic Adjustment 
in Medicare Payment, Phase I: Improving Accuracy,'' prepared for CMS 
under contract and released on September 28, 2011, the Institute of 
Medicine recommended that ``a new source of data should be developed to 
determine the variation in the price of commercial office rent per 
square foot.'' The Institute of Medicine report did not identify any 
new data source and did not suggest how a new source of data might be 
developed. Because we could not identify a reliable commercial rental 
data source that is available on a national basis and includes data for 
non-metropolitan areas, we continued to use residential rent data for 
the CY 2012 GPCI update.
    For the CY 2014 GPCI update, we continued our efforts to identify a 
reliable source of commercial rent data that could be used in 
calculating the rent index. We could not identify a nationally 
representative commercial rent data source that is available in the 
public sector. However, we identified a proprietary commercial rent 
data source that has potential for use in calculating the office rent 
indices in future years. To that end, we are attempting to negotiate an 
agreement with the proprietor to use the data for purposes of 
calculating the office rent component of the PE GPCI.
    One of the challenges of using a proprietary data source is our 
ability to make information available to the public. When using 
government data, we are able to release all data for public 
consideration. However, when using a proprietary data source, it is 
likely that restrictions will be imposed on its use and our ability to 
disclose data. In such a situation, those wishing to replicate our 
calculations based on detailed data would also need to purchase the 
underlying proprietary data. We also believe that, generally speaking, 
a proprietary ``for profit'' data source is more susceptible to 
periodic changes in the criteria used for data collection, including 
possible changes in the data collected, the frequency at which the data 
is updated, changes in ownership, and the potential for termination of 
the survey vehicle entirely as changes are made to address economic 
pressures or opportunities. As such, we cannot predict that a given 
proprietary data source will be available in the format needed to 
develop office rent indices in the future. Since we have not identified 
a nationally representative commercial rent data source that is 
available in the public sector, we believe it would be necessary to use 
a proprietary data source for commercial office rent data. That is, in 
the absence of using a proprietary data source, it is unlikely that we 
would be able to use commercial rent data to calculate the office rent 
index component of the PE GPCI. Therefore, we request comments on the 
potential future use of a proprietary commercial rent data source as 
well as whether there is a source for these data that is not 
proprietary.
c. Malpractice Expense (MP) GPCIs
    The MP GPCIs measure the relative cost differences among PFS 
localities for the purchase of professional liability insurance (PLI). 
The MP 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). 
For the CY 2011 GPCI update (sixth update) we used 2006 and 2007 
malpractice premium data (75 FR 73256). The proposed CY 2014 MP GPCI 
update reflects 2011 and 2012 premium data.
    Additionally, for the past several GPCI updates, we were not able 
to collect MP premium data from insurer rate filings for the Puerto 
Rico payment locality. For the CY 2014 (seventh) GPCI update, we worked 
directly with the Puerto Rico Insurance Commissioner and Institute of 
Statistics to obtain data on MP insurance premiums that were used to 
calculate an updated MP GPCI for Puerto Rico. Using updated MP premium 
data would result in a 17 percent increase in MP GPCI for the Puerto 
Rico payment locality under the proposed fully phased-in seventh GPCI 
update, which would be effective CY 2015.
d. GPCI Cost Share Weights
    To determine the cost share weights for the proposed CY 2014 GPCIs, 
we used the weights we propose to use for the CY 2014 value for the 
revised 2006-based Medicare Economic Index (MEI) as discussed in 
section II.D. of this proposed rule. As discussed in detail in that 
section, the MEI was rebased and revised in the CY 2011 PFS final rule 
with comment period (75 FR 73262 through 73277) to reflect the 
weighted-average annual price change for various inputs needed to 
provide physicians' services. We have historically updated the GPCI 
cost share weights to make them consistent with the most recent

[[Page 43324]]

update to the MEI, and propose to do so again for CY 2014. We would 
note that consistent with this approach in the CY 2011 proposed rule, 
the last time the MEI was revised, we proposed to update the GPCI cost 
share weights to reflect these revisions to the MEI. However, in 
response to public comments we did not finalize the proposal in the CY 
2011 PFS final rule with comment period (75 FR 73258 and 73260), so 
that we could explore public comments received suggesting the 
reallocation of labor related costs from the medical equipment, 
supplies and miscellaneous component to the employee compensation 
component and comments received on the cost share weight for the rent 
index of the PE GPCI as well as to continue our analysis of the cost 
share weights attributed to the PE GPCIs as required by section 
1848(e)(1)(H)(iv) of the Act.
    In the CY 2012 PFS final rule (76 FR 73085 through 73086) we 
addressed commenter concerns regarding the inclusion of the cost share 
weight assigned to utilities within the office rent component of the PE 
GPCI and to geographically adjust wage related industries contained 
within the medical equipment, supplies and miscellaneous component of 
the PE GPCI. As a result, to accurately capture the utility measurement 
present in the ACS two bedroom gross rent data, the cost share weight 
for utilities was combined with the fixed capital portion to form the 
office rent index. Additionally, we developed a purchased service index 
to geographically adjust the labor-related components of the ``All 
Other Services'' and ``Other Professional Expenses'' categories of the 
2006-based MEI market basket. Upon completing our analysis of the GPCI 
cost share weights (as required by the Act) and addressing commenters' 
concerns regarding the office rent and labor related industries 
previously contained in the medical equipment, supplies and other 
miscellaneous components of the PE GCPI, we updated the GPCI cost share 
weights consistent with the weights established in the 2006-based MEI 
in the CY 2012 PFS final rule (76 FR 73086).
    The proposed revised 2006-based MEI cost share weights reflect our 
actuaries' best estimate of the weights associated with each of the 
various inputs needed to provide physicians' services. Use of the 
current MEI cost share weights also provides consistency across the PFS 
in the use of this data. Given that we have addressed previous 
commenters concerns about the allocation of labor related costs (as 
discussed earlier in this section) and that we have completed our 
analysis of the GPCI cost share weights (as required by the Act) we 
believe it is appropriate to propose to adopt the weights we are 
proposing to use for the revised 2006-based MEI as the GPCI cost share 
weights for CY 2014.
    As a result, the cost share weight for the work GPCI (as a 
percentage of the total) in this proposal is changed from 48.266 
percent to 50.866 percent, and the cost share weight for the PE GPCI is 
revised from 47.439 percent to 44.839 percent with a change in the 
employee compensation component from 19.153 to 16.553 percentage 
points. The cost share weights for the office rent component (10.223 
percent), purchased services component (8.095 percent), and the medical 
equipment, supplies, and other miscellaneous expenses component (9.968 
percent) of the PE GPCI and the cost share weight for the MP GPCI 
(4.295 percent) remains unchanged. A discussion of the specific MEI 
cost centers and the respective weights used to calculate each GPCI 
component (and subcomponent) is provided below.
(1) Work GPCIs
    We propose to adopt the proposed revised weight of 50.866 for the 
physician compensation cost category as the proposed work GPCI cost 
share weight.
(2) Practice Expense GPCIs
    For the cost share weight for the PE GPCIs, we used the revised 
2006-based MEI proposed weight for the PE category of 49.134 percent 
minus the PLI category weight of 4.295 percent (because the relative 
costs differences in malpractice expenses are measured by its own 
GPCI). Therefore, the proposed cost share weight for the PE GPCIs is 
44.839 percent.
(a) Employee Compensation
    For the employee compensation portion of the PE GPCIs, we used the 
proposed non-physician employee compensation category weight of 16.553 
percent reflected in the revised 2006-based MEI.
(b) Office Rent
    We set the PE GPCI office rent portion at 10.223 percent which 
includes the proposed revised 2006-based MEI cost weights for fixed 
capital (reflecting the expenses for rent, depreciation on medical 
buildings and mortgage interest) and utilities. As discussed previously 
in this section, we propose to use 2008-2010 ACS rental data as the 
proxy for physician office rent. As mentioned previously, these data 
represent a gross rent amount and include data on utility expenditures. 
Since it is not possible to separate the utilities component of rent 
for all ACS survey respondents, we combined these two components to 
calculate office rent values that were used to calculate the office 
rent index component of the proposed PE GPCI. For purposes of 
consistency, we combined those two cost categories when assigning a 
proposed weight to the office rent component.
(c) Purchased Services
    As discussed in section II.D. of this proposed rule, to be 
consistent with the purchased services index, we are proposing to 
combine the current MEI cost share weights for ``All Other Services'' 
and ``Other Professional Expenses'' into a component called ``All Other 
Professional Services.'' The proposed weight for ``All Other 
Professional Services'' is 8.095. As noted in the CY 2012 PFS final 
rule with comment period (76 FR 73084), we only adjust for locality 
cost differences of the labor-related share of the purchased services 
index. We determined that only 5.011 percentage points of the total 
8.095 proposed weight are labor-related and, thus, would be adjusted 
for locality cost differences (5.011 adjusted purchased service + 3.084 
non-adjusted purchased services = 8.095 total cost share weight). 
Therefore, only 62 percent (5.011/8.095) of the purchased service index 
is adjusted for geographic cost differences while the remaining 38 
percent (3.084/8.095) of the purchased service index is not adjusted 
for geographic variation.
(d) Equipment, Supplies, and Other Miscellaneous Expenses
    To calculate the medical equipment, supplies, and other 
miscellaneous expenses component, we removed PLI (4.295 percentage 
points), non-physician employee compensation (16.553 percentage 
points), fixed capital/utilities (10.223 percentage points), and 
purchased services (8.095 percentage points) from the total proposed PE 
category weight (44.839 percent). Therefore, the proposed cost share 
weight for the medical equipment, supplies, and other miscellaneous 
expenses component is 9.968 percent (44.839 - (4.295 + 16.553 + 10.223 
+ 8.095) = 9.968). As explained above, because we believe there is a 
national market for these items, costs that fall within this component 
of the PE GPCI are not adjusted for geographic variation.
(3) Malpractice GPCIs
    We propose to use the PLI weight of 4.295 percent for the MP GPCI 
cost

[[Page 43325]]

share weight. The proposed GPCI cost share weights for CY 2014 are 
displayed in Table 22.

      Table 22--Proposed Cost Share Weights for CY 2014 GPCI Update
------------------------------------------------------------------------
                                                             Proposed CY
                                                  Current     2014 cost
               Expense  category                 cost share     share
                                                   weight       weight
                                                 (percent)    (percent)
------------------------------------------------------------------------
Work..........................................       48.266       50.866
Practice Expense..............................       47.439       44.839
--Employee Compensation.......................       19.153       16.553
--Office Rent.................................       10.223       10.223
--Purchased Services..........................        8.095        8.095
--Equipment, Supplies, Other..................        9.968        9.968
Malpractice Insurance.........................        4.295        4.295
                                               -------------------------
  Total.......................................      100.000      100.000
------------------------------------------------------------------------

e. PE GPCI Floor for Frontier States
    Section 10324(c) of the Affordable Care Act 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 
effective January 1, 2011. In accordance with section 1848(e)(1)(I) of 
the Act, beginning in CY 2011, we applied a 1.0 PE GPCI floor for 
physicians' services furnished in States determined to be frontier 
States. In general, a frontier state is one in which at least 50 
percent of the counties are ``frontier counties,'' which are those that 
have a population per square mile of less than 6. For more information 
on the criteria used to define a frontier state, we refer readers to 
the FY 2011 Inpatient Prospective Payment System final rule (75 FR 
50160 through 50161). There are no changes in the States identified as 
``Frontier States'' for the CY 2014 proposed rule. The qualifying 
States are reflected in Table 23. In accordance with statute, we will 
apply a 1.0 PE GPCI floor for these States in CY 2014.

                        Table 23--Frontier States Under Section 1848(E)(1)(I) of the Act
                            [As added by section 10324(c) of the Affordable Care Act]
----------------------------------------------------------------------------------------------------------------
                                                                                                Percent frontier
                                                                                                    counties
                               State                                    Total       Frontier      (relative to
                                                                       counties     counties    counties in the
                                                                                                State) (percent)
----------------------------------------------------------------------------------------------------------------
Montana............................................................           56           45                 80
Wyoming............................................................           23           17                 74
North Dakota.......................................................           53           36                 68
Nevada.............................................................           17           11                 65
South Dakota.......................................................           66           34                 52
----------------------------------------------------------------------------------------------------------------

f. Proposed GPCI Update
    As explained above in the background section, 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 to provide an opportunity for public comment and further 
revisions in response to comments prior to implementation. The proposed 
CY 2014 updated GPCIs for the first and second year of the 2-year 
transition, along with the GAFs, are displayed in Addenda D and E to 
this proposed rule available on the CMS Web site under the supporting 
documents section of the CY 2014 PFS proposed rule Web page at http://www.cms.gov/PhysicianFeeSched/.
3. Payment Locality Discussion
a. Background
    The current PFS locality structure was developed and implemented in 
1997. There are currently 89 total PFS localities; 34 localities are 
statewide areas (that is, only one locality for the entire state). 
There are 52 localities in the other 16 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).
    Prior to 1992, Medicare payments for physicians' services were made 
under the reasonable charge system. Payments were based on the charging 
patterns of physicians. This resulted in large differences in payment 
for physicians' services among types of services, geographic payment 
areas, and physician specialties. Recognizing this, the Congress 
replaced the reasonable charge system with the Medicare PFS in the 
Omnibus Budget Reconciliation Act (OBRA) of 1989, and the PFS went into 
effect January 1, 1992. Payments under the PFS are based on the 
relative resources involved with furnishing services, and are adjusted 
to account for geographic variations in resource costs as measured by 
the GPCIs.
    Payment localities originally were established under the reasonable 
charge system by local Medicare carriers based on their knowledge of 
local physician charging patterns and economic conditions. These 
localities changed little between the inception of Medicare in 1967 and 
the beginning of the PFS in 1992. Shortly after the PFS took effect, 
CMS undertook a study in 1994 that culminated in a comprehensive 
locality revision that was implemented in 1997 (61 FR 59494).
    The revised locality structure reduced the number of localities 
from 210 to the current 89, and the number of statewide localities 
increased from 22 to 34. The revised localities were based on locality 
resource cost differences as reflected by the GPCIs. For a full 
discussion of the methodology, see the CY 1997 PFS final rule with 
comment period (61 FR 59494). The current 89 fee schedule areas are 
defined alternatively by state boundaries (for example, Wisconsin), 
metropolitan areas (for example, Metropolitan St. Louis, MO), portions 
of a metropolitan area (for example, Manhattan), or rest-of-state areas 
that exclude metropolitan areas (for example, Rest of Missouri). This 
locality

[[Page 43326]]

configuration is used to calculate the GPCIs that are in turn used to 
calculate payments for physicians' services under the PFS.
    As stated in the CY 2011 PFS final rule with comment period (75 FR 
73261), we require that changes to the PFS locality structure be done 
in a budget neutral manner within a state. For many years, before 
making any locality changes, we have sought consensus from among the 
professionals whose payments would be affected. In recent years, we 
have also considered more comprehensive changes to locality 
configuration. In 2008, we issued a draft comprehensive report 
detailing four different locality configuration options (www.cms.gov/physicianfeesched/downloads/ReviewOfAltGPCIs.pdf). The alternative 
locality configurations in the report are described below.
     Option 1: CMS Core-Based Statistical Area (CBSA) Payment 
Locality Configuration: CBSAs are a combination of Office of Management 
and Budget (OMB's) Metropolitan Statistical Areas (MSAs) and 
Micropolitan Statistical Areas. Under this option, MSAs would be 
considered as urban CBSAs. Micropolitan Statistical 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 areas used in 
the Inpatient Prospective Payment System (IPPS) pre-reclassification 
wage index, which is the hospital wage index for a geographic area 
(CBSA or non-CBSA) calculated from submitted hospital cost report data 
before statutory adjustments reconfigure, or ``reclassify'' a hospital 
to an area other than its geographic location, to adjust payments for 
differences in local resource costs in other Medicare payment systems. 
Based on data used in the 2008 locality report, 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.
    For a detailed discussion of the public comments on the 
contractor's 2008 draft report detailing four different locality 
configurations, we refer readers to the CY 2010 PFS proposed rule (74 
FR 33534) and subsequent final rule with comment period (74 FR 61757). 
There was no public consensus on the options, although a number of 
commenters expressed support for Option 3 (separate MSAs from statewide 
localities) because the commenters believed this alternative would 
improve payment accuracy and could mitigate potential reductions to 
rural areas compared to Option 1 (CMS CBSAs).
    In response to some public comments regarding the third of the four 
locality options, we had our contractor conduct an analysis of the 
impacts that would result from the application of Option 3. Those 
results were displayed in the final locality report released in 2011. 
The final report, entitled ``Review of Alternative GPCI Payment 
Locality Structures--Final Report,'' may be accessed directly from the 
CMS Web site at www.cms.gov/PhysicianFeeSched/downloads/Alt_GPCI_Payment_Locality_Structures_Review.pdf.
    Moreover, at our request, the Institute of Medicine conducted a 
comprehensive empirical study of the Medicare GAFs established under 
sections 1848(e) (PFS GPCI) and 1886(d)(3)(E) (IPPS hospital wage 
index) of the Act. These adjustments are designed to ensure Medicare 
payments reflect differences in input costs across geographic areas. 
The first of the Institute of Medicine's two reports entitled, 
``Geographic Adjustment in Medicare Payment, Phase I: Improving 
Accuracy'' recommended that the same labor market definition should be 
used for both the hospital wage index and the physician geographic 
adjustment factor. Further, the Institute of Medicine recommended that 
MSAs and statewide non-metropolitan statistical areas should serve as 
the basis for defining these labor markets.
    Under the Institute of Medicine's recommendations, MSAs would be 
considered as urban CBSAs. Micropolitan Areas (as defined by the OMB) 
and rural areas would be considered as non-urban (rest of State) CBSAs. 
This approach would be consistent with the areas used in the IPPS pre-
reclassification wage index to make geographic payment adjustments in 
other Medicare payment systems. For more information on the Institute 
of Medicine's recommendations on the PFS locality structure, see the CY 
2013 PFS final rule with comment period (77 FR 68949). We also provided 
our technical analyses of the Institute of Medicine Phase I 
recommendations in a report released on the PFS Web site at 
www.cms.gov/PhysicianFeeSched.
    Additionally, the Phase I report can be accessed on the Institute 
of Medicine's Web site at http://www.iom.edu/Reports/2011/Geographic-Adjustment-in-Medicare-Payment-Phase-I-Improving-Accuracy.aspx.
b. Institute of Medicine Phase II Report Discussion
    The Institute of Medicine's second report, entitled ``Geographic 
Adjustment in Medicare Payment--Phase II: Implications for Access, 
Quality, and Efficiency'' was released July 17, 2012 and can be 
accessed on the Institute of Medicine's Web site at http://www.iom.edu/Reports/2011/Geographic-Adjustment-in-Medicare-Payment-Phase-I-Improving-Accuracy.aspx.
    The Phase II report evaluated the effects of geographic adjustment 
factors (hospital wage index and GPCIs) on the distribution of the 
health care workforce, quality of care, population health, and the 
ability to provide efficient, high value care. The Institute of 
Medicine's Phase II report also included an analysis of the impacts of 
implementing its recommendations for accuracy in geographic adjustments 
which include a CBSA-based locality structure under the PFS. The 
Institute of Medicine analysis found that adopting a CBSA-based 
locality structure under the PFS creates large changes in county GAF 
values; for example, approximately half of all US counties would 
experience a payment reduction. The Institute of Medicine also found 
that GPCIs calculated under a CBSA-based locality structure would 
result in lower GAFs in rural areas (relative to the national average) 
because the GPCI values for rural areas would no longer include 
metropolitan practice costs within the current ``rest-of-state'' or 
``statewide'' localities.
(1) Institute of Medicine Phase II Report Recommendations
    The Institute of Medicine developed recommendations for improving 
access to and quality of medical care. The

[[Page 43327]]

recommendations included in the Institute of Medicine's Phase II report 
are summarized as follows:
     Recommendation 1: The Medicare program should develop and 
apply policies that promote access to primary care services in 
geographic areas where Medicare beneficiaries experience persistent 
access problems.
     Recommendation 2: The Medicare program should pay for 
services that improve access to primary and specialty care for 
beneficiaries in medically underserved urban and rural areas, 
particularly telehealth technologies.
     Recommendation 3: To promote access to appropriate and 
efficient primary care services, the Medicare program should support 
policies that would allow all qualified practitioners to practice to 
the full extent of their educational preparation.
     Recommendation 4: The Medicare program should reexamine 
its policies that provide location-based adjustments for specific 
groups of hospitals, and modify or discontinue them based on their 
effectiveness in ensuring adequate access to appropriate care.
     Recommendation 5: Congress should fund an independent 
ongoing entity, such as the National Health Care Workforce Commission, 
to support data collection, research, evaluations, and strategy 
development, and make actionable recommendations about workforce 
distribution, supply, and scope of practice.
     Recommendation 6: Federal support should facilitate 
independent external evaluations of ongoing workforce programs intended 
to provide access to adequate health services for underserved 
populations and Medicare beneficiaries. These programs include the 
National Health Services Corps, Title VII and VIII programs under the 
Public Health Service Act, and related programs intended to achieve 
these goals.
(2) Institute of Medicine Phase II Report Conclusions
    The Institute of Medicine committee concluded that geographic 
payment adjustments under the PFS are not a strong determinant of 
access problems and not an appropriate mechanism for improving the 
distribution of the healthcare workforce, quality of care, population 
health, and the ability to provide efficient, high value care. 
Specifically, the Institute of Medicine committee stated ``that there 
are wide discrepancies in access to and quality of care across 
geographic areas particularly for racial and ethnic minorities. 
However, the variations do not appear to be strongly related to 
differences in or potential changes to fee for service payment'' (Page. 
6). The committee also concluded ``that Medicare beneficiaries in some 
geographic pockets face persistent access and quality problems, and 
many of these pockets are in medically underserved rural and inner-city 
areas. However, geographic adjustment of Medicare payment is not an 
appropriate approach for addressing problems in the supply and 
distribution of the health care workforce. The geographic variations in 
the distribution of physicians, nurses and physician assistants, and 
local shortages that create access problems for beneficiaries should be 
addressed through other means'' (Page. 7). Moreover, the committee 
concluded that ``geographic [payment] adjustment is not an appropriate 
tool for achieving policy goals such as improving quality of expanding 
the pool of providers available to see Medicare beneficiaries'' (Page. 
9).
(3) CMS Summary Response to Institute of Medicine Phase II Report
    The Institute of Medicine's Phase II report recommendations are 
broad in scope, do not propose specific recommendations for making 
changes to the GPCIs or PFS locality structure, or are beyond the 
statutory authority of CMS.
    We agree with the Institute of Medicine's assessment that many 
counties would experience a payment reduction and that large payment 
shifts would occur as a result of implementing a CBSA-based locality 
configuration under the PFS. Based on our contractor's analysis, there 
would be significant redistributive impacts if we were to implement a 
policy that would reconfigure the PFS localities based on the Institute 
of Medicine's CBSA-based locality recommendation. Many rural areas 
would see substantial decreases in their corresponding GAF and GPCI 
values as higher cost counties are removed from current ``rest of 
state'' payment areas. Conversely, many urban areas, especially those 
areas that are currently designated as ``rest of state'' but are 
located within higher cost MSAs, would experience increases in their 
applicable GPCIs and GAFs. That is, given that urban and rural areas 
would no longer be grouped together (for example, as in the current 34 
statewide localities), many rural areas would see a reduction in 
payment under a CBSA-based locality configuration.
    As noted earlier in this section, we are assessing a variety of 
approaches to changing the locality structure under the PFS and will 
continue to study options for revising the locality structure. However, 
to fully assess the implications of proposing a nationwide locality 
reconfiguration under the PFS, we must also assess and analyze the 
operational changes necessary to implement a revised locality 
structure. Given that all options under consideration (including the 
Institute of Medicine's CBSA-based approach) would expand the number of 
current localities and result in payment reductions to primarily rural 
areas, presumably any nationwide locality reconfiguration could 
potentially be transitioned over a number of years (to phase-in the 
impact of payment reductions gradually, from year to year, instead of 
all at once). As such, transitioning from the current locality 
structure to a nationwide reconfigured locality structure would present 
operational and administrative challenges that need to be identified 
and addressed. Therefore, we have begun to assess the broad operational 
changes that would be involved in implementing a nationwide locality 
reconfiguration under the PFS. Accordingly, we believe that it would be 
premature to make any statements about potential changes we would 
consider making to the PFS localities at this time. Any changes to PFS 
fee schedule areas would be made through future notice and comment 
rulemaking.
    In the event that we develop a specific proposal for changing the 
locality configuration during future rulemaking, we would provide 
detailed analysis on the impact of the changes for physicians in each 
county. We would also provide opportunities for public input.

F. Medicare Telehealth Services for the Physician Fee Schedule

1. Billing and Payment for Telehealth Services
a. 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, 
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

[[Page 43328]]

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 that would have been made to the 
consultant for the service furnished. 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 (BIPA) (Pub. L. 
106-554) added 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) of 
the Act 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 distant site physician or practitioner. 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 Act allows the 
use of asynchronous ``store-and-forward'' technology 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 furnished to an eligible 
telehealth individual notwithstanding the fact that the practitioner 
furnishing 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. Under the BIPA, originating sites were limited under 
section 1834(m)(3)(C) of the Act 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 (as defined in section 
1861(e) of the Act). 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 a 
hospital-based renal dialysis center, a skilled nursing facility (SNF), 
and a community mental health center (CMHC). To serve as a telehealth 
originating site, a site must also be located in an area designated as 
a rural 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 as of December 31, 2000. Finally, 
section 1834(m) of the Act does not require the eligible telehealth 
individual to be with a telepresenter at the originating site.
b. Current Telehealth Billing and Payment Policies
    As noted previously, Medicare telehealth services can only be 
furnished to an eligible telehealth beneficiary in a qualifying 
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. 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 and group medical nutrition therapy (MNT);
     Neurobehavioral status exam;
     Individual and group health and behavior assessment and 
intervention (HBAI);
     Subsequent hospital care;
     Subsequent nursing facility care;
     Individual and group kidney disease education (KDE);
     Individual and group diabetes self-management training 
(DSMT);
     Smoking cessation services;
     Alcohol and/or substance abuse and brief intervention 
services;
     Screening and behavioral counseling interventions in 
primary care to reduce alcohol misuse;
     Screening for depression in adults;
     Screening for sexually transmitted infections (STIs) and 
high intensity behavioral counseling (HIBC) to prevent STIs;
     Intensive behavioral therapy for cardiovascular disease; 
and
     Behavioral counseling for obesity.
    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 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 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

[[Page 43329]]

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 certifies 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 as of December 31, 2000 as specified in section 
1834(m)(4)(C)(i)(III) of the Act.
    As previously described, 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) of the 
Act. 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).
c. Geographic Criteria for Originating Site Eligibility
    Section 1834(m)(4)(C)(i)(I)-(III) of the Act specifies three 
criteria for the location of eligible telehealth originating sites. One 
of these is for entities participating in federal telemedicine 
demonstration projects as of December 31, 2000, and the other two are 
geographic. One of the geographic criteria is that the site is located 
in a county that is not in an MSA and the other is that the site is 
located in an area that is designated as a rural HPSA under section 
332(a)(1)(A) of the Public Health Service Act (PHSA) (42 U.S.C. 
254e(a)(1)(A)). Section 332(a)(1)(A) of the PHSA provides for the 
designation of various types of HPSAs, but does not provide for 
``rural'' HPSAs. In the absence of guidance in the PHSA, CMS has in the 
past interpreted the term ``rural'' under section 1834(m)(4)(C)(i)(I) 
to mean an area that is not located in an MSA. As such, the current 
geographic criteria for telehealth originating sites limits eligible 
sites to those that are not in an MSA.
    To determine rural designations with more precision, HHS and CMS 
have sometimes used methods that do not rely solely on MSA 
designations. For example, the Office of Rural Health Policy (ORHP) 
uses the Rural Urban Commuting Areas (RUCAs) to determine rural areas 
within MSAs. RUCAs are a census tract-based classification scheme that 
utilizes the standard Bureau of Census Urbanized Area and Urban Cluster 
definitions in combination with work commuting information to 
characterize all of the nation's census tracts regarding their rural 
and urban status and relationships. They were developed under a 
collaborative project between ORHP, the U.S. Department of 
Agriculture's Economic Research Service (ERS), and the WWAMI Rural 
Health Research Center (RHRC). A more comprehensive description is 
available at the USDA ERS Web site at: www.ers.usda.gov/data-products/rural-urban-commuting-area-codes/documentation.aspx#.UcsKfZwzZKE. The 
RUCA classification scheme contains 10 primary and 30 secondary codes. 
The primary code numbers (1 through 10) refer to the primary, or single 
largest, commuting share. Census tracts with RUCA codes of 4 through 10 
refer to areas with a primary commuting share outside of a metropolitan 
area. In addition to counties that are not in an MSA, ORHP considers 
some census tracts in MSA counties to be rural. Specifically, census 
tracts with RUCA codes 4 through 10 are considered to be rural, as well 
as census tracts with RUCA codes 2 and 3 that are also at least 400 
square miles and have a population density of less than 35 people per 
square mile.
    We are proposing to modify our regulations regarding originating 
sites to define rural HPSAs as those located in rural census tracts as 
determined by ORHP. We believe that defining ``rural'' to include 
geographic areas located in rural census tracts within MSAs would allow 
for the appropriate inclusion of additional HPSAs as areas for 
telehealth originating sites. We also believe that adopting the more 
precise definition of ``rural'' for this purpose would expand access to 
health care services for Medicare beneficiaries located in rural areas.
    We are also proposing to change our policy so that geographic 
eligibility for an originating site would be established and maintained 
on an annual basis, consistent with other telehealth payment policies. 
Absent this proposed change, the status of a geographic area's 
eligibility for telehealth originating site payment is effective at the 
same time as the effective date for changes in designations that are 
made outside of CMS. This proposed change would reduce the likelihood 
that mid-year changes to geographic designations would result in sudden 
disruptions to beneficiaries' access to services, unexpected changes in 
eligibility for established telehealth originating sites and avoid the 
operational difficulties associated with administering with mid-year 
Medicare telehealth payment changes. We are proposing to establish 
geographic eligibility for Medicare telehealth originating sites for 
each calendar year based upon the status of the area as of December 
31st of the prior calendar year. Accordingly, we are proposing to 
revise our regulations at Sec.  410.78(b)(4) to conform with both of 
these proposed policies.
2. Adding Services to the List of Medicare Telehealth Services
    As noted previously, 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 
telehealth services to one of

[[Page 43330]]

two categories. In the November 28, 2011 Federal Register (76 FR 
73102), we finalized revisions to criteria that we use to review 
requests in the second category. The two categories are:
     Category 1: Services that are similar to professional 
consultations, office visits, and office psychiatry services that are 
currently on the list of telehealth 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 service is accurately described by the 
corresponding code when delivered via telehealth and whether the use of 
a telecommunications system to deliver the service produces 
demonstrated clinical benefit to the patient. In reviewing these 
requests, we look for evidence indicating that the use of a 
telecommunications system in delivering the candidate telehealth 
service produces clinical benefit to the patient. Submitted evidence 
should include both a description of relevant clinical studies that 
demonstrate the service furnished by telehealth to a Medicare 
beneficiary improves the diagnosis or treatment of an illness or injury 
or improves the functioning of a malformed body part, including dates 
and findings, and a list and copies of published peer reviewed articles 
relevant to the service when furnished via telehealth. Our evidentiary 
standard of clinical benefit does not include minor or incidental 
benefits.
    Some examples of clinical benefit include the following:
     Ability to diagnose a medical condition in a patient 
population without access to clinically appropriate in-person 
diagnostic services.
     Treatment option for a patient population without access 
to clinically appropriate in-person treatment options.
     Reduced rate of complications.
     Decreased rate of subsequent diagnostic or therapeutic 
interventions (for example, due to reduced rate of recurrence of the 
disease process).
     Decreased number of future hospitalizations or physician 
visits.
     More rapid beneficial resolution of the disease process 
treatment.
     Decreased pain, bleeding, or other quantifiable symptom.
     Reduced recovery time.
    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 and group 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 to examine the vascular access site); 
individual and group MNT; neurobehavioral status exam; initial and 
follow-up inpatient telehealth consultations for beneficiaries in 
hospitals and skilled nursing facilities (SNFs); subsequent hospital 
care (with the limitation of one telehealth visit every 3 days); 
subsequent nursing facility care (with the limitation of one telehealth 
visit every 30 days); individual and group KDE; and individual and 
group DSMT (with a minimum of 1 hour of in-person instruction to ensure 
effective injection training), smoking cessation services; alcohol and/
or substance abuse and brief intervention services; screening and 
behavioral counseling interventions in primary care to reduce alcohol 
misuse; screening for depression in adults; screening for sexually 
transmitted infections (STIs) and high intensity behavioral counseling 
(HIBC) to prevent STIs; intensive behavioral therapy for cardiovascular 
disease; and behavioral counseling for obesity.
    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 2013 will be 
considered for the CY 2015 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 www.cms.gov/telehealth/.
3. Submitted Requests and Other Additions to the List of Telehealth 
Services for CY 2014
    We received a request in CY 2012 to add online assessment and E/M 
services as Medicare telehealth services effective for CY 2014. The 
following presents a discussion of this request, and our proposals for 
additions to the CY 2014 telehealth list.
a. Submitted Requests
    The American Telemedicine Association (ATA) submitted a request to 
add CPT codes 98969 (Online assessment and management service provided 
by a qualified nonphysician health care professional to an established 
patient, guardian, or health care provider not originating from a 
related assessment and management service provided within the previous 
7 days, using the Internet or similar electronic communications 
network) and 99444 (Online evaluation and management service provided 
by a physician to an established patient, guardian, or health care 
provider not originating from a related E/M service provided within the 
previous 7 days, using the Internet or similar electronic 
communications network) to the list of Medicare telehealth services.
    As we explained in the CY 2008 PFS final rule with comment period 
(72 FR 66371), we assigned a status indicator of ``N'' (Non-covered 
service) to these services because: (1) These services are non-face-to-
face; and (2) the code descriptor includes language that recognizes the 
provision of services to parties other than the beneficiary and for 
whom Medicare does not provide coverage (for example, a guardian). 
Under section 1834(m)(2)(A) of the Act, Medicare pays the physician or 
practitioner furnishing a telehealth service an amount equal to the 
amount that would have been paid if the service was furnished without 
the use of a telecommunications system. Because CPT codes 98969 and 
99444 are currently noncovered, there would be no Medicare payment if 
these services were furnished without the use of a telecommunications 
system. Since these codes are noncovered services for which no payment 
may be made under Medicare, we are not proposing to add online 
evaluation and management services to the list of Medicare Telehealth 
Services for CY 2014.
b. Other Additions
    Under our existing policy, we add services to the telehealth list 
on a category 1 basis when we determine that they are similar to 
services on the

[[Page 43331]]

existing telehealth list with respect to the roles of, and interactions 
among, the beneficiary, physician (or other practitioner) at the 
distant site and, if necessary, the telepresenter. As we stated in the 
CY 2012 proposed rule (76 FR 42826), we believe that the category 1 
criteria not only streamline our review process for publically 
requested services that fall into this category, the criteria also 
expedite our ability to identify codes for the telehealth list that 
resemble those services already on this list.
    For CY 2013, CMS finalized a payment policy for new CPT code 99495 
(Transitional care management services with the following required 
elements: Communication (direct contact, telephone, electronic) with 
the patient and/or caregiver within 2 business days of discharge 
medical decision making of at least moderate complexity during the 
service period face-to-face visit, within 14 calendar days of 
discharge) and CPT code 99496 (Transitional care management services 
with the following required elements: Communication (direct contact, 
telephone, electronic) with the patient and/or caregiver within 2 
business days of discharge medical decision making of high complexity 
during the service period face-to-face visit, within 7 calendar days of 
discharge). These services are for a patient whose medical and/or 
psychosocial problems require moderate or high complexity medical 
decision making during transitions in care from an inpatient hospital 
setting (including acute hospital, rehabilitation hospital, long-term 
acute care hospital), partial hospitalization, observation status in a 
hospital, or skilled nursing facility/nursing facility, to the 
patient's community setting (home, domiciliary, rest home, or assisted 
living). Transitional care management is comprised of one face-to-face 
visit within the specified time frames following a discharge, in 
combination with non-face-to-face services that may be performed by the 
physician or other qualified health care professional and/or licensed 
clinical staff under his or her direction.
    We believe that that the interactions between the furnishing 
practitioner and the beneficiary described by the required face-to-face 
visit component of the TCM services are sufficiently similar to 
services currently on the list of Medicare telehealth services for 
these services to be added under category 1. Specifically, we believe 
that the required face-to-face visit component of TCM services is 
similar to the office/outpatient evaluation and management visits 
described by CPT codes 99201-99205 and 99211-99215. We note that like 
certain other non-face-to-face PFS services, the other components of 
the TCM service are commonly furnished remotely using 
telecommunications technology, and do not require the patient to be 
present in-person with the practitioner when they are furnished. As 
such, we do not need to consider whether the non-face-to-face aspects 
of the TCM service are similar to other telehealth services. Were these 
components of the TCM services separately billable, they would not need 
to be on the telehealth list to be covered and paid in the same way as 
services delivered without the use of telecommunications technology. 
Therefore, we are proposing to add CPT codes 99495 and 99496 to the 
list of telehealth services for CY 2014 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 TCM 
services as Medicare telehealth services.
4. Telehealth Frequency Limitations
    The ATA asked that we remove the telehealth frequency limitation 
for subsequent nursing facility services reported by CPT codes 99307 
through 99310. Subsequent nursing facility services were added to the 
list of Medicare telehealth services in the CY 2011 PFS final rule (75 
FR 73317 through 73318), with a limitation of one telehealth subsequent 
nursing facility care service every 30 days. In the CY 2011 PFS final 
rule (75 FR 73615) we noted that, as specified in our regulation at 
Sec.  410.78(e)(2), the federally mandated periodic SNF visits required 
under Sec.  483.40(c) could not be furnished through telehealth.
    The ATA requested that the frequency limitation be removed due to 
``recent federal telecommunications policy changes'' and newly 
available information from recent studies. Specifically, the ATA 
pointed to the Federal Communications Commission (FCC) pilot funding of 
a program to facilitate the creation of a nationwide broadband network 
dedicated to health care, connecting public and private non-profit 
health care providers in rural and urban locations, and a series of 
studies that demonstrated the value to patients of telehealth 
technology.
    In considering this request, we began with the analysis contained 
in the CY 2011 proposed rule (75 FR 73318), when we proposed to add SNF 
subsequent care, to the list of Medicare telehealth services. We 
discussed our complementary commitments to ensuring that SNF residents, 
given their potential clinical acuity, continue to receive in-person 
visits as appropriate to manage their complex care and to make sure 
that Medicare pays only for medically reasonable and necessary care. To 
meet these commitments, we believed it was appropriate to limit the 
provision of subsequent nursing facility care services furnished 
through telehealth to once every 30 days.
    We then reviewed the publicly available information regarding both 
the FCC pilot program and the ATA-referenced studies in light of the 
previously stated commitments to assess whether these developments 
warrant a change in 30-day frequency limitation policy. Based on our 
review of the FCC demonstration project and the studies referenced in 
the request, we found no information regarding the relative clinical 
benefits of SNF subsequent care when furnished via telehealth more 
frequently than once every 30 days. We did note that the FCC 
information reflected an aim to improve access to medical specialists 
in urban areas for rural health care providers, and that medical 
specialists in urban areas can continue to use the inpatient telehealth 
consultation HCPCS G-codes (specifically G0406, G0407, G0408, G0425, 
G0426, or G0427) when reporting medically reasonable and necessary 
consultations furnished to SNF residents via telehealth without any 
frequency limitation.
    We also reviewed the studies referenced by the ATA to assess 
whether they provided evidence that more frequent telehealth visits 
would appropriately serve this particular population given the 
potential medical acuity and complexity of patient needs. We did not 
find any such evidence in the studies. Three of the studies identified 
by the ATA were not directly relevant to SNF subsequent care services. 
One of these focused on using telehealth technology to treat patients 
with pressure ulcers after spinal cord injuries. The second focused on 
the usefulness of telehealth technology for patients receiving home 
health care services. A third study addressed the use of interactive 
communication technology to facilitate the coordination of care between 
hospital and SNF personnel on the day of hospital discharge. The ATA 
also mentioned a peer-reviewed presentation delivered at its annual 
meeting related to SNF patient care, suggesting that the presentation 
demonstrated that telehealth visits are better for SNF patients than 
in-person visits to emergency departments or, in some cases, visits to 
physician offices. Although we did not have access to the full 
presentation it does not appear to

[[Page 43332]]

address subsequent nursing facility services, so we do not believe this 
is directly relevant to the clinical benefit of SNF subsequent care 
furnished via telehealth. More importantly, none of these studies 
addresses the concerns we have expressed about the possibility that 
nursing facility subsequent care visits furnished too frequently 
through telehealth rather than in-person could compromise care for this 
potentially acute and complex patient population.
    We remain committed to ensuring that SNF inpatients receive 
appropriate in-person visits and that Medicare pays only for medically 
reasonable and necessary care. We are not persuaded by the information 
submitted by the ATA that it would be beneficial or advisable to remove 
the frequency limitation we established for SNF subsequent care when 
furnished via telehealth. Because we want to ensure that nursing 
facility patients with complex medical conditions have appropriately 
frequent, medically reasonable and necessary encounters with their 
admitting practitioner, we continue to believe that it is appropriate 
for some subsequent nursing facility care services to be furnished 
through telehealth. At the same time, because of the potential acuity 
and complexity of SNF inpatients, we remain committed to ensuring that 
these patients continue to receive in-person, hands-on visits as 
appropriate to manage their care. Therefore, we are not proposing any 
changes to the limitations regarding SNF subsequent care services 
furnished via telehealth for CY 2014.

G. Therapy Caps

1. Outpatient Therapy Caps for CY 2014
    Section 1833(g) of the Act applies annual, per beneficiary, 
limitations on expenses considered incurred for outpatient therapy 
services under Medicare Part B, commonly referred to as ``therapy 
caps.'' There is one therapy cap for outpatient occupational therapy 
(OT) services and another separate therapy cap for physical therapy 
(PT) and speech-language pathology (SLP) services combined.
    Until October 1, 2012, the therapy caps applied to all outpatient 
therapy services except those furnished by a hospital or another entity 
under an arrangement with a hospital described under section 
1833(a)(8)(B) of the Act. For convenience, we will refer to the 
exemption from the caps for services described under section 
1833(a)(8)(B) of the Act as the ``outpatient hospital services 
exemption.'' Section 3005(b) of the MCTRJCA added section 1833(g)(6) of 
the Act to temporarily suspend the outpatient hospital services 
exemption, thereby requiring that the therapy caps apply to services 
described under section 1833(a)(8)(B) of the Act from October 1, 2012 
to December 31, 2012 for services furnished during 2012. This broadened 
application of the therapy caps was extended through December 31, 2013, 
by section 603(a) of the ATRA. In addition, section 603(b) of the ATRA 
amended section 1833(g)(6) of the Act to specify that during CY 2013, 
for outpatient therapy services paid under section 1834(g) of the Act 
(those furnished by a critical access hospital (CAH)), we must count 
towards the therapy caps the amount that would be payable for the 
services under Medicare Part B if the services were paid as outpatient 
therapy services under section 1834(k)(1)(B) of the Act, which 
describes payment for outpatient therapy services furnished by 
hospitals and certain other entities, instead of as CAH outpatient 
therapy services under section 1834(g) of the Act. Payment for 
outpatient therapy services under section 1834(k)(1)(B) of the Act is 
made at 80 percent of the lesser of the actual charge for the services 
or the applicable fee schedule amount as defined in section 1834(k)(3) 
of the Act. Section 1834(k)(3) of the Act defines applicable fee 
schedule to mean the payment amount determined under a fee schedule 
established under section 1848 of the Act, which refers to the PFS, or 
an amount under a fee schedule for comparable services as the Secretary 
specifies. The PFS is required as the applicable fee schedule to be 
used as the payment basis under section 1834(k)(3) of the Act. Section 
603(b) of the ATRA also specified that nothing in the amendments to 
section 1833(g)(6) of the Act ``shall be construed as changing the 
method of payment for outpatient therapy services under 1834(g) of the 
Act.''
    Since CY 2011, a therapy multiple procedure payment reduction 
(MPPR) policy has applied to the second and subsequent ``always 
therapy'' services billed on the same date of service for one patient 
by the same practitioner or facility under the same NPI. Prior to April 
1, 2013, the therapy MPPR reduced the practice expense portion of 
office-based services by 20 percent and reduced the practice expense 
portion of institutional-based services by 25 percent. As of April 1, 
2013, section 633(a) of the ATRA amended sections 1848(b)(7) and 
1834(k) of the Act to increase the therapy MPPR to 50 percent for all 
outpatient therapy services furnished in office-based and institutional 
settings. (For more information on the MPPR and its history, see 
section II.B.4 of this proposed rule.)
    Sections 1833(g)(1) and (3) of the Act specify that in counting 
services towards the cap, ``no more than the amount specified in 
paragraph (2) for the year shall be considered incurred expenses.'' As 
noted above, section 603(b) of the ATRA amended section 1833(g)(6) of 
the Act to require that outpatient therapy services furnished by CAHs 
during CY 2013 are counted towards the therapy caps using the amount 
that would be paid for those services under section 1834(k)(1)(B) of 
the Act, which is how outpatient therapy services furnished by 
hospitals and certain other entities are paid. Since payment for 
outpatient therapy services under section 1834(k)(1)(B) of the Act is 
made at the PFS rate and includes any applicable therapy MPPR, the 
amounts for incurred expenses counted toward the caps for therapy 
services furnished by a CAH also reflect any applicable therapy MPPR.
    We believe that this is consistent with the statutory amendments 
made by the ATRA. Including the therapy MPPR in calculating incurred 
expenses for therapy services furnished by CAHs treats CAH services 
consistently with services furnished in other applicable settings. 
Therefore, therapy services furnished by CAHs during CY 2013 count 
towards the therapy caps using the amount that would be payable under 
section 1834(k)(1)(B) of the Act, which includes an applicable MPPR. 
For a list of the ``always therapy'' codes subject to the therapy MPPR 
policy, see Addendum H of this proposed rule.
    The therapy cap amounts under section 1833(g) of the Act are 
updated each year based on the Medicare Economic Index (MEI). 
Specifically, the annual caps are calculated by updating the previous 
year's cap by the MEI for the upcoming calendar year and rounding to 
the nearest $10 as specified in section 1833(g)(2)(B) of the Act. The 
therapy cap amounts for CY 2014 will be announced in the CY 2014 PFS 
final rule with comment period.
    An exceptions process for the therapy caps has been in effect since 
January 1, 2006. Originally required by section 5107 of the Deficit 
Reduction Act of 2005 (DRA), which amended section 1833(g)(5) of the 
Act, the exceptions process for the therapy caps has been continuously 
extended several times through subsequent legislation (MIEA-TRHCA, 
MMSEA, MIPPA, the Affordable Care Act, MMEA, TPTCCA, and MCTRJCA). Last 
amended by section 603(a) of the ATRA, the Agency's current authority 
to provide an

[[Page 43333]]

exceptions process for therapy caps expires on December 31, 2013. After 
expenses incurred for the beneficiary's services for the year have 
exceeded the therapy cap, therapy suppliers and providers use the KX 
modifier on claims for services to request an exception to the therapy 
caps. By use of the KX modifier, the therapist is attesting that the 
services above the therapy cap are reasonable and necessary and that 
there is documentation of medical necessity for the services in the 
beneficiary's medical record.
    Under section 1833(g)(5)(C) of the Act, added by the MCTRJCA and 
extended through 2013 by the ATRA, we are required to apply a manual 
medical review process to therapy claims when a beneficiary's incurred 
expenses exceed a threshold amount of $3,700. There are two separate 
thresholds of $3,700, just as there are two therapy caps, and incurred 
expenses are counted toward the thresholds in the same manner as the 
caps. Under the statute, the required application of the manual medical 
review process expires December 31, 2013. For information on the manual 
medical review process, go to www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medical-Review/TherapyCap.html.
2. Proposed Application of Therapy Caps to Services Furnished by CAHs
    Section 4541 of the BBA amended section 1833(g) of the Act to 
create the therapy caps discussed above. This BBA provision applied the 
therapy caps to outpatient therapy services described at section 
1861(p) of the Act except for the outpatient therapy services described 
in section 1833(a)(8)(B) of the Act. Section 1833(a)(8)(B) of the Act 
refers to therapy services furnished by a hospital to an outpatient, to 
services furnished to a hospital inpatient who has exhausted, or is not 
entitled to, benefits under Part A; and to these same services when 
furnished by an entity under arrangements with a hospital. Payment for 
the services described under section 1833(a)(8)(B) of the Act is made 
under section 1834(k)(1)(B) of the Act.
    Section 4201 of the BBA amended section 1820 of the Act to require 
a process for establishment of CAHs. Payment for CAH outpatient 
services is described under section 1834(g) of the Act.
    When we proposed language to implement the BBA provision 
establishing therapy caps in the CY 1999 PFS proposed rule, we 
indicated in the preamble that the therapy caps do not apply to therapy 
services furnished directly or under arrangements by a hospital or CAH 
to an outpatient or to an inpatient who is not in a covered Part A stay 
(63 FR 30818, 30858). We included a similar statement in the preamble 
to the final rule; however, we did not include the same reference to 
CAHs in that sentence in the CY 1999 PFS final rule with comment period 
(63 FR 58814, 58865). In the CY 1999 PFS final rule with comment 
period, we also stated generally that the therapy caps apply only to 
items and services furnished by nonhospital providers and therapists 
(63 FR 58865). In the CY 1999 proposed rule, we proposed to include 
provisions at Sec.  410.59(e)(3) and Sec.  410.60(e)(3) to describe, 
respectively, the outpatient therapy services that are exempt from the 
statutory therapy caps for outpatient OT services, and for outpatient 
PT and SLP services combined. Specifically, in the CY 1999 PFS proposed 
rule, we proposed to add the following regulatory language for OT and 
for PT at Sec. Sec.  410.59(e)(3) and 410.60(e)(3): ``For purposes of 
applying the limitation, outpatient [occupational therapy/physical 
therapy] excludes services furnished by a hospital or CAH directly or 
under arrangements'' (63 FR 30880). However, in the CY 1999 PFS final 
rule with comment period, the phrase ``or CAH'' was omitted from the 
final regulation text for OT in Sec.  410.59(e)(3), but was included in 
the final regulation text for PT in Sec.  410.60(e)(3). We note that 
for purposes of the therapy cap, outpatient PT services under our 
regulation at Sec.  410.60 include outpatient SLP services described 
under Sec.  410.62. As such, SLP services are included in the 
references to PT under Sec.  410.60. Although the rulemaking history 
and regulations appear inconclusive as to whether outpatient therapy 
services furnished by CAHs were intended to be subject to the therapy 
caps between January 1, 1999 and October 1, 2012, we believe that we 
inadvertently omitted the phrase ``or CAH'' in the CY 1999 final 
regulation for the occupational therapy cap. Moreover, we have 
consistently excluded all outpatient therapy services furnished by CAHs 
from the therapy caps over this time frame, whether the services were 
PT, SLP, or OT.
    Accordingly, from the outset of the therapy caps under section 
1833(g) of the Act, therapy services furnished by CAHs have not been 
subject to the therapy caps. Thus, CAHs have not been required to use 
the exceptions process (including the KX modifier and other 
requirements) when furnishing medically necessary therapy services 
above the therapy caps; and therapy services furnished by CAHs above 
the threshold amounts have not been subject to the manual medical 
review process. Similarly, until section 603(b) of the ATRA amended the 
statute to specify the amount that must be counted towards the therapy 
caps and thresholds for outpatient therapy services furnished by CAHs, 
we did not apply towards the therapy caps or thresholds any amounts for 
therapy services furnished by CAHs. Therefore, we have interpreted the 
statutory exclusion for outpatient therapy services furnished by 
hospital outpatient departments also to apply to CAHs and implemented 
the therapy caps accordingly.
    As noted above, section 3005(b) of the MCTRJCA temporarily 
suspended the outpatient hospital services exemption from October 1, 
2012 through December 31, 2012 (which has subsequently been extended by 
the ATRA through December 31, 2013). As a result, from October 1, 2012 
to the present, CAH services have been treated differently than 
services furnished in other outpatient hospital settings. In 
implementing this change required by the MCTRJCA, we had reason to 
assess whether, as a result of the amendment, the therapy caps should 
be applied to outpatient therapy services furnished by CAHs. We 
concluded that the MCTRJCA amendment did not make the therapy caps 
applicable to services furnished by CAHs for which payment is made 
under section 1834(g) of the Act because it affected only the 
outpatient hospital services described under section 1833(a)(8)(B) of 
the Act for which payment is made under section 1834(k)(1)(B) of the 
Act. With the enactment in section 603(b) of the ATRA of specific 
language requiring us to count amounts toward the therapy caps and 
thresholds for services furnished by CAHs, we again had reason to 
assess whether the therapy caps apply to services furnished by CAHs. We 
concluded that the ATRA amendment did not explicitly make the therapy 
caps applicable to services furnished by CAHs, but directed us to count 
CAH services towards the caps. However, after reflecting on the 
language of section 1833(g) of the Act, we have concluded that the 
therapy caps should be applied to outpatient therapy services furnished 
by CAHs.
    To explain further, under sections 1833(g)(1) and (3) of the Act, 
the therapy caps are made applicable to all services described under 
section 1861(p) of the Act except those described under the outpatient 
hospital services exemption. Section 1861(p) of the Act establishes the 
benefit category for outpatient PT, SLP and OT services, (expressly for 
PT

[[Page 43334]]

services and, through section 1861(ll)(2) of the Act, for outpatient 
SLP services and, through section 1861(g) of the Act, for outpatient OT 
services). Section 1861(p) of the Act defines outpatient therapy 
services in the three disciplines as those furnished by a provider of 
services, a clinic, rehabilitation agency, or a public health agency, 
or by others under an arrangement with, and under the supervision of, 
such provider, clinic, rehabilitation agency, or public health agency 
to an individual as an outpatient; and those furnished by a therapist 
not under arrangements with a provider of services, clinic, 
rehabilitation agency, or a public health agency. As such, section 
1861(p) of the Act defines outpatient therapy services very broadly to 
include those furnished by providers and other institutional settings, 
as well as those furnished in office settings. Under section 1861(u) of 
the Act, a CAH is a ``provider of services.'' As such, unless the 
outpatient therapy services furnished by a CAH fit within the 
outpatient hospital services exemption under section 1833(a)(8)(B) of 
the Act, the therapy caps would be applicable to PT, SLP, OT services 
furnished by a CAH. As noted above, section 1833(a)(8)(B) of the Act 
describes only outpatient therapy services for which payment is made 
under section 1834(k) of the Act. Payment for CAH services is made 
under section 1834(g) of the Act. Thus, the outpatient hospital 
services exemption to the therapy caps under section 1833(a)(8)(B) of 
the Act does not apply, and the therapy caps are applicable, to 
outpatient therapy services furnished by a CAH.
    However, we recognize that our current regulation specifically 
excludes PT and SLP services furnished by CAHs from the therapy caps, 
and our consistent practice since 1999 has been to exclude PT, SLP and 
OT services furnished by CAHs from the therapy caps. As such, in order 
to apply the therapy caps and related policies to services furnished by 
CAHs for CY 2014 and subsequent years, we believe we would need to 
revise our regulations.
    We propose to apply the therapy cap limitations and related 
policies to outpatient therapy services furnished by a CAH beginning on 
January 1, 2014. Not only do we believe this is the proper statutory 
interpretation, but we also believe it is the appropriate policy. Under 
the existing regulations, with the suspension of the outpatient 
hospital services exemption through 2013, the therapy caps apply to 
outpatient therapy services paid under Medicare Part B and furnished in 
all applicable settings except CAHs. We believe that outpatient therapy 
services furnished by a CAH should be treated consistently with 
outpatient therapy services furnished in all other settings. Therefore, 
we propose to revise the therapy cap regulation at Sec.  410.60(e)(3) 
to remove the exemption for services furnished by a CAH.
    CAH outpatient therapy services are distinct from other outpatient 
therapy services in that outpatient therapy services furnished in 
office-based or other institutional settings are paid at the rates 
contained in the PFS, whereas CAHs are paid for outpatient therapy 
services under the methodology described under section 1834(g) of the 
Act. Because the CAH reasonable cost-based payment amounts are 
reconciled at cost reporting year-end, and are different from the fee 
schedule-based payments for other outpatient therapy services, it might 
have been difficult to identify the amounts that we should have accrued 
towards the therapy caps for services furnished by CAHs. Therefore, 
prior to 2013, not only did CMS not apply any caps to services provided 
by a CAH, but also did not count CAH services towards the caps. 
However, the ATRA amended the statute to require for outpatient therapy 
services furnished by CAHs during 2013 that we count towards the caps 
and the manual medical review thresholds the amount that would be 
payable for the services under Medicare Part B as if the services were 
paid as outpatient therapy services under section 1834(k)(1)(B) of the 
Act instead of as CAH services under section 1834(g) of the Act. Thus, 
the distinction in payment methodology no longer provides a technical 
barrier to including an amount for therapy services furnished by CAHs 
in the caps. We propose to continue this methodology of counting the 
amount payable under section 1834(k)(1)(B) of the Act towards the 
therapy cap and threshold for services furnished by CAHs in CY 2014 and 
subsequent years.
    We recognize that the outpatient hospital services exemption is 
suspended under current law only through December 31, 2013. If this 
provision is not extended, with our proposal to apply the therapy caps 
to services furnished by CAHs, effective January 1, 2014, therapy 
services furnished by CAHs would be treated differently than services 
furnished in other outpatient hospital settings. We note that the 
exceptions process described above, including use of the KX modifier to 
attest to the medical necessity of therapy services above the caps and 
other requirements, would apply for services furnished by a CAH in the 
same way that it applies to outpatient therapy services furnished by 
certain other facilities. Similarly, the manual medical review process 
for claims that exceed the $3,700 thresholds would apply to therapy 
services furnished by a CAH in the same way that they apply for 
outpatient therapy services furnished by certain other facilities. We 
recognize that the manual medical review process expires on December 
31, 2013 and we would apply the manual medical review process to CAH 
services only as required by statute. We are proposing to amend the 
regulations establishing the conditions for PT, OT, and SLP services by 
removing the exemption of CAH services from the therapy caps and 
specifying that the therapy caps apply to such services.
    Specifically, we propose to amend the regulations, which pertain to 
the OT therapy cap and the combined PT and SLP therapy cap, 
respectively, by including paragraph (e)(1)(iv) under Sec.  410.59 and 
(e)(1)(iv) under Sec.  410.60 to specify that (occupational/physical) 
therapy services furnished by a CAH directly or under arrangements 
shall be counted towards the annual limitation on incurred expenses as 
if such services were paid under section 1834(k)(1)(B) of the Act. We 
also propose to add new paragraph (e)(2)(v) to Sec.  410.59 and 
(e)(2)(vi) to Sec.  410.60. These new paragraphs would expressly 
include outpatient (occupational/physical) therapy services furnished 
by a CAH directly or under arrangements under the description of 
services to which the annual limitation applies. Further, we propose to 
amend the regulation at Sec.  410.60(e)(3), which currently excludes 
services furnished by a CAH from the therapy cap for PT and SLP 
services, to remove the phrase ``or CAH.''

H. Requirements for Billing ``Incident To'' Services

    Section 1861(s)(2)(A) of the Act establishes the benefit category 
for services and supplies furnished as ``incident to'' the professional 
services of a physician. The statute specifies that ``incident to'' 
services and supplies are ``of kinds which are commonly furnished in 
physicians' offices and are commonly either rendered without charge or 
included in physicians' bills.''
    In addition to the requirements of the statute, our regulation at 
Sec.  410.26 sets forth specific requirements that must be met in order 
for physicians and other practitioners to bill Medicare for incident to 
physicians' services. Section 410.26(a)(7) limits ``incident to'' 
services to those included under section 1861(s)(2)(A) of the Act and 
that are not covered under another benefit category. Section 410.26(b) 
specifies (in part) that

[[Page 43335]]

in order for services and supplies to be paid as ``incident to'' 
services under Medicare Part B, the services or supplies must be:
     Furnished in a noninstitutional setting to 
noninstitutional patients.
     An integral, though incidental, part of the service of a 
physician (or other practitioner) in the course of diagnosis or 
treatment of an injury or illness.
     Furnished under direct supervision (as specified under 
Sec.  410.26(a)(2) and defined in Sec.  410.32(b)(3)(ii)) of a 
physician or other practitioner eligible to bill and directly receive 
Medicare payment.
     Furnished by the physician, practitioner with an 
``incident to'' benefit, or auxiliary personnel.
    In addition to Sec.  410.26, there are regulations specific to each 
type of practitioner who is allowed to bill for ``incident to'' 
services. These are found at Sec.  410.71(a)(2) (clinical psychologist 
services), Sec.  410.74(b) (physician assistants' services), Sec.  
410.75(d) (nurse practitioners' services), Sec.  410.76(d) (clinical 
nurse specialists' services), and Sec.  410.77(c) (certified nurse-
midwives' services). When referring to practitioners who can bill for 
services furnished ``incident to'' their professional services, we are 
referring to physicians and these practitioners.
    ``Incident to'' services are treated as if they were furnished by 
the billing practitioner for purposes of Medicare billing and payment. 
Consistent with this terminology, in this discussion when referring to 
the practitioner furnishing the service, we mean the practitioner who 
is billing for the service. When we refer to the ``auxiliary 
personnel'' or the person who ``provides'' the service we are referring 
to an individual who is personally performing the service or some 
aspect of it. Since we treat ``incident to'' services as services 
furnished by the billing practitioner for purposes of Medicare billing 
and payment, payment is made to the billing practitioner under the PFS, 
and all relevant Medicare rules apply including, but not limited to, 
requirements regarding medical necessity, documentation, and billing. 
Those practitioners who can bill Medicare for ``incident to'' services 
are paid at their applicable Medicare payment rate as if they furnished 
the service. For example, when ``incident to'' services are billed by a 
physician, they are paid at 100 percent of the fee schedule amount, and 
when the services are billed by a nurse practitioner or clinical nurse 
specialist, they are paid at 85 percent of the fee schedule amount. 
Payments are subject to the usual deductible and coinsurance.
    As the services commonly furnished in physicians' offices and other 
nonfacility settings have expanded to include more complicated 
services, the types of services that can be furnished ``incident to'' 
physicians' services have also expanded. States have increasingly 
adopted standards regarding the delivery of health care services in all 
settings, including physicians' offices, in order to protect the health 
and safety of their citizens. These state standards often include 
qualifications for the individuals who are permitted to furnish 
specific services or requirements about the circumstances under which 
services may be actually furnished. For example, since 2009, New York 
has required that offices in which surgery is furnished must be 
accredited by a state-approved accredited agency or organization. 
Similarly, Florida requires certain standards be met when surgery is 
furnished in offices, including that the surgeon must ``examine the 
patient immediately before the surgery to evaluate the risk of 
anesthesia and of the surgical procedure to be performed'' and 
``qualified anesthesia personnel shall be present in the room 
throughout the conduct of all general anesthetics, regional anesthetics 
and monitored anesthesia care.''
    Over the past years, several situations have come to our attention 
where Medicare was billed for ``incident to'' services that were 
provided by auxiliary personnel who did not meet the state standards 
for those services in the state in which the services were furnished. 
The physician or practitioner billing for the services would have been 
permitted under state law to personally furnish the services, but the 
services were actually provided by auxiliary personnel who were not in 
compliance with state law in providing the particular service (or 
aspect of the service).
    Practitioners authorized to bill Medicare for services that they 
furnish to Medicare beneficiaries are required under Medicare to comply 
with state law. For example, section 1861(r) of the Act specifies that 
an individual can be considered a physician in the performance of any 
function or action only when legally authorized to practice in the 
particular field by the State in which he performs such function or 
action. Section 410.20(b) of our regulations provides that payment is 
made for services only if furnished by a doctor who is ``. . . legally 
authorized to practice by the state in which he or she performs the 
functions or actions, and who is acting within the scope of his or her 
license.'' Similarly, section 1861(s)(2)(K)(ii) of the Act provides a 
benefit category for services of a nurse practitioner (NP) or clinical 
nurse specialist (CNS) that the NP or CNS is ``legally authorized to 
perform by the State in which the services are performed, and Sec.  
410.75(b) of our regulations provides that nurse practitioners' 
services are covered only if the NP is ``authorized by the State in 
which the services are furnished to practice as a nurse practitioner in 
accordance with State law.'' There are similar provisions for clinical 
psychologist services (Sec.  410.71(a)(2)), clinical social worker 
services (Sec.  410.73(b)(1)), physician assistants' services (Sec.  
410.74(a)(2)(ii)), clinical nurse specialists' services (Sec.  
410.76(b)(1)), and certified nurse-midwives' services (Sec.  
410.77(b)(1)).
    However, the Medicare requirements for services and supplies 
incident to a physician's professional services (Sec.  410.26 discussed 
above), do not specifically make compliance with state law a condition 
of payment for services (or aspects of services) and supplies furnished 
and billed as ``incident to'' services. Nor do any of the regulations 
regarding services furnished ``incident to'' the services of other 
practitioners contain this requirement. Thus, Medicare has had limited 
recourse when services furnished incident to a physician's or 
practitioner's services are not furnished in compliance with state law.
    In 2009, the Office of Inspector General issued a report entitled 
``Prevalence and Qualifications of Nonphysicians Who Performed Medicare 
Physician Services'' (OEI-09-06-00430) that considered in part the 
qualifications of auxiliary personnel providing incident to physician 
services. This report found that services were being billed to Medicare 
that were provided by auxiliary personnel. After finding that services 
were being provided and billed to Medicare by auxiliary personnel ``. . 
. who did not possess the required licenses or certifications according 
to State laws, regulations, and/or Medicare rules,'' the OIG 
recommended that we revise the ``incident to'' rules to, among other 
things, ``require that physicians who do not personally perform the 
services they bill to Medicare ensure that no persons except . . . 
nonphysicians who have the necessary training, certification, and/or 
licensure, pursuant to State laws, State regulations, and Medicare 
regulations personally perform the services under the direct 
supervision of a licensed physician.'' We are also proposing amendments 
to our regulations to address this recommendation.
    To ensure that auxiliary personnel providing services to Medicare

[[Page 43336]]

beneficiaries incident to the services of other practitioners do so in 
accordance with the requirements of the state in which the services are 
furnished and to ensure that Medicare dollars can be recovered when 
such services are not furnished in compliance with the state law, we 
are proposing to add a requirement to the ``incident to'' regulations 
at Sec.  410.26, Services and supplies incident to a physician's 
professional services: Conditions. Specifically, we are proposing to 
amend Sec.  410.26(b) by redesignating paragraphs (b)(7) and (b)(8) as 
paragraphs (b)(8) and (b)(9), respectively, and by adding a new 
paragraph (b)(7) to state that ``Services and supplies must be 
furnished in accordance with applicable State law.'' We are also 
proposing to amend the definition of auxiliary personnel at Sec.  
410.26(a)(1) to require that the individual performing ``incident to'' 
services ``meets any applicable requirements to provide the services, 
including licensure, imposed by the State in which the services are 
being furnished.''
    In addition, we are proposing to eliminate redundant and 
potentially incongruent regulatory language by replacing the specific 
``incident to'' requirements currently contained in the regulations 
relating to each of the various types of practitioners with a reference 
to the requirements of Sec.  410.26. Specifically, we are proposing to:
     Revise Sec.  410.71(a)(2) regarding clinical psychologist 
services to read ``Medicare Part B covers services and supplies 
incident to the services of a clinical psychologist if the requirements 
of Sec.  410.26 are met.''
     Revise Sec.  410.74(b) regarding physician assistants' 
services to read ``Medicare Part B covers services and supplies 
incident to the services of a physician assistant if the requirements 
of Sec.  410.26 are met.''
     Revise Sec.  410.75(d) regarding nurse practitioners to 
read ``Medicare Part B covers services and supplies incident to the 
services of a nurse practitioner if the requirements of Sec.  410.26 
are met.''
     Revise Sec.  410.76(d) regarding clinical nurse 
specialists' services to read with ``Medicare Part B covers services 
and supplies incident to the services of a clinical nurse specialist if 
the requirements of Sec.  410.26 are met.''
     Revise the language in Sec.  410.77(c) regarding certified 
nurse-midwives' services to read ``Medicare Part B covers services and 
supplies incident to the services of a certified nurse-midwife if the 
requirements of Sec.  410.26 are met.''
    As discussed above, these practitioners are, and would continue to 
be under this proposal, required to comply with Sec.  410.26 for 
services furnished incident to their professional services. We believe 
it is redundant and potentially confusing to have separate regulations 
that generally restate the requirements for ``incident to'' services of 
Sec.  410.26 using slightly different terminology. Our goal in 
proposing the revisions to refer to Sec.  410.26 in the regulation for 
each practitioner's ``incident to'' services is to reduce the 
regulatory burden and make it less difficult for practitioners to 
determine what is required. Reconciling these regulatory requirements 
for physicians and all other practitioners who have the authority to 
bill Medicare for ``incident to'' services is also consistent with our 
general policy to treat nonphysician practitioners similarly to 
physicians unless there is a compelling reason for disparate treatment. 
We believe that this proposal would make the requirements clearer for 
practitioners furnishing ``incident to'' services without eliminating 
existing regulatory requirements or imposing new ones. We welcome 
comments on any requirements that we may have inadvertently overlooked 
in our proposed revisions, or any benefit that accrues from continuing 
to carry these separate regulatory requirements.
    The regulations applicable to Rural Health Clinics (RHCs) and 
Federally Qualified Health Centers (FQHCs) have similar ``incident to'' 
rules, and we are proposing to make conforming changes to these 
regulations. Specifically, we are also proposing to revise Sec.  
405.2413(a), which addresses services and supplies incident to 
physicians' services for RHCs and FQHCs, by redesignating paragraphs 
(a)(4) and (a)(5) as paragraphs (a)(5) and (a)(6), respectively and by 
adding a new paragraph (a)(4) that states services and supplies must be 
furnished in accordance with applicable state law. Additionally, we are 
proposing to amend Sec.  405.2415(a), which addresses services incident 
to nurse practitioner and physician assistant services by redesignating 
paragraphs (a)(4) and (a)(5) as paragraphs (a)(5) and (a)(6), 
respectively and by adding a new paragraph (a)(4) that specifies 
services and supplies must be furnished in accordance with applicable 
state law. We are proposing to amend Sec.  405.2452(a), which addresses 
services and supplies incident to clinical psychologist and clinical 
social worker services by redesignating paragraphs (a)(4) and (a)(5) as 
paragraphs (a)(5) and (a)(6), respectively and by adding a new 
paragraph (a)(4) that states services and supplies must be furnished in 
accordance with applicable state law. Finally, we are also proposing 
the removal of the word ``personal'' in Sec. Sec.  405.2413, 405.2415, 
and 405.2452 to be consistent with the ``incident to'' provisions in 
Sec.  410.26 Services and supplies incident to a physician's 
professional services: Conditions.
    The proposed amendments to our regulations are consistent with the 
traditional approach of relying primarily on the states to regulate the 
health and safety of their residents in the delivery of health care 
services. Throughout the Medicare program, as evidenced by several 
examples above, the qualifications required for the delivery of health 
care services are generally determined with reference to state law. As 
discussed above, our current regulations governing practitioners who 
can bill Medicare directly include a basic requirement to comply with 
state law when furnishing Medicare covered services. However, the 
Medicare regulations for ``incident to'' services and supplies do not 
specifically make compliance with state law a condition of payment for 
services and supplies furnished and billed as an incident to a 
practitioner's services. The proposed amendments to our regulations 
would rectify this situation and make compliance with state law a 
requirement for all ``incident to'' services. In addition to health and 
safety benefits we believe would accrue to the Medicare patient 
population, this approach would assure that federal dollars are not 
expended for services that do not meet the standards of the states in 
which they are being furnished, and provides the ability for the 
federal government to recover funds paid where services and supplies 
are not furnished in accordance with state law.
    We note that this proposal would not impose any new requirements on 
those practitioners billing the Medicare program since auxiliary 
personnel furnishing services in a state would already be required to 
comply with the laws of that state. This regulatory change would simply 
adopt the existing requirements as a condition of payment under 
Medicare. Codifying this requirement would provide the federal 
government a clear basis to deny a claim for Medicare payment when 
services are not furnished in accordance with applicable state law and 
the ability to recover funds, as well as assure that Medicare makes 
payment for services furnished to beneficiaries only when the services 
meet the requirements imposed by the states to regulate health care 
delivery in order to ensure the health and safety of their citizens.

[[Page 43337]]

I. Complex Chronic Care Management Services

    As we discussed in the CY 2013 PFS final rule with comment period, 
we are committed to primary care and we have increasingly recognized 
care management as one of the critical components of primary care that 
contributes to better health for individuals and reduced expenditure 
growth (77 FR 68978). Accordingly, we have prioritized the development 
and implementation of a series of initiatives designed to improve 
payment for, and encourage long-term investment in, care management 
services. These initiatives include the following programs and 
demonstrations:
     The Medicare Shared Savings Program (described in 
``Medicare Program; Medicare Shared Savings Program: Accountable Care 
Organizations; Final Rule'' which appeared in the November 2, 2011 
Federal Register (76 FR 67802)).
     The testing of the Pioneer ACO model, designed for 
experienced health care organizations (described on the Center for 
Medicare and Medicaid Innovation's (Innovation Center's) Web site at 
innovations.cms.gov/initiatives/ACO/Pioneer/index.html).
     The testing of the Advance Payment ACO model, designed to 
support organizations participating in the Medicare Shared Savings 
Program (described on the Innovation Center's Web site at 
innovations.cms.gov/initiatives/ACO/Advance-Payment/index.html).
     The Primary Care Incentive Payment (PCIP) Program 
(described on the CMS Web site at www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/Downloads/PCIP-2011-Payments.pdf).
     The patient-centered medical home model in the Multi-payer 
Advanced Primary Care Practice (MAPCP) Demonstration designed to test 
whether the quality and coordination of health care services are 
improved by making advanced primary care practices more broadly 
available (described on the CMS Web site at www.cms.gov/Medicare/Demonstration-Projects/DemoProjectsEvalRpts/downloads/mapcpdemo_Factsheet.pdf).
     The Federally Qualified Health Center (FQHC) Advanced 
Primary Care Practice demonstration (described on the CMS Web site at 
www.cms.gov/Medicare/Demonstration-Projects/DemoProjectsEvalRpts/downloads/mapcpdemo_Factsheet.pdf and the Innovation Center's Web site 
at innovations.cms.gov/initiatives/FQHCs/index.html).
     The Comprehensive Primary Care (CPC) initiative (described 
on the Innovation Center's Web site at innovations.cms.gov/initiatives/Comprehensive-Primary-Care-Initiative/index.html). The CPC initiative 
is a multi-payer initiative fostering collaboration between public and 
private health care payers to strengthen primary care in certain 
markets across the country.
    In coordination with these initiatives, we also continue to explore 
potential refinements to the PFS that would appropriately value care 
management within Medicare's statutory structure for fee-for-service 
physician payment and quality reporting. For example, in the CY 2013 
PFS final rule with comment period, we adopted a policy to pay 
separately for care management involving the transition of a 
beneficiary from care furnished by a treating physician during a 
hospital stay to care furnished by the beneficiary's primary physician 
in the community (77 FR 68978 through 68993). We view potential 
refinements to the PFS such as these as part of a broader strategy that 
relies on input and information gathered from the initiatives described 
above, research and demonstrations from other public and private 
stakeholders, the work of all parties involved in the potentially 
misvalued code initiative, and from the public at large.
1. Patient Eligibility for Separately Payable Non-Face-to-Face Complex 
Chronic Care Management Services
    Under current PFS policy, the payment for non-face-to-face care 
management services is bundled into the payment for face-to-face E/M 
visits because care management is a component of those E/M services. 
The pre- and post-encounter non-face-to-face care management work is 
included in calculating the total work for the typical E/M services, 
and the total work for the typical service is used to develop RVUs for 
the E/M services. In the CY 2012 PFS proposed rule, we highlighted some 
of the E/M services that include substantial care management work. 
Specifically, we noted that the vignettes that describe a typical 
service for mid-level office/outpatient services (CPT codes 99203 and 
99213) include furnishing care management, communication, and other 
necessary care management related to the office visit in the post-
service work (76 FR 42917).
    However, the physician community continues to tell us that the care 
management included in many of the E/M services, such as office visits, 
does not adequately describe the typical non-face-to-face care 
management work involved for certain categories of beneficiaries. 
Because the current E/M office/outpatient visit CPT codes were designed 
to support all office visits and reflect an overall orientation toward 
episodic treatment, we agree that these E/M codes may not reflect all 
the services and resources required to furnish comprehensive, 
coordinated care management for certain categories of beneficiaries. 
For example, we currently pay physicians separately for the non face-
to-face care plan oversight services furnished to beneficiaries under 
the care of home health agencies or hospices and we currently pay 
separately for care management services furnished to beneficiaries 
transitioning from care furnished by a treating physician during a 
hospital stay to care furnished by the beneficiary's primary physician 
in the community.
    Similar to these situations, we believe that the resources required 
to furnish complex chronic care management services to beneficiaries 
with multiple (that is, two or more) chronic conditions are not 
adequately reflected in the existing E/M codes. Furnishing care 
management to beneficiaries with multiple chronic conditions requires 
complex and multidisciplinary care modalities that involve: Regular 
physician development and/or revision of care plans; subsequent reports 
of patient status; review of laboratory and other studies; 
communication with other health professionals not employed in the same 
practice who are involved in the patient's care; integration of new 
information into the care plan; and/or adjustment of medical therapy. 
Therefore, for CY 2015, we are proposing to establish a separate 
payment under the PFS for complex chronic care management services 
furnished to patients with multiple complex chronic conditions that are 
expected to last at least 12 months or until the death of the patient, 
and that place the patient at significant risk of death, acute 
exacerbation/decompensation, or functional decline.
    We have performed an analysis of Medicare claims for patients with 
selected multiple chronic conditions (see http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Chronic-Conditions/Downloads/2012Chartbook.pdf). This analysis indicated that 
patients with these selected multiple chronic conditions are at 
increased risk for hospitalizations, use of post-acute care services, 
and emergency department visits. We believe these findings would hold 
in general for patients with multiple

[[Page 43338]]

complex chronic conditions that are expected to last at least 12 months 
or until the death of the patient, and that place the patient at 
significant risk of death, acute exacerbation/decompensation, or 
functional decline. We believe that successful efforts to improve 
chronic care management for these patients could improve the quality of 
care while simultaneously decreasing costs (for example, through 
reductions in hospitalizations, use of post-acute care services, and 
emergency department visits.)
    As described below in more detail in section II.I.3, we intend to 
develop standards for furnishing complex chronic care management 
services to ensure that the physicians who bill for these services have 
the capability to provide them. One of the primary reasons for our 
proposed 2015 implementation date is to provide sufficient time to 
develop and obtain public input on the standards necessary to 
demonstrate the capability to provide these services.
2. Scope of Complex Chronic Care Management Services
    We consider the scope of complex chronic care management services 
to include:
     The provision of 24-hour-a-day, 7-day-a-week access to 
address a patient's acute complex chronic care needs. To accomplish 
these tasks, we would expect that the patient would be provided with a 
means to make timely contact with health care providers in the practice 
to address urgent complex chronic care needs regardless of the time of 
day or day of the week. Members of the complex chronic care team who 
are involved in the after-hours care of a patient must have access to 
the patient's full electronic medical record even when the office is 
closed so they can continue to participate in care decisions with the 
patient.
     Continuity of care with a designated practitioner or 
member of the care team with whom the patient is able to get successive 
routine appointments.
     Care management for chronic conditions including 
systematic assessment of patient's medical, functional, and 
psychosocial needs; system-based approaches to ensure timely receipt of 
all recommended preventive care services; medication reconciliation 
with review of adherence and potential interactions; and oversight of 
patient self-management of medications. In consultation with the 
patient and other key practitioners treating the patient, the 
practitioner furnishing complex chronic care management services should 
create a patient-centered plan of care document to assure that care is 
provided in a way that is congruent with patient choices and values. A 
plan of care is based on a physical, mental, cognitive, psychosocial, 
functional and environmental (re)assessment and an inventory of 
resources and supports. It is a comprehensive plan of care for all 
health issues. It typically includes, but is not limited to, the 
following elements: Problem list, expected outcome and prognosis, 
measurable treatment goals, symptom management, planned interventions, 
medication management, community/social services ordered, how the 
services of agencies and specialists unconnected to the practice will 
be directed/coordinated, identify the individuals responsible for each 
intervention, requirements for periodic review and, when applicable, 
revision, of the care plan. The provider should seek to reflect a full 
list of problems, medications and medication allergies in the 
electronic health record to inform the care plan, care coordination and 
ongoing clinical care.
     Management of care transitions within health care 
including referrals to other clinicians, visits following a patient 
visit to an emergency department, and visits following discharges from 
hospitals and skilled nursing facilities. The practice must be able to 
facilitate communication of relevant patient information through 
electronic exchange of a summary care record with other health care 
providers regarding these transitions. The practice must also have 
qualified personnel who are available to deliver transitional care 
services to a patient in a timely way so as to reduce the need for 
repeat visits to emergency departments and re-admissions to hospitals 
and skilled nursing facilities.
     Coordination with home and community based clinical 
service providers required to support a patient's psychosocial needs 
and functional deficits. Communication to and from home and community 
based providers regarding these clinical patient needs must be 
documented in practice's medical record system.
     Enhanced opportunities for a patient to communicate with 
the provider regarding their care through not only the telephone but 
also through the use of secure messaging, internet or other 
asynchronous non face-to-face consultation methods.
3. Standards for Furnishing Complex Chronic Care Coordination Services
    Not all physicians and qualified nonphysician practitioners who 
wish to furnish complex chronic care management services currently have 
the capability to fully provide the scope of services described in 
section II.I.2. without making additional investments in technology, 
staff training, and the development and maintenance of systems and 
processes to furnish the services. We intend to establish standards 
that would be necessary to provide high quality, safe complex chronic 
care management services. For example, potential standards could 
include the following:
     The practice must be using a certified Electronic Health 
Record (EHR) for beneficiary care that meets the most recent HHS 
regulatory standard for meaningful use. The EHR must be integrated into 
the practice to support access to care, care coordination, care 
management and communication.
     The practice must employ one or more advanced practice 
registered nurses or physicians assistants whose written job 
descriptions indicate that their job roles include and are 
appropriately scaled to meet the needs for beneficiaries receiving 
services in the practice who require complex chronic care management 
services provided by the practice.
     The practice must be able to demonstrate the use of 
written protocols by staff participating in the furnishing of services 
that describe: (1) The methods and expected ``norms'' for furnishing 
each component of complex chronic care management services provided by 
the practice; (2) the strategies for systematically furnishing health 
risk assessments to identify all beneficiaries eligible and who may be 
willing to participate in the complex chronic care management services; 
(3) the procedures for informing eligible beneficiaries about complex 
chronic care management services and obtaining their consent; (4) the 
steps for monitoring the medical, functional and social needs of all 
beneficiaries receiving complex chronic care management services; (5) 
system based approaches to ensure timely delivery of all recommended 
preventive care services to beneficiaries; (6) guidelines for 
communicating common and anticipated clinical and non-clinical issues 
to beneficiaries; (7) care plans for beneficiaries post-discharge from 
an emergency department or other institutional health care setting, to 
assist beneficiaries with follow up visits with clinical and other 
suppliers or providers, and in managing any changes in their 
medications; (8) a systematic approach to communicate and 
electronically exchange clinical information with and coordinate care 
among all service providers involved in

[[Page 43339]]

the ongoing care of a beneficiary receiving complex chronic care 
management services; (9) a systematic approach for linking the practice 
and a beneficiary receiving complex chronic care management services 
with long-term services and supports including home and community-based 
services; (10) a systematic approach to the care management of 
vulnerable beneficiary populations such as racial and ethnic minorities 
and people with disabilities; and (11) patient education to assist the 
beneficiary to self-manage a chronic condition that is considered at 
least one of his/her complex chronic conditions. These protocols must 
be reviewed and updated as is appropriate based on the best available 
clinical information at least annually.
     All practitioners including advanced practice registered 
nurses or physicians assistants, involved in the delivery of complex 
chronic care management services must have access at the time of 
service to the beneficiary's EHR that includes all of the elements 
necessary to meet the most recent HHS regulatory standard for 
meaningful use. This includes any and all clinical staff providing 
after hours care to ensure that the complex chronic care management 
services are available with this level of EHR support in the practice 
or remotely through a Virtual Private Network (VPN), a secure Web site, 
or a health information exchange (HIE) 24 hours per day and 7 days a 
week.
    Some have suggested that, to furnish these services, practices 
could be recognized as a medical home by one of the national 
organizations including: the National Committee for Quality Assurance 
(NCQA), the Accreditation Association for Ambulatory Health Care, The 
Joint Commission, URAC, etc.; which are formally recognizing primary 
care practices as a patient-centered medical home. We understand there 
are differences among the approaches taken by national organizations 
that formally recognize medical homes and therefore, we seek comment on 
these and other potential care coordination standards, and the 
potential for CMS recognizing a formal patient-centered medical home 
designation as one means for a practice to demonstrate it has met any 
final care coordination standards for furnishing complex chronic care 
management services. Any regulatory changes would be addressed through 
separate notice-and-comment rulemaking.
4. Billing for Separately Payable Complex Chronic Care Management 
Services and Obtaining Informed Consent From the Beneficiary
    To recognize the additional resources required to provide complex 
chronic care management services to patients with multiple chronic 
conditions, we are proposing to create two new separately payable 
alphanumeric G-codes.

    Complex chronic care management services furnished to patients 
with multiple (two or more) complex chronic conditions expected to 
last at least 12 months, or until the death of the patient, that 
place the patient at significant risk of death, acute exacerbation/
decompensation, or functional decline;
    GXXX1, initial services; one or more hours; initial 90 days
    GXXX2, subsequent services; one or more hours; subsequent 90 
days

    Typically, we would expect the one or more hours of services to be 
provided by clinical staff directed by a physician or other qualified 
health care professional. Initial services include obtaining the 
initial informed consent from the beneficiary as described below and 
the initial implementation of the complex chronic care management 
services described in section II.I.2. of this proposed rule.
    Not all patients who are eligible for separately payable complex 
chronic care management services may necessarily want these services to 
be provided. Therefore, before the practitioner can furnish or bill for 
these services, the eligible beneficiary must be informed about the 
availability of the services from the practitioner and provide his or 
her consent to have the services provided, including the electronic 
communication of the patient's information with other treating 
providers as part of care coordination. This would include a discussion 
with the patient about what complex chronic care management services 
are, how these services are accessed, how their information will be 
shared among other providers in the care team, and that cost-sharing 
applies to these services even when they are not delivered face-to-face 
in the practice. To bill for the initial services (GXXX1), the 
practitioner would be required to document in the patient's medical 
record that all of the complex chronic care management services were 
explained and offered to the patient, noting the patient's decision to 
accept these services. Also, a written or electronic copy of the care 
plan would be provided to the beneficiary and this would also be 
recorded in the beneficiary's electronic medical record.
    A practitioner would need to reaffirm with the beneficiary at least 
every 12 months whether he or she wishes to continue to receive complex 
chronic care management services during the following 12-month period.
    The informed consent for complex chronic care management services 
could be revoked by the beneficiary at any time. However, if the 
revocation occurs during a current 90-day complex chronic care 
management period, the revocation would not be effective until the end 
of that period. The beneficiary could notify the practitioner either 
verbally or in writing. At the time the informed consent is obtained, 
the practitioner would be required to inform the beneficiary of the 
right to stop the complex chronic care management services at any time 
and the effect of a revocation of consent on complex chronic care 
management services. Revocation by the beneficiary of the informed 
consent must also be noted by recording the date of the revocation in 
the beneficiary's medical record and by providing the beneficiary with 
written confirmation that the practitioner would not be providing 
complex chronic care management services beyond the current 90 day 
period.
    A beneficiary who has revoked informed consent for complex chronic 
care management services from one practitioner may choose instead to 
receive these services from a different practitioner, which can begin 
at the conclusion of the current 90-day period. The new practitioner 
would need to fulfill all the requirements for billing GXXX1 and then 
GXXX2.
    Prior to submitting a claim for complex chronic care management 
services, the practitioner must notify the beneficiary that a claim for 
these services will be submitted to Medicare. The notification must 
indicate: that the beneficiary has been receiving these services over 
the previous 90-day period (noting the beginning and end dates for the 
90-day period), the reason(s) why the services were provided and a 
description of the services provided. The notice may be delivered by a 
means of communication mutually agreed to by the practitioner and 
beneficiary such as mail, email, or facsimile, or in person (for 
example, at the time of an office visit.) The notice must be received 
by the beneficiary before the practitioner submits the claim for the 
services. A separate notice must be received by the beneficiary for 
each 90-day period for which the services will be billed. A copy of the 
notice should be included in the medical record.
    In addition to the requirement that at least an hour of complex 
chronic care

[[Page 43340]]

management services be furnished to the patient, we propose that 
billing for subsequent complex chronic care management services (GXXX2) 
would be limited to those 90-day periods in which the medical needs of 
the patient require substantial revision of the care plan discussed in 
section II.I.2. Substantial revision to a care plan typically is 
required when the patient's clinical condition changes sufficiently to 
require: Significantly more intensive monitoring by clinical staff, 
significant changes in the treatment regimen, and significant time to 
educate the patient/caregiver about the patient's condition/change in 
treatment plan and prognosis.
    Because the payment for non-face-to-face care management services 
is generally bundled into the payment for face-to-face E/M visits, the 
resources required to provide care management services for patients 
without multiple chronic conditions or for less than the one or more 
hours of clinical staff time continues to be reflected in the payment 
for face-to-face E/M visits. For similar reasons, the resources 
required to provide care management services to patients residing in 
facility settings where care management activity by facility staff 
would be included in the associated facility payment also continues to 
be reflected in the payment for face-to-face E/M visits.
    We propose that complex chronic care management services include 
transitional care management services (CPT 99495, 99496), home health 
care supervision (HCPCS G0181), and hospice care supervision (HCPCS 
G0182). If furnished, in order to avoid duplicate payment, we propose 
that these services may not be billed separately during the 90 days for 
which either GXXX1 or GXXX2 are billed. For similar reasons, we propose 
that GXXX1 or GXXX2 cannot be billed separately if ESRD services (CPT 
90951-90970) are billed during the same 90 days.
    Practitioners billing a complex chronic care management code accept 
responsibility for managing and coordinating the beneficiary's care 
over this period. Therefore, we propose to pay only one claim for the 
complex chronic care management services (either GXXX1 or GXXX2) billed 
per beneficiary at the conclusion of each 90-day period. All of the 
complex chronic care management services delineated in section II.H.2 
above that are relevant to the patient must be furnished in order to 
bill GXXX1 or GXXX2 for a 90-day period.
    If a face-to-face visit is provided during the 90-day period by the 
practitioner who is furnishing complex chronic care management 
services, the practitioner should report the appropriate evaluation and 
management code in addition to GXXX1 or GXXX2.
    We note that to bill for these services, we propose that at least 
60 minutes of complex chronic care management services must be 
provided. Time of less than 60 minutes over the 90 day period could not 
be rounded up to 60 minutes in order to bill for these services. We 
also propose that for purposes of meeting the 60-minute requirement, 
the practitioner could count the time of only one clinical staff member 
for a particular segment of time, and could not count overlapping 
intervals such as when two or more clinical staff members are meeting 
about the patient.
    In future rulemaking, we intend to propose RVUs for complex chronic 
care management services. To inform our proposal, we seek input on the 
physician work and practice expenses associated with these services.
5. Complex Chronic Care Management Services and the Annual Wellness 
Visit (AWV) (HCPCS codes G0438, G0439)
    We are proposing that a beneficiary must have received an AWV in 
the past twelve months in order for a practitioner to be able to bill 
separately for complex chronic care management services. We believe 
that the linking of these services to the AWV makes sense for several 
reasons. First, the AWV is designed to enable a practitioner to 
systematically capture information that is essential for the 
development of a care plan. This includes the establishment of a list 
of current practitioners and suppliers that are regularly involved in 
providing medical care to the beneficiary, the assessment of the 
beneficiary's functional status related to chronic health conditions, 
the assessment of whether the beneficiary suffers from any cognitive 
limitations or mental health conditions that could impair self-
management of chronic health conditions, and an assessment of the 
beneficiary's preventive health care needs including those that 
contribute to or result from a beneficiary's chronic conditions. 
Second, the beneficiary's selection of a practitioner to furnish the 
AWV is a useful additional indicator to assist us in knowing which 
single practitioner a beneficiary has chosen to furnish complex chronic 
care management services. While a beneficiary would retain the right to 
choose and change the practitioner to furnish complex chronic care 
management services, we do not believe that it is in the interest of a 
beneficiary to have more than one practitioner at a time coordinating 
the beneficiary's care and we do not intend to pay multiple 
practitioners for furnishing these services over the same time period. 
Third, the AWV is updated annually which is consistent with the minimal 
interval for reviewing and modifying the care plan required for the 
complex chronic care management services.
    We would expect that the practitioner the beneficiary chooses for 
the AWV would be the practitioner furnishing the complex chronic care 
management services. For the less frequent situations when a 
beneficiary chooses a different practitioner to furnish the complex 
chronic care management services from the practitioner who in the 
previous year furnished the AWV, the practitioner furnishing the 
complex chronic are management services would need to obtain a copy of 
the assessment and care plan developed between the beneficiary and the 
practitioner who furnished the AWV prior to billing for complex chronic 
care management services.
    Because a beneficiary is precluded from receiving an AWV within 12 
months after the effective date of his or her first Medicare Part B 
coverage period, for that time period we propose the Initial Preventive 
Physical Examination (G0402) can substitute for the AWV to allow a 
beneficiary to receive complex chronic care management services.
6. Complex Chronic Care Management Services Furnished Incident to a 
Physician's Service Under General Physician Supervision
    We outline the requirements for billing for services furnished in 
the office, but not personally and directly performed by the physician 
or qualified nonphysician practitioner (referred to as a 
``practitioner'' in the following discussion), under our ``incident 
to'' requirements in regulations and in section 60, Chapter 12, of 
Medicare Benefit Policy Manual (100-02). One key requirement of 
``incident to'' services is that a practitioner (as the term is used in 
section II.H of this proposed rule directly supervise the provision of 
services by auxiliary personnel by being in the office suite and able 
to furnish assistance and direction throughout the provision of the 
service. Section 60.4 of the Manual specifically discusses the one 
exception that allows for general supervision of ``incident to'' 
services furnished to homebound patients in medically underserved 
areas. Under that provision, we identify more specific requirements for 
the personnel that can furnish ``incident to'' services under general 
supervision. For example, we require that the personnel must be

[[Page 43341]]

employed by, employed by the same entity, or an independent contractor 
of, the practitioner billing the ``incident to'' services.
    One of the required capabilities for a physician to furnish complex 
chronic care management services is 24-hour-a-day, 7-day-a-week 
beneficiary access to the practice to address the patient's complex 
chronic care needs. We would expect that the patient would be provided 
with a means to make timely contact with health care providers in the 
practice to address those needs regardless of the time of day or day of 
the week. If the patient has a complex chronic care need outside of the 
practice's normal business hours, the patient's initial contact with 
the practice for that need could be with clinical staff employed by the 
practice, (for example, a nurse or other appropriate auxiliary 
personnel) and not necessarily with a physician or practitioner. Those 
services would be furnished incident to the services of the billing 
practitioner.
    We have also proposed to require that at least one hour of complex 
chronic care services be furnished to a patient during the 90-day 
period in order for the practitioner to be able to bill separately for 
the chronic care services. The time, if not personally performed by the 
physician, must be directed by the physician. We are proposing that the 
time spent by a clinical staff person furnishing aspects of complex 
chronic care services outside of the practice's normal business hours 
during which there is no direct physician supervision would count 
towards the one hour requirement even though the services do not meet 
the direct supervision requirement for ``incident to'' services.
    We believe that the additional requirements we impose for personnel 
under the exception for general supervision for homebound patients in 
medically underserved areas should apply in these circumstances where 
we are allowing a practitioner to bill Medicare for complex chronic 
care management services furnished under their general supervision and 
incident to their professional services. In both of these unusual 
cases, these requirements help to ensure that appropriate services are 
being furnished by appropriate personnel in the absence of the direct 
supervision. Specifically, we propose that if a practice meets all the 
conditions required to bill separately for complex chronic care 
management services, the time spent by a clinical staff employee 
furnishing aspects of these services to address a patient's complex 
chronic care need outside of the practice's normal business hours is 
counted towards the one hour requirement when at a minimum the 
following conditions are met:
     The clinical staff person is directly employed by the 
physician and the employed clinical staff person meets any relevant 
state requirements.
     The services of the clinical staff person are an integral 
part of the physician's complex chronic care management services to the 
patient (the patient must be one the physician is treating and for 
which informed consent is in effect), and are performed under the 
general supervision of the physician. General supervision means that 
the physician need not be physically present when the services are 
performed; however, the services must be performed under the 
physician's overall supervision and control. Contact is maintained 
between the clinical staff person and the physician (for example, the 
employed clinical staff person contacts the physician directly if 
warranted and the physician retains professional responsibility for the 
service.)
     The services of the employed clinical staff person meet 
all other ``incident to'' requirements with the exception of direct 
supervision.
7. Complex Chronic Care Management Services and the Primary Care 
Incentive Payment Program (PCIP)
    Under section 1833(x) of the Act, the PCIP provides a 10 percent 
incentive payment for primary care services within a specific range of 
E/M services when furnished by a primary care practitioner. Specific 
physician specialties and qualified nonphysician practitioners can 
qualify as primary care practitioners if 60 percent of their PFS 
allowed charges are primary care services. As we explained in the CY 
2011 PFS final rule (75 FR 73435 through 73436), we do not believe the 
statute authorizes us to add codes (additional services) to the 
definition of primary care services. However, to avoid inadvertently 
disqualifying community primary care physicians who follow their 
patients into the hospital setting, we finalized a policy to remove 
allowed charges for certain E/M services furnished to hospital 
inpatients and outpatients from the total allowed charges in the PCIP 
primary care percentage calculation. In the CY 2013 final rule (77 FR 
68993), we adopted a policy that the TCM code should be treated in the 
same manner as those services for the purposes of PCIP because post-
discharge TCM services are a complement in the community setting to the 
hospital-based discharge day management services already excluded from 
the PCIP denominator. Similar to the codes already excluded from the 
PCIP denominator, we expressed concern that inclusion of the TCM code 
in the denominator of the primary care percentage calculation could 
produce unwarranted bias against ``true primary care practitioners'' 
who are involved in furnishing post-discharge care to their patients.
    Complex chronic care management services are also similar to the 
services that we have already excluded from the from the PCIP 
denominator. For example, complex chronic care management includes 
management of care transitions within health care settings including 
referrals to other clinicians, visits following a patient visit to an 
emergency department, and visits following discharges from hospitals 
and skilled nursing facilities. Therefore, while physicians and 
qualified nonphysician practitioners who furnish complex chronic care 
management services would not receive an additional incentive payment 
under the PCIP for the service itself (because it is not considered a 
``primary care service'' for purposes of the PCIP), we propose that the 
allowed charges for complex chronic care management services would not 
be included in the denominator when calculating a physician's or 
practitioner's percent of allowed charges that were primary care 
services for purposes of the PCIP.
8. Summary
    In summary, we are proposing for CY 2015 to establish a separate 
payment under the PFS for complex chronic care management services 
furnished to patients with multiple complex chronic conditions that are 
expected to last at least 12 months or until the death of the patient, 
and that place the patient at significant risk of death, acute 
exacerbation/decompensation, or functional decline, as discussed in 
section II.I.1. We are proposing the scope of these complex chronic 
care management services discussed in section II.I.2; the billing 
requirements for these services as discussed in section II.I.4; the AWV 
requirement as discussed in section II.I.5; the general supervision 
requirements as discussed in section II.I.6, and the PCIP denominator 
exclusion as discussed in section II.I.7.
    We are seeking input from the public on, the standards required to 
provide these services as discussed in section II.I.3, and the work and 
PE that would be associated with these services.
    We are making this proposal to establish codes and separate payment 
for complex chronic care management services in the context of the 
broader

[[Page 43342]]

multi-year strategy to appropriately recognize and value primary care 
and care management services. Should this proposal become final policy, 
it may be a short-term payment strategy that would be modified and/or 
revised to be consistent with broader primary care, and care management 
and coordination services if the agency decides to pursue payment for a 
broader set of management and coordination services in future 
rulemaking. We also note that as we consider a final policy, we would 
assess the potential impact of the policy on our current programs and 
demonstrations designed to improve payment for, and encourage long-term 
investment in, care management services. Likewise, to assure that there 
are not duplicate payments for delivery of care management services, we 
would consider whether such payments are appropriate for providers 
participating in other programs and demonstrations.

J. Chiropractors Billing for Evaluation and Management Services

    Section 1861(r)(5) of the Act includes chiropractors in its 
definition of ``physician'' with language limiting chiropractors to 
``treatment by means of manual manipulation of the spine (to correct a 
subluxation).'' Specifically, the Act says:

    The term ``physician,'' when used in connection with the 
performance of any function or actions means . . . a chiropractor 
who is licensed as such by the State (or in a State which does not 
license chiropractors as such, is legally authorized to perform the 
services of a chiropractor in the jurisdiction in which he performs 
such services) and who meets uniform minimum standards promulgated 
by the Secretary, but only for the purpose of sections 1861(s)(1) 
and 1861(s)(2)(A) and only with respect to treatment by means of 
manual manipulation of the spine (to correct a subluxation) which he 
is legally authorized to perform the State or jurisdiction in which 
such treatment is provided.

    The statute, thus, limits chiropractic coverage to treatment of 
subluxation of the spine. Our interpretation of this language allows 
payment to chiropractors for chiropractic manual manipulation to 
correct a subluxation of the spine. Specifically, we provide for 
payment of the following codes listed in the chiropractic section of 
the CPT Manual.

98940--Chiropractic manipulation treatment (CMT), spinal, 1-2 regions
98941--CMT spinal, 3-4 regions
98942--CMT spinal, 5 regions

    (CPT includes an additional CPT code 98943--CMT extraspinal 1 or 
more regions for which Medicare does not cover as it is not a spinal 
manipulation.)
    Section 240.1.2 of the IOM 100-02 includes requirements that must 
be met to demonstrate that these services are necessary, using either 
x-ray or physical examination. In addition, it includes documentation 
requirements for initial and subsequent visits. These include a history 
and physical exam.
    According to the CPT manual, the codes for CMT describe services 
including a ``pre-manipulative patient assessment,'' which is 
consistent with the history and physical exam requirement discussed 
above. In determining the relative value assigned to the CMT services 
we include this pre-manipulative patient assessment.
    These chiropractic codes have a global surgery indicator of 0, 
meaning that we do not pay separately for services provided on the same 
day and related to the same service. The CPT manual notes that separate 
E/M services can be reported with a -25 modifier ``if the patient's 
condition requires a significant, separately identified E/M service 
above and beyond the usual preservice and postservice work associated 
with the procedures.'' It goes on to note that a separate diagnosis is 
not required.
    We currently do not allow payment for E/M services to chiropractors 
as we have not identified an E/M service that would be related to 
treatment of subluxation of the spine, which is the statutory 
requirement, beyond the preservice and postservice work associated with 
the CMT. We have believed that the assessments included in the CMT 
codes accurately capture the E/M that would typically be furnished by 
chiropractors in furnishing CMT services.
    Questions have arisen as to whether it would be appropriate to 
allow chiropractors to furnish and bill Medicare for E/M services, 
especially in light of the CPT language regarding the reporting of a 
separate E/M service on the same day using a -25 modifier. We would 
note that CPT codes are the HIPPA compliant code set. Their use is not 
limited to Medicare, and other insurers may not limit chiropractic 
coverage to manual manipulation to correct subluxation of the spine. We 
are seeking comment to assess whether there are situations in which E/M 
services that are not included in the CMT codes, but would meet the 
statutory requirements for chiropractor services, would be appropriate. 
We are not proposing to pay chiropractors for E/M services in CY 2014. 
If after receiving and analyzing public comment we determine that it 
would be appropriate to modify our policy with respect to chiropractors 
and E/M services, we would do so in future rulemaking.
    Specifically, we are seeking comments on the following questions:
     Are there situations where a chiropractor would furnish E/
M services that are with respect to treatment by means of manual 
manipulation of the spine (to correct a subluxation) that are not 
included within the definition of the CMT codes? Specifically, we are 
seeking information on the situations, the services that would be 
provided, and the E/M codes that would be billed.
     Would such a policy expand access to chiropractic services 
for Medicare beneficiaries? Are there other benefits that would accrue?
     If payment were to be allowed for E/M services, which 
codes would be appropriate to report chiropractic E/M services? For 
services provided in an office, would it be appropriate to allow 
billing of all five office E/M codes for new or existing patient as 
appropriate? Should one or a set of codes be created specifically for 
chiropractic E/M services similar to those for therapy evaluations or 
ophthalmic evaluations? With what frequency should chiropractors be 
allowed to bill E/M services?
     What would justify E/M services beyond those included in 
CMT codes? Should they be allowed on every treatment day or only at the 
onset of treatment?
     Are these E/M services ones that are already being 
furnished by another physician or other practitioner? If these are not 
services currently covered by Medicare, what volume could be expected?

III. Other Provisions of the Proposed Regulations

A. Medicare Coverage of Items and Services in FDA Investigational 
Device Exemption Clinical Studies--Revision of Medicare Coverage

1. Statutory Authority and Background
    This proposed rule would revise certain Medicare regulations 
currently codified in Sec.  405.201 through 405.214, and Sec.  
411.15(o) relating to coverage of the costs of routine items and 
services in Category A Investigational device exemption (IDE) studies 
and trials, and coverage of the costs of Category B, investigational 
devices and the costs of routine items and services in Category B 
investigational device exemption (IDE) studies and trials. It is based 
on section 1862(m) of the Act, which, among other things, authorizes 
the Secretary to establish criteria to ensure that studies and trials 
of Category A devices conform to appropriate scientific and ethical

[[Page 43343]]

standards. We are proposing to establish those criteria that ensure 
that studies and trials of Category A devices conform to appropriate 
scientific and ethical standards. We are also proposing, based on our 
rulemaking authority in section 1871 of the Act, to extend the same 
criteria proposed for Category A IDE studies and trials to Category B 
IDE studies and trials. Our proposed rules are necessary to carry out 
the administration of the insurance program under Title XVIII of the 
Act). Finally, to ensure that coverage of items and services in IDE 
studies and trials is uniform across Medicare administrative regions, 
we are proposing that IDE coverage decisions will be made by CMS 
centrally.
    On September 8, 1995, the FDA and CMS (then known as HCFA) entered 
into an interagency agreement in which the FDA agreed to categorize 
investigational device exemptions (IDEs) for purposes of Medicare 
coverage. The process identified in this interagency agreement is 
reflected in a September 19, 1995 final rule (60 FR 48417). The 
September 19, 1995 rule described two FDA device categories: (1) 
Category A devices were described as experimental/investigational 
devices; and (2) Category B devices were described as nonexperimental/
investigational devices.
a. Coverage of IDE--Costs of Routine Items, Services, and Devices
    The September 19, 1995 rule created a path to Medicare coverage 
under certain circumstances for Category B investigational devices and 
the costs of routine items and services in IDE studies and trials. The 
IDE coverage policy gave Medicare beneficiaries the opportunity to have 
earlier access to new medical devices, but these determinations were 
made by local Medicare contractors sometimes on a claim-by-claim basis. 
Although the current IDE policy was a path to earlier access to certain 
devices and the costs of routine items and services, we were also 
hearing that the IDE coverage approval process was burdensome and 
created national variability that made it difficult for study sponsors 
to conduct national IDE studies.
    As we evaluated the IDE review and approval process we heard and 
sought out feedback from stakeholders (for example, manufacturers, 
study sponsors, and hospitals). Most of the stakeholders told us that 
obtaining coverage of the device and the costs of routine items and 
services was inefficient; that each Medicare contractor has different 
processes to review IDE devices and studies. It also became apparent 
that the lack of centralization led to inconsistent IDE coverage across 
the Medicare contractors. These factors contributed to some reluctance 
to enroll Medicare beneficiaries in IDE studies.
    We also requested feedback from the Medicare local contractors. We 
found that the Medicare contractors reviewed pertinent available 
evidence and the FDA-approved IDE study protocol as factors in their 
decision-making process. Reviewing all of the information related to 
the IDE device and the FDA-approved study was a way to ensure that the 
device, as used, is reasonable and necessary for the Medicare 
beneficiary and furnished in a setting appropriate to the patient's 
medical needs. While each contractor's process was appropriate, they 
were in practice slightly different from contractor to contractor; and 
in most cases duplicative. Furthermore, we found that local Medicare 
contractors were applying varying levels of scrutiny in reviewing IDE 
devices and the costs of routine items and services within IDE studies. 
Most contractors reviewed IDE study protocols extensively, while other 
contractors may have reviewed them less extensively.
2. Proposals
    We are proposing a transparent, centralized review process that 
would be more efficient by reducing the burden for stakeholders 
interested in conducting nationwide trials. Once the IDE coverage 
process is centralized, there would be a single entity making the IDE 
coverage decision. This enhances administrative efficiency by 
eliminating the need for duplicative reviews by Medicare local 
contractors and the submission of duplicated coverage requests to 
different contractors by stakeholders. We believe that a centralized 
review process would not significantly reduce the number of IDE devices 
currently covered; but we are specifically requesting public to comment 
on this issue. Changing the review and decision of IDE coverage to a 
centralized review process in no way changes any beneficiary appeal 
rights.
a. Category A IDE Devices
    In 2003, section 731(b) of the Prescription Drug, Improvement, and 
Modernization Act (MMA) provided that the Secretary could not exclude 
coverage for certain routine care costs in IDE studies and trials of 
Category A devices, provided to beneficiaries under section 
1862(a)(1)(A) of the Act. A Category A IDE device is a device for which 
the initial questions of safety and effectiveness have not been 
resolved and the FDA is unsure whether the device type can be safe and 
effective. In addition, the Secretary was given the authority to ensure 
that any Category A IDE device study conform to appropriate scientific 
and ethical standards (section 1862(m)(1) of the Act). While the 
Congress gave the Secretary the authority to determine the scope of 
routine care costs, the Congress did not authorize or establish 
coverage for the Category A device itself. Therefore, we are not 
proposing any changes to coverage of the Category A IDE device. 
Category A devices would continue to be noncovered under section 
1862(a)(1)(A) of the Act.
    The Congress has expressly authorized the Secretary to establish 
criteria to ensure that any Category A IDE device study conform to 
appropriate scientific and ethical standards. (For more information, 
see section 1862(m)(2)(B) of the Act.) In the November 15, 2004 
conforming final rule (69 FR 66420), we finalized a regulatory 
provision at Sec.  405.207(b)(2) requiring Category A IDE devices be 
furnished in conjunction with an FDA-approved clinical study and that 
the study standards would be defined through the national coverage 
determination (NCD) process. Rather than establish standards through 
the NCD process, we would specify the study standards in this proposed 
rule. We believe the Congress gave the Secretary the authority to 
create appropriate scientific and ethical standards because of their 
importance in protecting for Medicare beneficiaries.
    The use of standards is essential to protecting Medicare study 
participants in category A trials. Studies that have high scientific 
and ethical standards lead to generalizable and reliable knowledge for 
Medicare providers, practitioners and beneficiaries.
    We believe that minimum standards are needed for IDE studies and 
trials for which Medicare coverage of devices or routine items and 
services is provided to ensure that Medicare beneficiaries who 
volunteer to participate in studies are protected and that the study 
design is appropriate to answer questions of importance to Medicare and 
its beneficiaries. Although an item or service may be considered 
``reasonable and necessary'' when used by a clinician for the benefit 
of an individual patient, it may not necessarily be reasonable and 
necessary when used in the context of an IDE study or trial. The use of 
such an item or service in an IDE study or trial may expose the study 
participants to increased risks that must be balanced by other factors, 
including the likelihood that the study would add important information 
to the body of

[[Page 43344]]

medical knowledge. There are numerous studies that may be considered 
``scientifically valid,'' but are of little benefit to patients or to 
the Medicare program.
    It is essential that CMS-approved IDE studies or trials serve the 
best interests of Medicare beneficiaries. We believe, in concert with 
other federal agencies, that appropriate study design is critical to 
ensure that not only are participants in research studies exposed to 
the least risk possible, but also to ensure that the results from the 
study would be useful in improving healthcare delivery. Scientifically 
and ethically flawed studies will not produce valid results, exposing 
Medicare beneficiaries to unnecessary risk; and wasting time and 
resources for all involved.
    We are proposing 13 standards that Category A IDE studies must meet 
in order for the costs of routine care items and services to be 
coverable. The first four and the seventh proposed standards embody 
ethical values. The fifth and sixth proposed standards were developed 
in response to reports of egregious misconduct in the past in endeavors 
to conduct clinical research by placing individuals at the risk of harm 
for the good of others. Both the independent review of protocols and 
informed consent by study participants are warranted to provide 
accountability to the public that the conduct of the study is not 
compromised by potential conflicts of interest on the part of 
investigators, and the study subject's autonomy is respected.
    The IDE study and trial standards that we are proposing are as 
follows:
     The principal purpose of the study is to test whether the 
item or service meaningfully improves health outcomes of patients who 
are represented by the Medicare-enrolled subjects.
     The rationale for the study is well supported by available 
scientific and medical information, or it is intended to clarify or 
establish the health outcomes of interventions already in common 
clinical use.
     The study results are not anticipated to unjustifiably 
duplicate existing knowledge.
     The study design is methodologically appropriate and the 
anticipated number of enrolled subjects is appropriate to answer the 
research question(s) being asked in the study.
     The study is sponsored by an organization or individual 
capable of completing it successfully.
     The study is in compliance with all applicable federal 
regulations concerning the protection of human subjects found at 45 CFR 
part 46.
     All aspects of the study are conducted according to 
appropriate standards of scientific integrity set by the International 
Committee of Medical Journal Editors.
     The study has a written protocol that clearly demonstrates 
adherence to the standards listed here as Medicare requirements.
     Where appropriate, the clinical research study is not 
designed to exclusively test toxicity or disease pathophysiology in 
healthy individuals. Trials of all medical technologies measuring 
therapeutic outcomes as one of the objectives may be exempt from this 
standard only if the disease or condition being studied is life 
threatening as defined in 21 CFR 312.81(a) and the patient has no other 
viable treatment options.
     The study is registered on the ClinicalTrials.gov Web site 
and/or the Registry of Patient Registries (RoPR) by the principal 
sponsor/investigator prior to the enrollment of the first study 
subject.
     The study protocol specifies the method and timing of 
public release of results on all pre-specified outcomes, including 
release of negative outcomes. The release should be hastened if the 
study is terminated early. The results must be made public within 24 
months of the end of data collection. If a report is planned to be 
published in a peer reviewed journal, then that initial release may be 
an abstract that meets the requirements of the International Committee 
of Medical Journal Editors (http://www.icmje.org). However, a full 
report of the outcomes must be made public no later than 3 years after 
the end of data collection.
     The study protocol explicitly discusses subpopulations 
affected by the item or service under investigation, particularly 
traditionally underrepresented groups in clinical studies, how the 
inclusion and exclusion criteria effect enrollment of these 
populations, and a plan for the retention and reporting of said 
populations in the study. If the inclusion and exclusion criteria are 
expected to have a negative effect on the recruitment or retention of 
underrepresented populations, the protocol must discuss why these 
criteria are necessary.
     The study protocol explicitly discusses how the results 
are or are not expected to be generalizable to subsections of the 
Medicare population to infer whether Medicare patients may benefit from 
the intervention. Separate discussions in the protocol may be necessary 
for populations eligible for Medicare due to age, disability or 
Medicaid eligibility.
    In proposed Sec.  405.212(a)(1) through (7), we would set forth 
scientific standards for IDE studies or trials in which providers, 
practitioners, suppliers or beneficiaries are requesting payment for 
items or services provided to Medicare beneficiaries participating in 
the IDE study or trial.
    While most studies are undertaken only after a detailed protocol 
has been developed, some are not. The protocol is the primary source of 
knowledge on the proposed design and management of the study. Without 
this document, reviewers and funding entities are unable to ascertain 
the quality and validity of the study. The exercise of committing to 
paper all the aspects of the study is crucial to ensuring that all 
potential concerns have been addressed. It is impossible to evaluate 
the adequacy of trial design without a written protocol. We do not 
propose to define the content of that protocol. Numerous federal 
agencies and other scientific entities have done that. However, in 
proposed Sec.  405.212(a)(8) we would specify that all IDE studies or 
trials must have a written protocol addressing the Medicare standards.
    In proposed Sec.  405.212(a)(9), we would specify the ``therapeutic 
intent'' requirement. We are proposing a standard that limits IDE 
studies to those that do not exclusively test toxicity or disease 
pathophysiology in healthy individuals but also have a therapeutic 
outcome. However, the study may exclusively test toxicity or disease 
pathophysiology, if the disease or condition being studied must be 
life-threatening as defined in 21 CFR 312.81(a) and the patient has no 
other viable treatment options or is severely debilitating as defined 
in 21 CFR 312.81(b). In proposed Sec.  405.212(a)(10), we would specify 
the standard that requires that IDE studies and trials that Medicare 
supports be registered on ClinicalTrials.gov site. The National 
Institutes of Health/National Library of Medicine (NIH/NLM) established 
a clinical trials registry (ClinicalTrials.gov) to meet the requirement 
of the 1997 Food and Drug Administration Modernization Act. After a 
thorough review of the NIH/NLM ClinicalTrials.gov Web site, we believe 
that all studies covered under this policy should be registered in this 
registry prior to enrollment of the first subject.
    Registration into ClinicalTrials.gov assures that beneficiaries 
would have pertinent information about and IDE study or trial Medicare 
supports--an essential component of transparency to

[[Page 43345]]

facilitate patient-provider informed decision-making. The World Health 
Organization and International Committee of Medical Journal Editors 
(WHO/ICMJE) data elements are the required data elements in this 
registry. Information about this registry may be obtained at http://www.clinicaltrials.gov/. We believe that registration serves the 
public's desire to obtain information about the studies that their 
Medicare premiums and tax dollars support.
    In proposed Sec.  405.212(a)(11), we would address the issue of 
dissemination of the IDE study or trial findings. We believe that it is 
imperative that the results of IDE studies and trials for which 
Medicare has made payment of any clinical costs be made available to 
the public regardless of the outcomes. If trial results are not 
published, they do not add to the clinical evidence base and cannot be 
used for medical decision-making. For this standard, we are suggesting 
that the study protocol provides a discussion of the publication/
dissemination plan of the study findings.
    In proposed Sec.  405.212(a)(12), we would focus on the issue of 
under-representation of specific demographic groups in U.S. clinical 
research studies. We want to support studies that allow Medicare 
beneficiaries to voluntarily participate in; and that add to the 
knowledge base about the use of the IDE device in the Medicare 
population, to ultimately improve the quality of care that Medicare 
beneficiaries receive. Well-designed studies have protocols that define 
the populations with the highest risk of having the disease or 
condition being studied. If data are not available that clearly 
demonstrate differences of clinical importance in subgroups defined by 
gender, race/ethnicity, age, or other relevant subpopulations, then the 
protocol must discuss the necessary steps to enroll appropriate numbers 
of these populations to ensure a valid analysis of the intervention 
effects. It is not our intention to require a specific enrollment of 
all subpopulations. However, it is, our intention that all covered 
study protocols address populations affected by the technology under 
investigation with special emphasis on minority and other groups that 
have experienced disparities in health care due to a lack of quality 
research data. If convincing evidence indicates that no differences 
exist between identified subgroups, that information should be noted in 
the protocol.
    In proposed Sec.  405.212(a)(13), we would specify the standard 
that requires that an IDE study or trial protocol explicitly discuss 
how the results are or are not expected to be generalizable to 
subsections of the Medicare population and to infer whether Medicare 
patients may benefit from the intervention. More often than not the 
published evidence does not include the Medicare population. We believe 
that unless there are clear data documenting that no important 
differences exist between the Medicare beneficiaries and the population 
studied, the study must discuss the enrollment of appropriate numbers 
representative of the Medicare population to ensure that the analysis 
of the results of the intervention may be applicable to Medicare 
beneficiaries.
    In Sec.  405.211, we are proposing that if the following two 
characteristics are also included met in addition to the criteria 
listed in Sec.  405.212(a)(1) through (a)(13), we would automatically 
cover the costs of routine items and services in the Category A study 
or trial, and the costs of the investigation device and the routine 
items and services in a Category B study or trial as follows:
     The study is a pivotal study.
     The study has is a superiority study design.
    In Sec.  405.212, we propose a process by which Category A IDE 
studies will qualify for Medicare coverage of routine items and 
services provided in the studies. We propose that any interested party 
who seeks coverage in an IDE study may send us a request letter that 
describes the scope and nature of the IDE study, discussing each of the 
15 standards in this policy.
b. Category B IDE Devices
    Under our regulations, a nonexperimental/investigational (Category 
B) device was described as a device for which the underlying questions 
of safety and effectiveness has been resolved. In the absence of a NCD, 
Medicare coverage for Category B devices has been decided by Medicare 
contractors, subject to review under the claims review process at Sec.  
405.211(b). If the Category B device was covered, Medicare also covered 
the costs of items and services specific to the use of the device and 
furnished in conjunction with an FDA-approved clinical study.
    Beyond Category A IDE studies, we believe that all investigational 
device studies wherein Medicare coverage is sought should conform to 
rigorous scientific and ethical standards. We believe that regardless 
of whether the device is categorized as an A or B the IDE study should 
meet the same scientific and ethical standards. Thus, we are proposing 
to require that Category B IDE trials must meet the same scientific and 
ethical standards.
c. Review and Approval (Sec.  405.212)
    We are proposing a centralized IDE coverage review process for 
Category A and Category B IDEs. We believe the criteria Sec.  
405.212(a)(1) through (a)(13) are integral to coverage in any study 
that is Medicare-approved because it ensures that the IDE device is 
being furnished in a study with high levels of scientific and ethical 
integrity.
    In addition, we propose to cover Category B IDE devices and the 
costs of routine care items and services furnished in an IDE study that 
meets the criteria proposed Sec.  405.212(a) and the following 
additional criteria:
     The study is a pivotal study.
     The study has is a superiority study design.
    As we review the IDE studies, we would look for reasonable 
assurance that enrolled Medicare beneficiary subjects will receive the 
best possible care and are protected when they are subjects in these 
IDE studies. The pivotal study and superiority study design criteria 
furnish assurances that the study results will be informative for 
beneficiary choices and medical decision-making in the non-trial 
settings where most care is actually furnished. We believe that their 
decisions are facilitated by trial designs that allow them to compare 
their options and determine which one is superior for the beneficiary. 
Non-inferiority trial designs (in contrast to superiority designs) only 
support more limited and thus less useful conclusions, that is, that 
the investigated device is no worse than the comparator treatment by 
some pre-specified margin.
    Supporting materials may be submitted. The request would include 
the following information:
     The FDA approval letter.
     IDE study protocol.
     IRB approval letter(s).
     The ClinicalTrials.gov identifier
    We propose that requests should be submitted via email to 
clinicalstudynotification@cms.hhs.gov or via hard copy to the following 
address:
    Centers for Medicare & Medicaid Services, Center for Clinical 
Standards & Quality, Director, Coverage and Analysis Group, ATTN: 
Clinical Study Certification, Mailstop: S1-02-01, 7500 Security Blvd., 
Baltimore, MD 21244.
d. Notification
    We propose that we would notify beneficiaries, providers, and 
practitioners of the IDE studies of all IDE devices eligible for 
coverage by

[[Page 43346]]

posting the IDE study title and ClinicalTrials.gov registry number on 
our Web site and publishing a list in the Federal Register.
e. Additional/Conforming Changes
    In addition to the proposed changes in Sec.  405.211 and Sec.  
405.212, we note the following changes:
     In Sec.  405.201(b), Definitions, we would be revised the 
section by removing, revising and adding definitions. Some of the 
definitions that we are proposing to remove comprise factors that will 
allow stakeholders to understand the clinical study criteria for items 
and services furnished in an IDE study including the Category A and B 
device itself. Therefore, we proposing the following changes
    ++ Removal of the following definitions:
    ++ Class I, II, and III devices which refers to the different 
designations of FDA devices. These designations are not relevant to CMS 
coverage of an IDE device and routine items and services in an IDE 
study.
    ++ Post-market approval refers to a marketing application for a 
Class III device. Like class this is not relevant to whether CMS may 
cover an IDE device or routine items or services in an IDE study.
    ++ Adding the following definitions:

--Clinicaltrials.gov which refers to the National Institutes of 
Health's National Library of Medicine's online registry and results 
database of publicly and privately supported clinical studies of human 
participants conducted around the world. After a thorough review of the 
NIH/NLM ClinicalTrials.gov Web site, we believe that all studies 
covered under this policy should be registered in this registry. This 
is common practice in the research community. Studies and trials are 
now transparent--the study sites, investigator names, source of 
support, description of the study methods, and study results are open 
to the public, including Medicare beneficiaries. We believe that 
registration serves the public's desire to obtain information about the 
studies they may want to participate. This is a benefit to 
beneficiaries and their providers participating in IDE studies.
--Pivotal studies or trials, which refer to clinical investigations 
designed to collect definitive evidence of the safety and effectiveness 
of a device for a specified intended use, typically in a statistically 
justified number of subjects. It may or may not be preceded by an early 
and/or a traditional feasibility study or trial.
--Routine care items and services, which refer to items and services 
that are otherwise generally available to Medicare beneficiaries (that 
is, there exists a benefit category, it is not statutorily excluded, 
and there is not a national noncoverage decision) that are furnished in 
either the experimental or the control arms of a clinical trial and 
that would be otherwise furnished even if the beneficiary were not 
enrolled in a clinical trial. We note that noncoverage of a routine 
care item or services under an IDE trial in no way restricts a 
beneficiary's access to guaranteed Medicare benefits outside of an IDE 
trial.
--Superiority studies refer to studies or trials that are intended to 
demonstrate at some pre-specified level of confidence that the effect 
of an investigational treatment is superior to that of an active 
control by more than a pre-specified margin.
    We are proposing the additions of the previously discussed 
definitions because we would use these factors in our decision to cover 
an investigational device and the costs of routine items and services 
in an IDE study.

     We are proposing to modify the following definitions:
    ++ The term Category A which was developed in cooperation with the 
FDA for the purposes of distinguishing those FDA classes under which 
investigational and non-investigational devices fall. A Category A IDE 
device is considered an experimental device; and therefore, deemed 
noncovered by Medicare standards.
    ++ Category A device would be defined as a device for which 
``absolute risk'' of the device type has not been established (that is, 
the question of safety and effectiveness have not been resolved) and 
the FDA is unsure whether the device type can be safe and effective.
    ++ The term Category B which was developed in cooperation with the 
FDA for the purposes of distinguishing those FDA classes under which 
investigational and non-investigational devices fall. FDA assigns each 
device with an FDA-approved IDE to one of two categories. We propose to 
revise the definition of Category B (Nonexperimental/investigational) 
device to mean a device for which the incremental risk is the primary 
risk in question (that is, initial questions of safety and 
effectiveness of that device type have been resolved), or it is known 
that the device type can be safe and effective because, for example, 
other manufacturers have obtained FDA approval for that device type.
    ++ Contractors mean Medicare Administrative Contractors and other 
entities that contract with CMS to review and adjudicate claims for 
Medicare items and services. Currently, this is the definition refers 
to CMS's local Medicare Contractors. We propose to update the current 
definition in order for the definition to be accurate and consistent 
Agency-wide.
    ++ IDE stands for investigational device exemption. An FDA-approved 
IDE application permits a device, which would otherwise be subject to 
marketing approval or clearance, to be shipped lawfully for the purpose 
of conducting a clinical study in accordance with 21 U.S.C. 360j(g) and 
21 CFR parts 812 and 813.
    In Sec.  405.203, FDA categorization of investigational devices, we 
are not proposing any changes. We have found that the interagency 
agreement between the FDA and CMS that supports the FDA categorization 
of devices to one of two categories for investigational purpose is 
widely accepted among device manufacturers. Therefore, to avoid future 
confusion by changing the categorization, we believe that maintaining 
this process continues to support the development of new health 
technologies and tools that practitioners and beneficiaries have 
access. It should be noted that neither the determination nor any re-
evaluation made by FDA, nor the review determination made by CMS under 
Sec.  405.211, would be considered coverage determinations that 
implicate the Part 426 NCD/LCD appeals process.
    In Sec.  405.207--
     In paragraph (a), we are not proposing any changes to our 
current noncoverage of Category A IDE devices. As stated previously, we 
continue to find that because initial questions of safety and 
effectiveness have not been resolved and the FDA is unsure of whether 
the device type can be safe and effective, experimental/investigational 
(Category A) devices are not reasonable and necessary under section 
1862(a)(1)(A) of the Act; and
     Paragraph (b) currently states that all Category A IDE 
studies and trials must meet the criteria established through the NCD 
process. Because we are proposing scientific and ethical standards, we 
no longer need to establish the IDE study criteria through the NCD 
process; and therefore, we are proposing to delete the NCD process 
requirement. We are also proposing to remove the following statement 
from Sec.  405.207(b)(2) that states ``If the trial is initiated before 
January 1, 2010, the device must be determined as intended for use in 
the diagnosis, monitoring or treatment of an immediately life-

[[Page 43347]]

threatening disease or condition'' because it is no longer applicable. 
We are not proposing changes to Sec.  405.207(b)(1) or (b)(3).
    In Sec. Sec.  405.205, 405.207, 405.209, and 405.211, we propose to 
retain the current explanation of coverage and payment for non-
experimental/investigational devices.
    For Sec.  405.213, Re-evaluation of a device categorization, we are 
not proposing any changes to this section because we believe that 
maintaining this process continues to support the development of new 
health technologies and tools that practitioners and beneficiaries have 
access.
    We are proposing to retain the protections in Sec.  405.215, 
Confidential Commercial and Trade Secret Information, without 
modification. We note that section 502(c) of the Act broadly prohibits 
the disclosure of trade secret and confidential commercial or financial 
information--information exempt from public disclosure by the Freedom 
of Information Act (FOIA) 5 U.S.C. 552(b)(4) outside the Department. 
This prohibition is found in the devices and regulatory inspections 
provisions of the Act, and is not limited to device-related 
information. This disclosure prohibition also applies to information 
reported or otherwise obtained by the Department during inspection 
activities and other activities. This prohibition is interpreted to 
allow information sharing within the U.S. Department of Health and 
Human Services only.
    In Sec.  411.15(o)(2), Experimental or investigational device 
exclusions, we propose to revise the requirement to specify that the 
exclusions under this section include experimental or investigational 
devices, except for certain devices furnished in accordance with the 
CMS IDE study and trial standards established in Sec.  405.21l. We are 
proposing this change to be consistent with the IDE study 
characteristics.

B. Ultrasound Screening for Abdominal Aortic Aneurysms

1. Background and Statutory Authority
    Section 1861(s)(2)(AA) of the Act authorizes Medicare coverage 
under Part B of ultrasound screening for abdominal aortic aneurysms 
(``AAA screening''), as defined in section 1861(bbb) of the Act. Our 
implementing regulations for AAA screening are at Sec.  410.19. AAA 
screening is covered for a beneficiary that meets certain criteria 
including that he or she must receive a referral during the initial 
preventive physical examination (IPPE) and has not previously had an 
AAA screening covered under the Medicare program. The IPPE, as 
described in section 1861(ww) of the Act (and regulations at Sec.  
410.16), includes a time restriction and must be furnished not more 
than one year after the effective date of the beneficiary's first Part 
B coverage period (see section 1862(a)(1)(K) of the Act). This time 
limitation for the IPPE effectively reduces a Medicare beneficiary's 
ability to obtain a referral for AAA screening.
    Section 1834(n) of the Act, added by section 4105 of the Affordable 
Care Act, grants the Secretary the discretion and authority to modify 
coverage of certain preventive services identified in section 
1861(ddd)(3) of the Act, which in turn cross-references section 
1861(ww)(2) of the Act (including AAA screening at section 
1861(ww)(2)(L). The Secretary may modify coverage to the extent that 
such modification is consistent with the recommendations of the United 
States Preventive Services Task Force (USPSTF) per section 
1834(n)(1)(A) of the Act. In 2005, the USPSTF recommended ``one-time 
screening for [AAA] by ultrasonography in men ages 65 through 75 who 
have ever smoked. (Grade: B Recommendation)'' (Screening for Abdominal 
Aortic Aneurysm: Recommendation Statement. http://www.uspreventiveservicestaskforce.org/uspstf05/aaascr/aaars.htm). The 
USPSTF recommendation does not include a time limit with respect to the 
referral for this test.
2. Provisions of the Proposed Regulations
    We are proposing to exercise our discretion and authority under 
section 1834(n) of the Act to modify coverage of AAA screening 
consistent with the recommendations of the USPSTF to eliminate the one-
year time limit with respect to the referral for this service. This 
proposed modification would allow coverage of AAA screening for 
eligible beneficiaries without requiring them to receive a referral as 
part of the IPPE. Specifically for purposes of coverage of AAA 
screening, we propose to modify the definition of ``eligible 
beneficiary'' in Sec.  410.19(a) by removing paragraph (a)(1), of this 
definition, and redesignating paragraphs (a)(2) and (a)(3) of this 
definition as paragraphs (a)(1) and (a)(2), respectively.
    The IPPE is a one-time benefit available to beneficiaries under 
Part B that receive the IPPE not more than one year after the effective 
date of the beneficiary's first Medicare Part B coverage period. Many 
beneficiaries were either not eligible to receive an IPPE (which did 
not become effective until January 1, 2005) or may not have taken 
advantage of the IPPE when they were eligible, limiting access to AAA 
screening. We believe that our proposed modification is consistent with 
current USPSTF recommendations for one-time screening and allows for 
expanded access to this important preventive service. We invite public 
comment on this proposal.

C. Colorectal Cancer Screening: Modification to Coverage of Screening 
Fecal Occult Blood Tests

1. Background and Statutory Authority
    Sections 1861(s)(2)(R) and 1861(pp)(1) of the Act authorize 
Medicare coverage of colorectal cancer screening. The statute 
authorizes coverage of screening fecal occult blood tests (FOBT), 
screening flexible sigmoidoscopies, screening colonoscopies, and other 
tests determined to be appropriate, subject to certain frequency and 
payment limits. Section 410.37(b) (condition for coverage of screening 
FOBT) specifies that Medicare Part B pays for screening FOBT if ordered 
in writing by the beneficiary's attending physician. For purposes of 
Sec.  410.37, ``attending physician'' is defined as ``a doctor of 
medicine or osteopathy (as defined in section 1861(r)(1) of the Act) 
who is fully knowledgeable about the beneficiary's medical condition, 
and who would be responsible using the results of any examination 
performed in the overall management of the beneficiary's specific 
medical problem.''
    The coverage provisions for FOBT screening were established in 1997 
and effective on January 1, 1998 (62 FR 59048, October 31, 1997). In 
the preamble to that final rule, we stated that the requirement for a 
written order from the attending physician was intended to make certain 
that beneficiaries receive appropriate preventive counseling about the 
implications and possible results of having these examinations 
performed (62 FR 59081).
    Since then, Medicare coverage of preventive services has expanded 
to include, among other things, coverage of an annual wellness visit 
(as defined in Sec.  410.15). The annual wellness visit includes 
provisions for furnishing personalized health advice and appropriate 
referrals. In addition to physicians, the annual wellness visit can be 
furnished by certain nonphysician practitioners, including physician 
assistants, nurse practitioners, and clinical nurse specialists.
    Additionally, Sec.  410.32 provides coverage and payment rules for 
diagnostic x-ray tests, diagnostic laboratory tests, and other 
diagnostic

[[Page 43348]]

tests. Section 410.32(a)(2) states: ``Nonphysician practitioners (that 
is, clinical nurse specialists, clinical psychologists, clinical social 
workers, nurse-midwives, nurse practitioners, and physician assistants) 
who furnish services that would be physician services if furnished by a 
physician, and who are operating within the scope of their authority 
under State law and within the scope of their Medicare statutory 
benefit, may be treated the same as physicians treating beneficiaries 
for the purpose of this paragraph.''
2. Proposed Revisions
    We are proposing to revise Sec.  410.37(b), ``Condition for 
coverage of screening fecal-occult blood tests,'' to allow an attending 
physician, physician assistant, nurse practitioner, or clinical nurse 
specialist to furnish written orders for screening FOBT. These proposed 
modifications would allow for expanded coverage and access to screening 
FOBT, particularly in rural areas. We invite public comment on this 
proposal. In addition, we are seeking public comment regarding whether 
a practitioner permitted to order a screening FOBT must be the 
beneficiary's attending practitioner as described earlier.

D. Ambulance Fee Schedule

1. Amendment to Section 1834(l)(13) of the Act
    Section 146(a) of the Medicare Improvements for Patients and 
Providers Act of 2008 (Pub. L. 110-275, enacted on July 15, 2008) 
(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 that 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 that 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 Affordable Care Act further 
amended 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 
applied to covered ground ambulance transports furnished on or after 
January 1, 2010, and before January 1, 2011. In the CY 2011 PFS final 
rule with comment period (75 FR 73385, 73386, 73625), we revised Sec.  
414.610(c)(1)(ii) to conform the regulations to this statutory 
requirement.
    Section 106(a) of the Medicare and Medicaid Extenders Act of 2010 
(Pub. L.111-309, enacted December 15, 2010) (MMEA) again amended 
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 
applied to covered ground ambulance transports furnished on or after 
January 1, 2011, and before January 1, 2012. In the CY 2012 End-Stage 
Renal Disease Prospective Payment System (ESRD PPS) final rule (76 FR 
70228, 70284 through 70285, and 70315), we revised Sec.  
414.610(c)(1)(ii) to conform the regulations to this statutory 
requirement.
    Section 306(a) of the Temporary Payroll Tax Cut Continuation Act of 
2011 (TPTCA) (Pub. L. 112-78, enacted on December 23, 2011) amended 
section 1834(l)(13)(A) of the Act to extend the payment add-ons 
described above through February 29, 2012; and section 3007(a) of the 
Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96, 
enacted on February 22, 2012) (MCTRJCA) further amended section 
1834(l)(13)(A) of the Act to extend these payment add-ons through 
December 31, 2012. Thus, these payment add-ons also applied to covered 
ground ambulance transports furnished on or after January 1, 2012 and 
before January 1, 2013. In the CY 2013 PFS final rule (77 FR 69139, 
69368), we revised Sec.  414.610(c)(1)(ii) to conform the regulations 
to this statutory requirement.
    Subsequently, section 604(a) of the ATRA amended section 
1834(l)(13)(A) of the Act to extend the payment add-ons described above 
through December 31, 2013. Thus, these payment add-ons also apply to 
covered ground ambulance transports furnished on or after January 1, 
2013 and before January 1, 2014. Thus, we propose to revise Sec.  
414.610(c)(1)(ii) 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.
2. Amendment to Section 146(b)(1) of MIPPA
    Section 146(b)(1) of the MIPPA amended the designation of certain 
rural areas for payment of air ambulance services. This section 
originally 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, must continue to 
be 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 Affordable Care Act amended 
section 146(b)(1) of MIPPA to extend this provision for an additional 
year, through December 31, 2010. In the CY 2011 PFS final rule (75 FR 
73385, 73386, and 73625 through 73626), we revised Sec.  414.610(h) to 
conform the regulations to this statutory requirement.
    Section 106(b) of the MMEA amended section 146(b)(1) of MIPPA to 
extend this provision again through December 31, 2011. In the CY 2012 
ESRD PPS final rule (76 FR 70284, 70285, and 70315), we revised Sec.  
414.610(h) to conform the regulations to this statutory requirement.
    Subsequently, section 306(b) of the TPTCCA amended section 
146(b)(1) of MIPPA to extend this provision through February 29, 2012; 
and section 3007(b) of the MCTRJCA further amended section 146(b)(1) of 
MIPPA to extend this provision through December 31, 2012. In the CY 
2013 PFS final rule (77 FR 69139, 69140, and 69368), we revised Sec.  
414.610(h) to conform the regulations to this statutory requirement.
    Subsequently, section 604(b) of the ATRA amended section 146(b)(1) 
of MIPPA to extend this provision through June 30, 2013. Thus, we 
propose to revise 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. 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 through June 30, 2013.
3. Amendment to Section 1834(l)(12) of the Act
    Section 414 of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 (Pub. L. 108-

[[Page 43349]]

173, enacted on December 8, 2003) (MMA) added section 1834(l)(12) to 
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 Affordable Care Act amended 
section 1834(l)(12)(A) of the Act to extend this rural bonus for an 
additional year through December 31, 2010. In the CY 2011 PFS final 
rule with comment period (75 FR 73385, 73386 and 73625), we revised 
Sec.  414.610(c)(5)(ii) to conform the regulations to this statutory 
requirement.
    Section 106(c) of the MMEA amended section 1834(l)(12)(A) of the 
Act to extend the rural bonus described above for an additional year, 
through December 31, 2011. Therefore, in the CY 2012 ESRD PPS final 
rule (76 FR 70284, 70285 and 70315), we revised Sec.  414.610(c)(5)(ii) 
to conform the regulations to this statutory requirement.
    Section 306(c) of the TPTCCA amended section 1834(l)(12)(A) of the 
Act to extend this rural bonus through February 29, 2012; and section 
3007(c) of the MCTRJCA further amended section 1834(l)(12)(A) of the 
Act to extend this rural bonus through December 31, 2012. In the CY 
2013 PFS final rule with comment period (77 FR 69140, 69368), we 
revised Sec.  414.610(c)(5)(ii) to conform the regulations to these 
statutory requirements.
    Subsequently, section 604(c) of the ATRA amended section 
1834(l)(12)(A) of the Act to extend this rural bonus through December 
31, 2013. Therefore, we are continuing to apply the 22.6 percent 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, 
2013 and before January 1, 2014 where transportation originates in a 
qualified rural area. Accordingly, we propose to revise Sec.  
414.610(c)(5)(ii) to conform the regulations to this statutory 
requirement.
    This rural bonus is sometimes referred to as the ``Super Rural 
Bonus'' and the qualified rural areas (also known as ``super rural'' 
areas) are identified during the claims adjudicative process via the 
use of a data field included on the CMS-supplied ZIP Code File.
    This statutory requirement is self-implementing. This provision 
requires a one-year extension of the rural bonus (which was previously 
established by the Secretary) through December 31, 2013, and does not 
require any substantive exercise of discretion on the part of the 
Secretary.
4. Addition of Section 1834(l)(15) of the Act
    Section 637 of the ATRA, which added section 1834(l)(15) of the 
Act, specifies that the fee schedule amount otherwise applicable under 
the preceding provisions of section 1834(l) of the Act shall be reduced 
by 10 percent for ambulance services furnished on or after October 1, 
2013, consisting of non-emergency basic life support (BLS) services 
involving transport of an individual with end-stage renal disease for 
renal dialysis services (as described in section 1881(b)(14)(B) of the 
Act) furnished other than on an emergency basis by a provider of 
services or a renal dialysis facility. We are proposing to revise Sec.  
414.610 by adding paragraph (c)(8) 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 decrease, and does not require any substantive exercise of 
discretion on the part of the Secretary. Accordingly, for the ambulance 
services described in section 637 of the ATRA furnished on or after 
October 1, 2013, the fee schedule amount otherwise applicable (both 
base rate and mileage) will be reduced by 10 percent. For further 
information regarding application of this mandated rate decrease, 
please see CR 8269.
5. Studies of Ambulance Costs
    Section 604(d)(1) of the ATRA provides that the Secretary shall 
conduct the following studies:
    (A) A study that analyzes data on existing cost reports for 
ambulance services furnished by hospitals and critical access 
hospitals, including variation by characteristics of such providers of 
services, with a Report to Congress on such study due no later than 
October 1, 2013; and
    (B) A study of the feasibility of obtaining cost data on a periodic 
basis from all ambulance providers of services and suppliers for 
potential use in examining the appropriateness of the Medicare add-on 
payments for ground ambulance services furnished under the fee schedule 
under section 1834(l) of the Act and in preparing for future reform of 
such payment system, with a Report to Congress due on such study no 
later than July 1, 2014.
    Further, in conducting the study under paragraph (B) above, section 
604(d)(2) of the ATRA directs the Secretary to:
     Consult with industry on the design of such cost 
collection efforts;
     Explore the use of cost surveys and cost reports to 
collect appropriate cost data and the periodicity of such cost data 
collection;
     Examine the feasibility of developing a standard cost 
reporting tool for providers of services and suppliers of ground 
ambulance services; and
     Examine the ability to furnish such cost data by various 
types of ambulance providers of services and suppliers, especially by 
rural and super-rural providers of services and suppliers.
    As noted above, in conducting the study under section 604(d)(1) of 
the ATRA described in paragraph (B) above, the Secretary is required to 
consult with industry on the design of such cost collection efforts 
(see section 604(d)(2)(A) of the ATRA). We are using this proposed rule 
as the instrument to collect information, comments, and ideas from the 
industry on the design of such cost collection efforts as described 
above, and on the feasibility of obtaining cost data on a periodic 
basis from all ambulance providers of services and suppliers for 
potential use in examining the appropriateness of the Medicare add-on 
payments for ground ambulance services furnished under the fee schedule 
under section 1834(l) of the Act and in preparing for future reform of 
such payment system. We therefore invite public comment on these issues

[[Page 43350]]

as part of the study we are conducting under section 604(d)(1)(B) of 
the ATRA.

E. Proposals Regarding the Clinical Laboratory Fee Schedule

1. Background on the Clinical Laboratory Fee Schedule
    Under Medicare Part B, clinical diagnostic laboratory tests 
furnished on or after July 1, 1984, in a physician's office, by an 
independent laboratory, or by a hospital laboratory for its outpatients 
and nonpatients currently are paid on the basis of the Clinical 
Laboratory Fee Schedule (CLFS), with limited exceptions. For each 
Healthcare Common Procedure Coding System (HCPCS) code, payment is the 
lesser of:
     The amount of charges billed for the test;
     The fee schedule amount for the State or a local 
geographic area; or
     A national limitation amount (NLA) (section 
1833(a)(1)(D)(i), (a)(2)(D)(i), (h)(1), and (h)(4)(B) of the Act). The 
NLA for a clinical diagnostic laboratory test performed after December 
31, 1997 is equal to 74 percent of the median of all fee schedules 
established for that test for that laboratory setting or 100 percent of 
such median in the case of a clinical diagnostic laboratory test 
performed on or after January 1, 2001, that the Secretary determines is 
a new test for which no limitation amount has previously been 
established (section 1833(h)(4)(B)(viii) of the Act).
    Currently, we update the CLFS amounts annually to reflect changes 
in the Consumer Price Index for all Urban Consumers (U.S. city average) 
(CPI-U) and apply a multi-factor productivity adjustment (see section 
1833(h)(2)(A) of the Act). In the past, we also implemented other 
adjustments or did not apply the change in the CPI-U to the CLFS in 
accordance with statutory mandates. For example, under section 
1833(h)(2)(A)(i) of the Act, we were required to subtract 0.5 
percentage points from the CPI-U adjustment for 2009 and 2010. We do 
not otherwise update or change the CLFS.
    For any clinical diagnostic laboratory tests where a new or 
substantially revised HCPCS code is assigned on or after January 1, 
2005, we determine the basis for, and amount of, payment for these 
clinical diagnostic laboratory tests (see section 1833(h)(8) of the Act 
and 42 CFR 414.500 through 414.509). Once established, however, in most 
cases, we only have the opportunity to reconsider the basis and/or 
amount of payment for new tests for one additional year after the basis 
or payment is initially set. Once the reconsideration process is 
complete, payment is not further adjusted (except by a change in the 
CPI-U, the productivity adjustment, and any other adjustments required 
by statute), regardless of any shift in the actual costs incurred to 
perform the test.
    This lack of an established mechanism to adjust payment amounts is 
unique among the Medicare payment schedules and systems. Generally, fee 
schedules and prospective payment systems are evaluated each year to 
reflect the changing mix of services provided under that system or 
schedule and then the system or schedule is adjusted to maintain budget 
neutrality. Since there is currently no process to make such 
adjustments for the CLFS, payment amounts are essentially locked in 
place and do not change when the cost of the test changes. As discussed 
below, in this proposed rule, we are proposing to implement a process 
to adjust payment amounts based on changes in technology.
2. Proposals Regarding Technological Changes Under Section 
1833(h)(2)(A)(i) of the Act
a. Background on Technological Changes
    There has been a significant amount of technological change in the 
clinical laboratory area since the implementation of the CLFS, which 
has resulted in the increased use of point-of-care testing, brand new 
tests being developed, and the proliferation of laboratory-developed 
tests. The Institute of Medicine (IOM) dedicated a chapter of its 2000 
report ``Medicare Laboratory Payment Policy: Now and in the Future'' to 
discussing trends in laboratory technology. The report noted rapid and 
dramatic innovation in the laboratory sector since the 1980s and 
remarkable growth in the range and complexity of available tests. The 
IOM concluded that the introduction of new tests, advances in equipment 
and testing techniques, and the proliferation of advanced information 
technology have all made testing more efficient and automated.
    Technology has enabled a significant site-of-service shift for many 
laboratory tests from the laboratory environment to the point of health 
care delivery. This point-of-care testing has increased since the 
1980s, when this type of testing first became available, mainly due to 
changes in technology which resulted in smaller, cheaper, and more 
portable test kits that are simple to use. For example, drug abuse 
testing has become readily available at the point of care. Point-of-
care testing can be performed in various institutional and community 
settings but the main objective of such testing is to produce a result 
quickly, at the place where the patient is receiving care, such as at a 
physician's office or at a hospital bedside, to facilitate decisions 
about appropriate treatment.
    There are also brand new technologies that did not exist when the 
CLFS was established, most notably genetic and genomic tests. This area 
of medicine evolved from the work of the Human Genome Project and 
subsequent research and development by both the federal government and 
private firms. The cost of sequencing a genome has dropped dramatically 
since the early inception of this technology in 2001 from more than $95 
million per genome to approximately $5,700 in early 2013 (http://www.genome.gov/pages/der/sequencing_cost.xlsx). Early tests in this 
area were less likely to be covered by Medicare because they were 
either screening tests or tests for conditions found in the pediatric 
population. As this area has expanded over the past several decades, 
Medicare has taken on a more prominent role in payment for these 
services (see 77 FR 68994 through 69002 for a thorough discussion of 
how Medicare pays for these tests). We expect the number of codes and 
tests in this area to continue to grow as the technology evolves and 
more tests become available in the areas of pharmacogenomics, 
personalized and predictive medicine, and companion diagnostics.
    We also note the growth in laboratory-developed tests (LDTs) over 
the years. These proprietary tests are developed by laboratories, which 
then offer the service of providing the test. Some of the most advanced 
laboratory tests currently being performed are LDTs which use 
sophisticated proprietary technology. Many LDTs do not have their own 
codes; instead, they are billed using unlisted codes for which 
contractors establish a payment amount. Other LDTs were billed to 
Medicare using ``stacking codes,'' where a laboratory submits a code 
for each step of the testing process; however, these ``stacking codes'' 
were eliminated at the end of 2012 for molecular pathology tests and 
replaced with 114 new test-specific codes. These payment processes 
provide us with limited information about the technology used to 
perform these tests. However, we know that the number of LDTs has been 
growing over the years and multiple laboratories have developed ways to 
perform the same test. Further, our recent experience with using a gap 
filling methodology to price molecular pathology tests, which are often 
LDTs, has shown that the costs of performing these tests have decreased 
since contractors initially established

[[Page 43351]]

payment amounts for the tests, or compared to the code stack previously 
billed. Our experience with gap filling molecular pathology tests has 
also shown that there is wide variation in the cost of performing the 
same test by different laboratories.
    We believe that, given the technological changes that have occurred 
in the laboratory industry over the past several decades and the growth 
in the number of clinical laboratory tests (CMS has added approximately 
800 new test codes to the CLFS since its inception), it would be 
appropriate to establish a process to reconsider payment amounts on the 
CLFS to take into account increased efficiency, changes in laboratory 
personnel and supplies necessary to conduct a test, changes in sites of 
service, and other changes driven by technological advances.
    Section 1833(h)(2)(A)(i) of the Act requires the Secretary to set 
the fee schedules for clinical laboratory tests ``for the 12-month 
period beginning July 1, 1984, adjusted annually (to become effective 
on January 1 of each year) by, subject to [the multi-factor 
productivity adjustment], [the change in the CPI-U] and subject to such 
other adjustments as the Secretary determines are justified by 
technological changes'' (emphasis added). Under this authority, we are 
proposing a process under which we will systematically reexamine the 
payment amounts established under the CLFS to determine if changes in 
technology for the delivery of that service warrant an adjustment to 
the payment amount.
b. Proposed Definition of Technological Changes
    We are proposing to define technological changes as changes to the 
tools, machines, supplies, labor, instruments, skills, techniques, and 
devices by which laboratory tests are produced and used. Changes in 
technology could result in changes to, among other things, the 
resources required to perform the test (such as the type, volume, or 
number of supplies or reagents required), the laboratory personnel 
required to perform the test, and/or the frequency of testing, volume 
of testing, or site of service (for example, a shift in service site 
from a specialty laboratory to a physician's office). We believe this 
broad definition would capture all of the technological changes that 
could impact the resource inputs for various tests on the CLFS. As 
discussed below, the technological changes for a specific test would be 
discussed in the proposed rule in which we are proposing to adjust the 
payment amount for that test, and we would seek public comment on our 
determination of the technological changes and the payment adjustment.
c. Proposed Process
    We are proposing that, each year, we would review certain codes on 
the CLFS, as described in the next section, to determine whether we 
believe that payment for these codes should be adjusted due to 
technological changes. For those codes where we determine that payment 
adjustments should be made, beginning with the CY 2015 PFS proposed 
rule, we would identify the test code, discuss how it has been impacted 
by technological changes, and propose an associated adjustment to the 
payment amount for the test code as appropriate to reflect the impact 
of such technological changes.
    We believe such adjustments could be made both to increase fee 
schedule amounts (for example, in situations where new high cost 
technologies are employed), and to provide for reductions in existing 
amounts (for example in situations where technology reduces costs 
through increased efficiencies). We expect that most payment amounts 
will decrease due to the changes in technology that have occurred over 
the years since the payment amounts were established and the general 
downward trend of costs once technology has had an opportunity to 
diffuse. A key goal in establishing this review process is to ensure 
payment accuracy after technological changes; thus payment rates could 
increase or decrease as a result of these reviews.
    Under our proposed process, we would also list codes that we 
reviewed but for which there was insufficient information to support or 
establish an adjustment to the payment amount due to technological 
changes. We would solicit comment on the technology used to perform any 
tests we reviewed for possible payment changes, and any relevant cost 
information. We expect that we would finalize any payment adjustments 
in the PFS final rule, beginning with the CY 2015 PFS final rule. We 
are proposing that the CPI-U and multi-factor productivity adjustments 
would be applied after we establish the new payment amount through our 
usual instruction process.
    We believe that this proposed process would best allow for the 
greatest amount of transparency in review and the most structured and 
consistent opportunity for the public to provide input into the 
process. We are soliciting comment on these proposals.
d. Proposed Identification and Prioritization of Codes to be Reviewed
    We are proposing to review all codes currently on the CLFS. We are 
proposing to start our review by examining the codes that have been on 
the CLFS the longest and then work our way forward, over multiple 
years, until we have reviewed all of the codes on the CLFS. We believe 
that the payment amounts for codes that have been on the CLFS the 
longest amount of time would be most affected by changes in technology 
because, in general, technology is most expensive earliest in its life 
cycle but decreases in cost as the technology matures and diffuses. If 
during the course of reviewing these individual codes we find that 
there are additional, newer codes that are clinically and/or 
technologically similar, we are proposing to consider them for review 
at the same time as we review the older codes because we expect we 
would have the same or similar justifications for making payment 
adjustments to those codes. We intend to review these codes as quickly 
as possible but we believe there would be a significant administrative 
burden associated with such a comprehensive review of the 1,250 codes 
on the CLFS. We are estimating that it would take at least 5 years to 
review all of the existing codes on the CLFS.
    Once we have completed our review of the codes currently on the 
CLFS and made any adjustments necessary due to technological changes, 
we are proposing to review codes added to the CLFS after 2015 that have 
been on the CLFS for at least 5 years. We would also review codes again 
that have not been reviewed in the previous 5 years, as time and 
resources allow. We believe that tests that are less than 5 years old 
are likely still in their technological infancy and enough time would 
not have passed to adequately assess any change in technology for those 
services. Similarly, for previously reviewed codes, we believe that 
technology likely would not have changed dramatically in less than 5 
years. We are soliciting public comment on how to prioritize these 
codes, which we expect to address in future rulemaking on this issue.
    After the initial review of the codes currently on the CLFS, we are 
also proposing to allow the public to nominate additional codes for 
review, including those that had been previously reviewed for 
technological change. We are proposing that the public may nominate 
only codes that have been on the CLFS for at least 5 years and that 
have not been reviewed in the previous 5 years. Further, we are

[[Page 43352]]

proposing that the nomination must include an explanation from the 
nominator of the technological change in the service and the way that 
change affects its delivery. We would then consider these nominations 
and, in the Federal Register the following year, either propose a 
payment change based on technological changes or explain why we think 
such a change is not warranted at that time.
    We are proposing to codify the proposed process at 42 CFR 414.511.
    We are seeking public comment on these proposals. We also are 
seeking comment on alternative approaches to achieving our goal of 
paying appropriately for laboratory tests by accounting for changes in 
technology. Finally, we are soliciting comment on general trends in 
technology change in the laboratory industry and the health care sector 
in general.
3. Proposed Changes in the CY 2014 OPPS/ASC Proposed Rule
    In the CY 2014 OPPS/ASC proposed rule, CMS is proposing to package 
payment for certain clinical diagnostic laboratory tests into the base 
payment for the Ambulatory Payment Classification (APC). For details on 
this proposal, please see the ``Proposed Changes to Packaged Items and 
Services'' section of the CY 2014 OPPS/ASC proposed rule. Comments on 
the OPPS proposal should be made to the CY 2014 OPPS/ASC proposed rule. 
Comments on the proposals in this rule should be made to the CY 2014 
PFS proposed rule.

F. Liability for Overpayments to or on Behalf of Individuals Including 
Payments to Providers or Other Persons

1. Background and Statutory Authority
    CMS waives recovery of overpayments in certain situations for 
claims based fee-for-service provider, supplier or beneficiary 
overpayments in accordance with section 1870 of the Act. Section 
1870(b) and (c) of the Act provide a waiver of recovery of provider, 
supplier or beneficiary overpayments under certain presumptions within 
a specified timeframe. Section 1870(b) and (c) of the Act allow the 
Secretary to reduce the specified time period to not less than one year 
if the Secretary finds that such a reduction is consistent with the 
objectives of the Medicare program. Section 638 of the American 
Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240, enacted January 2, 
2013) changed the timeframes associated with section 1870(b) and (c) of 
the Act.
    Section 1870(b) of the Act provides for the waiver of recovery of 
an overpayment to a provider of services (hereinafter, ``provider'') or 
other person whenever that provider or other person is ``without 
fault'' in incurring the overpayment. For purposes of section 1870 of 
the Act and this proposed rule, the term ``other person'' includes 
practitioners, physicians, and other suppliers.
    Section 1870(b) of the Act also establishes circumstances under 
which a provider or other person is presumed for administrative 
purposes to be ``without fault'' for an overpayment. If an overpayment 
is determined after a specified period of time, a provider or other 
person is presumed to be ``without fault.'' This presumption is 
negated, however, if there is evidence to show that the provider or 
other person was responsible for causing the overpayment.
    Section 1870(c) of the Act provides for the waiver of recovery of 
an overpayment to an individual whenever the individual is ``without 
fault'' in incurring the overpayment, and recovery would either defeat 
the purpose of the Social Security or Medicare programs or would be 
``against equity and good conscience.''
    Section 1870(c) of the Act also establishes circumstances under 
which recovery of an overpayment for an individual is presumed to be 
``against equity and good conscience.'' After a specified period of 
time, recovery of certain overpayments from individuals who are 
``without fault'' is presumed ``against equity and good conscience.'' 
The overpayments addressed by this provision are payments for items or 
services for which payment may not be made because of the prohibitions 
found in section 1862(a)(1) or (a)(9) of the Act. Sections 1862(a)(1) 
and (a)(9) prohibit payment for, among other things, items and services 
that are not reasonable and necessary or that are for custodial care.
    Section 638 of the ATRA amended the timeframe specified in section 
1870(b) of the Act ``without fault'' presumption from 3 to 5 years so 
that the presumption of ``without fault'' only applies if the Medicare 
claims based fee-for-service overpayment determination for a provider 
or other person is made subsequent to the fifth year (instead of the 
third year) following the year in which the notice was sent to such 
individual that such amount had been paid. Likewise, section 638 of the 
ATRA amended the timeframe in section 1870(c) of the Act so that the 
presumption for ``against equity and good conscience'' for certain 
types of denials for an individual who is ``without fault'' only 
applies if the overpayment determination is made subsequent to the 
fifth year (instead of the third year) following the year in which 
notice of such payment was sent to such individual.
    These ATRA changes do not affect or change CMS' claims reopening 
regulation at Sec.  405.980. Specifically, we retain our authority to 
reopen claims for any reason within one year, for good cause within 4 
years, and at any time for fraud or similar fault.
2. Provisions of the Proposed Regulations
    We propose to revise Sec.  405.350(c) and Sec.  405.355(b). These 
proposed revisions would change the timing of the triggering event for 
the ``without fault'' and ``against equity and good conscience'' 
presumptions. These revisions are being proposed to reflect the 
revisions to section 1870 of the Act as specified in by section 638 of 
ATRA.
    Specifically, we propose to change the timeframe at Sec.  
405.350(c) so that the rebuttable ``without fault'' presumption for the 
provider or other person would apply if the Medicare claims based fee-
for-service overpayment determination is made subsequent to the fifth 
year (instead of the third year) following the year in which the notice 
was sent to such individual that such amount had been paid.
    Likewise, we propose to amend the timeframe at Sec.  405.355(b) for 
the presumption ``against equity and good conscience'' for certain 
types of denials for an individual who is ``without fault'' so that the 
presumption would apply if the overpayment determination is made 
subsequent to the fifth year (instead of the third year) following the 
year in which the notice of payment was sent to the individual.
    Additionally, in our review of the current regulation implementing 
section 1870(c) of the Act, we noted that Sec.  405.355(b) does not 
clearly reflect the statutory language, which limits the ``against 
equity and good conscience'' presumption to overpayments associated 
with denials under section 1862(a)(1) or (a)(9) of the Act. 
Accordingly, we propose to update and clarify Sec.  405.355(b) so that 
it clearly reflects the statutory language by adding that the ``against 
equity and good conscience'' presumption would be applicable for an 
individual who is ``without fault'' only if the overpayment is related 
to items and services that are not payable under section 1862(a)(1) or 
(a)(9) of the Act. In addition, we propose to delete the parenthetical 
at the end of Sec.  405.355(b) because the regulations referenced no 
longer exists; those

[[Page 43353]]

sections of the regulations were reassigned. (See the October 11, 1989 
Federal Register (54 FR 41733).) The modifications we propose to Sec.  
405.355(b) makes the references in the parenthetical no longer 
necessary.

G. Physician Compare Web site

1. Background and Statutory Authority
    Section 10331 (a)(1) of the Affordable Care Act, requires that, by 
no later than January 1, 2011, we develop a Physician Compare Internet 
Web site with information on physicians enrolled in the Medicare 
program under section 1866(j) of the Act, as well as information on 
other eligible professionals who participate in the Physician Quality 
Reporting System (PQRS) under section 1848 of the Act.
    CMS launched the first phase of Physician Compare on December 30, 
2010 (www.medicare.gov/physiciancompare). In the initial phase, we 
posted the names of eligible professionals that satisfactorily 
submitted quality data for the 2009 PQRS, as required by section 
1848(m)(5)(G) of the Act.
    Section 10331(a)(2) of the Affordable Care Act also requires that, 
no later than January 1, 2013, and for reporting periods that begin no 
earlier than January 1, 2012, we implement a plan for making publicly 
available through Physician Compare information on physician 
performance that provides comparable information on quality and patient 
experience measures. We met this requirement in advance of January 1, 
2013, as outlined below, and intend to continue to address elements of 
the plan through rulemaking.
    To the extent that scientifically sound measures are developed and 
are available, we are required to include, to the extent practicable, 
the following types of measures for public reporting:
     Measures collected under the PQRS.
     An assessment of patient health outcomes and functional 
status of patients.
     An assessment of the continuity and coordination of care 
and care transitions, including episodes of care and risk-adjusted 
resource use.
     An assessment of efficiency.
     An assessment of patient experience and patient, 
caregiver, and family engagement.
     An assessment of the safety, effectiveness, and timeliness 
of care.
     Other information as determined appropriate by the 
Secretary.
    As required under section 10331(b) of the Affordable Care Act, in 
developing and implementing the plan, we must include, to the extent 
practicable, the following:
     Processes to ensure that data made public are 
statistically valid, reliable, and accurate, including risk adjustment 
mechanisms used by the Secretary.
     Processes for physicians and eligible professionals whose 
information is being publicly reported to have a reasonable 
opportunity, as determined by the Secretary, to review their results 
before posting to Physician Compare. This would consist of a 30-day 
preview period for all measurement performance data that will allow 
physicians and other eligible professionals to view their data as it 
will appear on the Web site in advance of publication. Details of the 
preview process will be communicated on the Physician Compare 
Initiative page on CMS.gov in advance of the preview period.
     Processes to ensure the data published on Physician 
Compare provides a robust and accurate portrayal of a physician's 
performance.
     Data that reflects the care provided to all patients seen 
by physicians, under both the Medicare program and, to the extent 
applicable, other payers, to the extent such information would provide 
a more accurate portrayal of physician performance.
     Processes to ensure appropriate attribution of care when 
multiple physicians and other providers are involved in the care of the 
patient.
     Processes to ensure timely statistical performance 
feedback is provided to physicians concerning the data published on 
Physician Compare.
     Implementation of computer and data infrastructure and 
systems used to support valid, reliable and accurate reporting 
activities.
    Section 10331(d) of the Affordable Care Act requires us to consider 
input from multi-stakeholder groups in selecting quality measures for 
Physician Compare, which we note we are working to accomplish through a 
variety of means including rulemaking and various forms of stakeholder 
outreach. In developing the plan for making information on physician 
performance publicly available through Physician Compare, section 
10331(e) of the Affordable Care Act requires the Secretary, as the 
Secretary deems appropriate, to consider the plan to transition to 
value-based purchasing for physicians and other practitioners that was 
developed under section 131(d) of the Medicare Improvements for 
Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275, enacted on 
July 15, 2008).
    Under section 10331(f) of the Affordable Care Act, we are required 
to submit a report to the Congress, by January 1, 2015, on Physician 
Compare development, and include information on the efforts and plans 
to collect and publish data on physician quality and efficiency and on 
patient experience of care in support of value-based purchasing and 
consumer choice. Initial work on this report is currently underway. 
Section 10331(g) of the Affordable Care Act provides that any time 
before that date, we may continue to expand the information made 
available on Physician Compare.
    We believe section 10331 of the Affordable Care Act supports our 
overarching goals of providing consumers with quality of care 
information to make informed decisions about their healthcare, while 
encouraging clinicians to improve on the quality of care they provide 
to their patients. In accordance with section 10331 of the Affordable 
Care Act, we intend to utilize Physician Compare to publicly report 
physician performance results.
2. Public Reporting of Physician Performance Data
    Since the initial launch of the Web site, we have continued to 
build on and improve Physician Compare. In 2013, we launched a full 
redesign of Physician Compare offering significant improvements 
including a complete overhaul of the underlying database and a new 
Intelligent Search feature, addressing two of our stakeholders' primary 
critiques of the site and considerably improving functionality and 
usability. The primary source of administrative information on 
Physician Compare is the Provider Enrollment, Chain, and Ownership 
System (PECOS); as the sole source of verified Medicare professional 
information, PECOS remains the primary information source. However, 
with the redesign, we incorporated Medicare claims information to 
verify the information in PECOS to ensure only the most current and 
accurate information is included on the site.
    With the redesign, users can now search for Medicare physicians and 
other healthcare professionals by defining a location--a ZIP code, a 
city/State combination, an exact address, or landmark--and by entering 
a medical specialty, health care professional or group practice name, a 
medical condition, body part, or organ system. The site produces a list 
of suggested specialties, as defined by the 855i Medicare Enrollment 
Form, users can choose related to their search term or a list of names, 
as appropriate.

[[Page 43354]]

    Currently, users can view information about approved Medicare 
professionals such as name, primary and secondary specialties, practice 
locations, group affiliations, hospital affiliations that link to the 
hospital's profile on Hospital Compare as available, Medicare 
Assignment status, education, languages spoken, and American Board of 
Medical Specialties (ABMS) board certification information. In 
addition, for group practices, users can also view group practice 
names, specialties, practice locations, Medicare Assignment status, and 
affiliated professionals.
    As required by 1848(m)(5)(G) of the Act, we are required to post on 
a CMS Web site the names of eligible professionals who satisfactorily 
report under the PQRS, as well as those eligible professionals who are 
successful electronic prescribers under the Medicare Electronic 
Prescribing (eRx) Incentive Program, and Physician Compare contains a 
link to the list of names. In addition to the list of names, there is a 
section on each individual's profile page listing the quality programs 
under which the specific individual satisfactorily reported or was a 
successful electronic prescriber. The program name is listed and a 
green check mark clearly indicates participation. These data will be 
updated annually with the most recent data available.
    With the Physician Compare redesign, we have also added a quality 
programs section to each group practice profile page in order to 
indicate which group practices are satisfactorily reporting in Group 
Practice Reporting Option (GPRO) under the PQRS or the eRx Incentive 
program. We have also included a notation and check mark for 
individuals that participate in the Medicare EHR Incentive Program, as 
authorized by section 1848(o)(3)(D) of the Act. These data will be 
updated with the most recent data available.
    As we indicated in the 2013 PFS final rule with comment period (77 
FR 69166), we will include a check mark in the quality programs section 
of the profile page to note those individuals who report the PQRS 
Cardiovascular Prevention measures group in support of the Million 
Hearts Initiative. Finally, a check mark will be added to indicate 
those individuals who have earned a Maintenance of Certification 
Additional Incentive starting with data reported for CY 2013. We will 
update this information annually moving forward.
    We are now instituting our plan for a phased approach to public 
reporting of performance information on Physician Compare. The first 
phase of our plan was finalized with the 2012 PFS final rule with 
comment period (77 FR 69166), where we established that PQRS GPRO 
measures collected through the GPRO Web interface during 2012 would be 
publicly reported on Physician Compare. These measures will be publicly 
reported on Physician Compare in CY 2014. We expanded our plan with the 
2013 PFS final rule with comment period (77 FR 69166) where we 
established that the specific GPRO web interface measures that would be 
posted on Physician Compare include the Diabetes Mellitus (DM) and 
Coronary Artery Disease (CAD) PQRS GPRO measures, and that we would 
develop and report composite measures for these measure groups in 
future years, if technically feasible. For data reported in 2013 under 
the GPRO, DM and CAD PQRS GPRO measures and composites collected via 
the GPRO web interface that meet the minimum sample size of 20 
patients, and that prove to be statistically valid and reliable, will 
be publicly reported on Physician Compare in late CY 2014, if 
technically feasible. As we previously established, if the minimum 
threshold is not met for a particular measure, or the measure is 
otherwise deemed not to be suitable for public reporting, the group's 
performance rate on that measure will not be publicly reported.
    In the Shared Savings Program final rule (76 FR 67948), we noted 
that because Accountable Care Organization (ACO) providers/suppliers 
that are eligible professionals are considered to be group practices 
for purposes of qualifying for a PQRS incentive under the Shared 
Savings Program, we would publicly report performance on quality 
measures as we report performance on quality measures for PQRS GPRO 
group practices. Public reporting of performance on these measures will 
be presented at the ACO level only.
    In the CY 2013 PFS final rule with comment period (77 FR 69167), we 
also finalized our decision to publicly report Clinician and Group 
Consumer Assessment of Healthcare Providers and Systems (CG-CAHPS) data 
for group practices of 100 or more eligible professionals reporting 
data in 2013 under the GPRO, and for ACOs participating in the Shared 
Savings Program. We anticipate posting these data on Physician Compare 
as early as 2014.
3. Future Development of Physician Compare
    We will continue to phase in an expansion of Physician Compare over 
the next several years by incorporating quality measures from a variety 
of sources, as technically feasible. We previously finalized a decision 
to publicly report on Physician Compare the performance rates on a 
limited set of Web interface quality measures that group practices 
submit under the 2012 and 2013 PQRS GPRO Web interface (76 FR 73417 and 
77 FR 69166).
    For 2014, we propose to expand the quality measures posted on 
Physician Compare by publicly reporting performance on all measures 
collected through the GPRO Web interface for groups of all sizes 
participating in 2014 under the PQRS GPRO and for ACOs participating in 
the Medicare Shared Savings Program. These data would include measure 
performance rates for measures reported that met the minimum sample 
size of 20 patients, and that prove to be statistically valid and 
reliable. We will provide a 30-day preview period prior to publication 
of quality data on Physician Compare so that group practices and ACOs 
can view their data as it will appear on Physician Compare before it is 
publicly reported. CMS will detail the process for the 30-day preview 
and provide a detailed timeline and instructions for preview in advance 
of the start of the preview period.
    For 2013 and 2014, we expanded the group reporting option for PQRS 
GPRO to include a registry reporting option, which we propose to 
further modify for data reported in 2014 under the PQRS GPRO registry 
option. Consistent with the requirement under section 10331(a)(2)(A) of 
the Affordable Care Act to make publicly available information on 
quality measures submitted by physicians and other eligible 
professionals under PQRS, we propose to publicly report on Physician 
Compare performance on certain measures that groups report via 
registries and EHRs in 2014 for the PQRS GPRO. Specifically, we propose 
to report, no earlier than 2015, performance on the GPRO registry and 
EHR measures identified below that can also be reported via the GPRO 
Web interface in 2014. By proposing to include on Physician Compare 
performance on these measures reported by participants under the GPRO 
through registries and EHRs, as well as the GPRO Web interface, we 
continue to provide beneficiaries with a consistent set of measures 
over time. For registry reporting, publicly reported measures would 
include:
     Diabetes: Hemoglobin A1c Poor Control.
     Heart Failure (HF): Beta-Blocker Therapy for Left 
Ventricular Systolic Dysfunction (LVSD).
     Medication Reconciliation.

[[Page 43355]]

     Preventive Care and Screening: Influenza Immunization.
     Pneumococcal Vaccination Status for Older Adults.
     Preventive Care and Screening: Breast Cancer Screening.
     Colorectal Cancer Screening.
     Coronary Artery Disease (CAD): Angiotensin-converting 
Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker (ARB) Therapy--
Diabetes or Left Ventricular Systolic Dysfunction (LVEF < 40%).
     Adult Weight Screening and Follow-Up.
     Preventive Care and Screening: Screening for Clinical 
Depression.
     Coronary Artery Disease (CAD): Lipid Control.
     Ischemic Vascular Disease (IVD): Use of Aspirin or Another 
Antithrombotic.
     Preventive Care and Screening: Tobacco Use: Screening and 
Cessation Intervention.
     Hypertension (HTN): Controlling High Blood Pressure.
     Ischemic Vascular Disease (IVD): Complete Lipid Panel and 
LDL Control.
     Preventive Care and Screening: Screening for High Blood 
Pressure and Follow-Up Documented.
    For EHR reporting, publicly reported measures would include:
     Diabetes: Hemoglobin A1c Poor Control.
     Heart Failure (HF): Beta-Blocker Therapy for Left 
Ventricular Systolic Dysfunction (LVSD).
     Preventive Care and Screening: Influenza Immunization.
     Pneumococcal Vaccination Status for Older Adults.
     Preventive Care and Screening: Breast Cancer Screening.
     Colorectal Cancer Screening.
     Adult Weight Screening and Follow-Up.
     Coronary Artery Disease (CAD): Lipid Control.
     Ischemic Vascular Disease (IVD): Use of Aspirin or Another 
Antithrombotic.
     Preventive Care and Screening: Tobacco Use: Screening and 
Cessation Intervention.
     Hypertension (HTN): Controlling High Blood Pressure.
     Ischemic Vascular Disease (IVD): Complete Lipid Panel and 
LDL Control.
     Preventive Care and Screening: Screening for High Blood 
Pressure and Follow-Up Documented.
    Consistent with the requirement under section 10331(a)(2) of the 
Affordable Care Act to make comparable information on patient 
experience of care measures publicly available, we previously finalized 
a plan to post performance on patient experience survey-based measures 
from the Clinician and Group Consumer Assessment of Healthcare 
Providers and Systems (CG-CAHPS) (77 FR 44804) including the following 
patient experience of care measures for group practices participating 
in the PQRS GPRO (77 FR 44964):
     CAHPS: Getting Timely Care, Appointments, and Information.
     CAHPS: How Well Your Doctors Communicate.
     CAHPS: Patients' Rating of Doctor.
     CAHPS: Access to Specialists.
     CAHPS: Health Promotion and Education
    These measures capture patients' experiences with clinicians and 
their staff, and patients' perception of care. We finalized a decision 
to publicly report performance on these measures on Physician Compare 
in 2014 for data collected for PY 2013 for group practices with 100 or 
more eligible professionals participating in the PQRS GPRO in 2013 and 
reporting data through the GPRO Web interface. At least for data 
reported for 2013, we noted that we would administer and collect 
patient experience survey data on a sample of the group practices' 
beneficiaries.
    For ACOs participating in the Shared Savings Program, consistent 
with the PQRS policy of publicly reporting patient experience measures 
on Physician Compare starting with data collected for CY 2013, we will 
publicly report patient experience data in addition to the measure data 
reported through the GPRO Web interface (76 FR 67948). Specifically, 
the patient experience measures that would be reported for ACOs include 
the CG-CAHPS measures in the Patient/Caregiver Experience domain 
finalized in the Shared Savings Program final rule (76 FR 67889):
     CAHPS: Getting Timely Care, Appointments, and Information.
     CAHPS: How Well Your Doctors Communicate.
     CAHPS: Patients' Rating of Doctor.
     CAHPS: Access to Specialists.
     CAHPS: Health Promotion and Education.
     CAHPS: Shared Decision Making
     CAHPS: Health Status/Functional Status
    For data reported for 2014, we propose to continue public reporting 
of these CG-CAHPS data for PQRS GPRO group practices of 100 or more 
eligible professionals participating in the GPRO via the Web interface 
and for Shared Savings Program ACOs reporting through the GPRO Web 
interface or other CMS-approved tool or interface. Consistent with what 
we finalized for CY 2013 under the PQRS GPRO, we will administer and 
fund the collection of data for these groups. As we will administer and 
collect the data for these surveys, we do not anticipate public 
reporting to impose any notable burden on these groups.
    We believe these patient surveys are important tools for assessing 
beneficiary experience of care and outcomes, and under our authority 
under section 1848(m)(3)(C) of the Act to select the measures for which 
a group practice must report under the PQRS, we seek to encourage 
groups of 25 or more eligible professionals to report CG-CAHPS by 
proposing to make these measures available for reporting the PQRS and 
for the Value Based Payment Modifier. We propose to publicly report CY 
2014 CG-CAHPS data for any group practice (regardless of size) that 
voluntarily chooses to report CG-CAHPS; however, CMS will not fund the 
surveys for these groups. CMS proposes to publically report comparable 
CG-CAHPS data collected by groups of any size collected via a certified 
CAHPS vendor.
    We are dedicated to publicly reporting accurate, valid, and 
reliable data on Physician Compare and are aware that each group 
practice is unique in size and scope. We have closely evaluated the 
available data collection mechanisms, and are confident that CG-CAHPS 
is a well-tested collection mechanism with strong support from the 
healthcare community, and that it provides the best opportunity to 
collect useful and accurate data for the largest number of group 
practices. We propose to use only those survey domains that are 
applicable to group practices or ACOs respectively, and believe that 
these domains have been well tested, and will therefore provide the 
best data for the largest number of groups.
    In the CY 2013 PFS final rule with comment period (77 FR 44804), we 
indicated our intention to publicly report performance rates on quality 
measures included in the 2014 PQRS and for individual eligible 
professionals consistent with the requirements under section 10331 of 
the Affordable Care Act to provide information about physicians and 
other eligible professionals who participate in PQRS. We believe that 
individual-level measure data is important in helping consumers make 
informed healthcare decisions and that this information should be 
posted on the site as soon as technically feasible. Therefore, we 
propose to publicly report comparable data, as noted below, collected 
for the CY 2014 PQRS via claims, EHR or registry from individual 
eligible professionals as early as CY

[[Page 43356]]

2015. Specifically, we propose to post individual measures reported by 
individual eligible professionals in line with those measures reported 
by groups through the GPRO Web interface. These measures include:
     Diabetes: Hemoglobin A1c Poor Control.
     Heart Failure (HF): Beta-Blocker Therapy for Left 
Ventricular Systolic Dysfunction (LVSD).
     Medication Reconciliation.
     Preventive Care and Screening: Influenza Immunization.
     Pneumococcal Vaccination Status for Older Adults.
     Preventive Care and Screening: Breast Cancer Screening.
     Colorectal Cancer Screening.
     Coronary Artery Disease (CAD): Angiotensin-converting 
Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker (ARB) Therapy--
Diabetes or Left Ventricular Systolic Dysfunction (LVEF < 40%).
     Adult Weight Screening and Follow-Up.
     Preventive Care and Screening: Screening for Clinical 
Depression.
     Coronary Artery Disease (CAD): Lipid Control.
     Ischemic Vascular Disease (IVD): Use of Aspirin or Another 
Antithrombotic.
     Preventive Care and Screening: Tobacco Use: Screening and 
Cessation Intervention.
     Hypertension (HTN): Controlling High Blood Pressure.
     Ischemic Vascular Disease (IVD): Complete Lipid Panel and 
LDL Control.
     Preventive Care and Screening: Screening for High Blood 
Pressure and Follow-Up Documented.
     Falls: Screening for Fall Risk.
     Diabetes Mellitus: Low Density Lipoprotein (LDL-C) 
Control.
     Diabetes Mellitus: High Blood Pressure Control.
     Diabetes Mellitus: Hemoglobin A1c Control (<8%).
    Additionally, and in support of the HHS-wide Million Hearts 
Initiative, we propose to publicly report, no earlier than 2015, 
performance rates on measures in the PQRS Cardiovascular Prevention 
measures group (77 FR 44803) at the individual eligible professional 
level for data collected in 2014 for the PQRS (Table 50).
    We seek comment on posting performance on patient experience 
survey-based measures for individual eligible professionals starting 
with data collected for CY 2015.
    In future years, we will consider expanding public reporting of, 
and seek comment on, measures that have been developed and collected by 
approved and vetted specialty societies for individual eligible 
professionals as well as data collected via the new qualified clinical 
data registry option being proposed under the PQRS. Additionally, we 
seek comment on publicly reporting participation by individual eligible 
healthcare professionals on initiatives such as Choosing Wisely, an 
initiative of the American Board of Internal Medicine Foundation.
    We are committed to making Physician Compare a constructive tool 
for Medicare beneficiaries, successfully meeting the Affordable Care 
Act mandate, and providing consumers with information needed to make 
informed healthcare decisions. We have developed a plan, and begun 
implementing that plan with a phased approach of adding physician 
quality data to Physician Compare. We believe this staged approach to 
public reporting of physician quality information allows consumers 
access to information that is currently available while we continue to 
develop the infrastructure necessary to support additional types of 
data and information on physicians' quality measure performance. We 
intend to implement subsequent phases of the plan in future rulemaking, 
as needed.
    We invite comments regarding our proposals to: (1) Publicly report 
performance rates on all quality measures that group practices submit 
through the GPRO web interface in 2014 under the PQRS GPRO and that 
ACOs participating in the Medicare Shared Savings Program submit using 
the GPRO web interface or another CMS-approved tool or interface; (2) 
publicly report performance on certain quality measures collected under 
the 2014 PQRS GPRO via registry and EHR reporting mechanisms; (3) 
publicly report performance on patient experience measures for 2014 
both for group practices and ACOs and for group practices of 25 or more 
professionals who choose to voluntarily report CG-CAHPS data as part of 
their participation in the PQRS GPRO; (4) publicly report performance 
on certain measures that are reported by individual eligible 
professionals reporting through an EHR, registry, or claims during 2014 
under the PQRS; and (5) in support of the HHS-wide Million Hearts 
Initiative, publicly report performance rates for measures included in 
the Cardiovascular Prevention measures group reported by individual 
eligible professionals participating in the 2014 PQRS.
    We seek comment regarding: (1) Publicly report patient experience 
survey data under the PQRS for individual eligible professionals, 
starting with data reported in 2015; and (2) to publicly report 
participation by individual eligible healthcare professionals on 
initiatives such as Choosing Wisely, an initiative of the American 
Board of Internal Medicine Foundation.
    For the above proposals, we note that we would only post data on 
Physician Compare as it is technically feasible and as the data are 
available.

H. Physician Payment, Efficiency, and Quality Improvements--Physician 
Quality Reporting System

    There are several healthcare quality improvement programs that 
affect physician payments under the Medicare PFS. As we stated 
previously, we believe that alignment of these quality improvement 
programs--such as the EHR Incentive Program, Value-based Payment 
Modifier, and Medicare Shared Savings Program--is critical for programs 
involving physicians and other healthcare eligible professionals. The 
proposals that follow facilitate the alignment of programs, reporting 
systems, and quality measures. We believe that alignment of CMS quality 
improvement programs will decrease the burden of participation on 
physicians and allow them to spend more time and resources caring for 
beneficiaries. Furthermore, as the leaders of care teams and the 
healthcare systems, physicians and other clinicians serve beneficiaries 
both as frontline and system-wide change agents to improve quality. We 
believe that to improve quality, quality measurement and reporting is 
an important component. It is our intent that the following 
requirements will further improve alignment of physician-focused 
quality improvement programs, decrease burden and duplicative reporting 
for eligible professionals, increase engagement of physicians and other 
eligible professionals in quality improvement, and ultimately, lead to 
higher quality care for beneficiaries.
    This section contains the requirements for the Physician Quality 
Reporting System (PQRS). The PQRS, as set forth in sections 1848(a), 
(k), and (m) of the Act, is a quality reporting program that provides 
incentive payments and payment adjustments to eligible professionals 
based on whether or not they satisfactorily report data on quality 
measures for covered professional services furnished during a specified 
reporting period. The regulation governing the PQRS is located at Sec.  
414.90. The program requirements for the 2007 through 2014 PQRS 
incentives and the 2015 PQRS payment adjustment that were

[[Page 43357]]

previously established, as well as information on the PQRS, including 
related laws and established requirements, are available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html. In addition, the 2011 PQRS and eRx 
Experience Report, which provides information about eligible 
professional participation in PQRS, is available for download at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html.
    In the CY 2013 PFS final rule with comment period (77 FR 69170), we 
finalized certain requirements for the 2013 and 2014 PQRS incentives, 
as well as 2015 and 2016 PQRS payment adjustments. We also finalized 
certain requirements for future years, such as the reporting periods 
for the PQRS payment adjustment, as well as requirements for the 
various PQRS reporting mechanisms. Below, we propose to change some 
requirements for the 2014 PQRS incentive and 2016 PQRS payment 
adjustment, as well as to make changes to the PQRS measure set. 
Furthermore, we introduce our proposals for a new PQRS reporting 
option--satisfactory participation in a qualified clinical data 
registry. We then seek comment on a general plan for future years for 
PQRS, so that we may continue to consider stakeholder feedback as we 
develop policies and proposals for the future.
1. Proposed Changes to Sec.  414.90
    As noted previously, the regulation governing the PQRS is located 
at Sec.  414.90. We are proposing the following changes and technical 
corrections to Sec.  414.90:
     Under Sec.  414.90(b), we are proposing to modify the 
definition of administrative claims to eliminate the words ``the 
proposed'' in the phrase ``on the proposed PQRS quality measures.'' We 
are proposing to make this technical change because this language was 
inadvertently included in the final regulation despite the fact that 
the quality measures that eligible professionals report under the PQRS 
were finalized in the CY 2013 PFS final rule with comment period (77 FR 
69364).
     We propose to modify Sec.  414.90(f) to include the term 
``for satisfactory reporting'' after the title ``Use of consensus-based 
quality measures for satisfactory reporting.'' We are adding the term 
``for satisfactory reporting'' so that it is clear that the paragraph 
refers to satisfactory reporting, not the new standard of 
satisfactorily participating in a qualified clinical data registry.
     We propose to modify the paragraph heading of Sec.  
414.90(g) to add the term ``satisfactory reporting'', so that the title 
of the paragraph reads ``Satisfactory reporting requirements for the 
incentive payments.'' We are proposing to make this change so that it 
is clear that the paragraph refers to satisfactory reporting, not the 
new standard of satisfactorily participating in a qualified clinical 
data registry.
     We propose to modify the paragraph heading of Sec.  
414.90(h) to add the term ``satisfactory reporting'', so that the title 
of the paragraph reads ``Satisfactory reporting requirements for the 
incentive payments.'' We are proposing to make this change so that it 
is clear that the paragraph refers to satisfactory reporting, not the 
new standard of satisfactorily participating in a qualified clinical 
data registry.
     We propose to delete paragraph Sec.  414.90(i)(4), because 
Sec.  414.90(i)(4) list requirements that are identical to Sec.  
414.90(i)(3). Therefore, Sec.  414.90(i)(4) is redundant.
    In addition, we are considering further revising the regulation at 
Sec.  414.90 to list all the specific satisfactory reporting 
requirements for the 2014 PQRS incentive and 2016 PQRS payment 
adjustment, so that the different reporting requirements are specified 
in the regulation. We seek public comment on these proposals.
2. Participation as a Group Practice in the Group Practice Reporting 
Option (GPRO)
a. Proposed Changes to the Self-nomination, or Registration, 
Requirement for Group Practices To Be Selected to Participate in the 
GPRO
    In the CY 2013 PFS final rule with comment period (77 FR 69172), we 
finalized requirements for the self-nomination process group practices 
must follow to participate in the PQRS GPRO. We propose to make two 
changes to the previously established self-nomination process for group 
practices. First, we propose to change the deadline for group practices 
to submit a self-nomination statement, or register, to participate in 
the PQRS GPRO. We previously established, that in order for a group 
practice to participate in PQRS under the GPRO, the group practice must 
submit a self-nomination statement, or register, via the web by October 
15 of the year in which the reporting period occurs. Starting with 
reporting periods occurring in 2014, we propose to change this deadline 
to September 30 of the year in which the reporting period occurs (that 
is September 30, 2014 for reporting periods occurring in 2014). We 
believe that the proposed deadline still gives group practices a 
reasonable amount of time to make a decision on whether to participate 
in the PQRS GPRO while allowing CMS more time to pull samples to 
populate the GPRO web-interface for those group practices that select 
that particular reporting mechanism. Second, we propose that group 
practices comprised of 25 or more individual eligible professionals 
that wish to report the CG CAHPS survey measures (which are discussed 
later in this section) would be required to elect to report the CG 
CAHPS survey measures via the web as well. The Web site that a group 
practice would use to elect to report the CG CAHPS survey measures 
would be the same Web site used by group practices to register to 
participate in the PQRS GPRO and used by group practices comprised of 
10-99 eligible professionals to elect quality tiering for the Value-
based Payment Modifier set forth in section III.M of this proposed 
rule. We believe that providing a single Web site whereby group 
practices may make multiple elections (such as submitting the self-
nomination statement to register to participate in the PQRS GPRO, be 
evaluated for the PQRS GPRO using CG CAHPS measures, and also elect 
quality tiering for the Value-based Payment Modifier) would be 
desirable for group practices. We seek public comment on the proposed 
changes to the PQRS GPRO self-nomination process.
3. Proposed Requirements for the PQRS Reporting Mechanisms
    The PQRS includes the following reporting mechanisms: Claims, 
registry, EHR (including direct EHR products and EHR data submission 
vendor products), administrative claims, and the GPRO web-interface. 
Section 414.90(g) and (h) govern which reporting mechanisms are 
available for use by individuals and group practices for the PQRS 
incentive and payment adjustment. This section contains our proposed 
changes to these PQRS reporting mechanisms. In addition, this section 
contains our proposals for two new PQRS reporting mechanisms. We 
propose a new certified survey vendor reporting mechanism for purposes 
of reporting CG CAHPS measures described below and a qualified clinical 
data registry reporting mechanism under the new PQRS ``satisfactory 
participation'' option.

[[Page 43358]]

a. Registry-Based Reporting Mechanism
    In the CY 2013 PFS final rule with comment period, we finalized the 
following requirement for registries to become qualified to participate 
in PQRS for 2013 and beyond: Be able to collect all needed data 
elements and transmit to CMS the data at the TIN/NPI level for at least 
3 measures (77 FR 69180). Since, as we describe in more detail below, 
we are proposing to increase the number of measures eligible 
professionals would be required to report for the 2014 PQRS incentive 
from 3 to 9 measures covering at least 3 of the National Quality 
Strategy domains, we are proposing to change this registry requirement 
as follows: A qualified registry must be able to collect all needed 
data elements and transmit to CMS the data at the TIN/NPI level for at 
least 9 measures covering at least 3 of the National Quality Strategy 
domains. We seek public comment on this proposal.
b. Certified Survey Vendors
    As discussed later in this section, we are proposing to allow group 
practices comprised of 25 or more eligible professionals to report CG 
CAHPS survey measures. The data collected on these CAHPS survey 
measures would not be transmitted to CMS via the previously established 
PQRS group practice reporting mechanisms (registry, EHR, or GPRO web 
interface). Rather, the data must be transmitted through a survey 
vendor. Therefore, to allow for the survey vendor to transmit survey 
measures data to CMS, we are proposing to modify Sec.  414.90(b), Sec.  
414.90(g)(3), and Sec.  414.90(h)(3) to propose a new reporting 
mechanism--the certified survey vendor.
    In addition, Sec.  414.90(g)(3), and Sec.  414.90(h)(3) currently 
requires group practices to use only one mechanism to meet the 
requirements for satisfactory reporting (that is, CMS will not combine 
data submitted under multiple reporting mechanism to determine if the 
requirements for satisfactory reporting are met). As discussed further 
below, we propose that a group practice choosing to report CG CAHPS 
survey measures would be required to select an additional reporting 
mechanism to meet the requirements for satisfactory reporting for both 
the 2014 PQRS incentive and the 2016 PQRS payment adjustment. 
Therefore, we propose to modify Sec.  414.90(g)(3), and Sec.  
414.90(h)(3) to indicate that groups selecting to use the certified 
survey vendor would be the exception to this requirement.
    Specifically, for purposes of PQRS, we are proposing to modify 
Sec.  414.90(b) to define a certified survey vendor as a vendor that is 
certified by CMS for a particular program year to transmit survey 
measures data to CMS.
    To obtain CMS certification, we propose that vendors would be 
required to undergo training, meet CMS standards on how to administer 
the survey, and submit a quality assurance plan. CMS would provide the 
identified vendor with an appropriate sample frame of beneficiaries 
from the group. The vendor would also be required to administer the 
survey according to established protocols to ensure valid and reliable 
results. Survey vendors would be supplied with mail and telephone 
versions of the survey in electronic form, and text for beneficiary 
pre-notification and cover letters. Surveys can be administered in 
English, Spanish, Cantonese, Mandarin, Korean, Russian and/or 
Vietnamese. Vendors would be required to use appropriate quality 
control, encryption, security and backup procedures to maintain survey 
response data. The data would then be securely sent back to CMS for 
scoring and/or validation. To ensure that a vendor possesses the 
ability to transmit survey measures data for a particular program year, 
we propose to require survey vendors to undergo this certification 
process for each year in which the vendor seeks to transmit survey 
measures data to CMS. We seek public comment on these proposals.
4. Proposed Changes to the Criteria for the Satisfactory Reporting for 
Individual Eligible Professionals for the 2014 PQRS Incentive--
Individual Quality Measures Submitted via Claims and Registries and 
Measures Groups Submitted via Claims
    Individual eligible professionals may currently report PQRS quality 
measures data to meet the criteria for satisfactory reporting for the 
2014 PQRS incentive via the claims, registry, and EHR-based reporting 
mechanisms. This section contains our proposed changes to the criteria 
for satisfactory reporting of individual quality measures via claims 
and registries by individual eligible professionals for the 2014 PQRS 
incentive. Please note that we are not proposing to modify the criteria 
for satisfactory reporting of individual quality measures via EHR that 
were established in the CY 2013 PFS final rule with comment period (see 
Table 91, 77 FR 69194).
a. Proposed Changes to the Criterion for Satisfactory Reporting of 
Individual Quality Measures via Claims for Individual Eligible 
Professionals for the 2014 PQRS Incentive
    For 2014, in accordance with Sec.  414.90(c)(3), eligible 
professionals that satisfactorily report data on PQRS quality measures 
are eligible to receive an incentive equal to 0.5 percent of the total 
estimated Medicare Part B allowed charges for all covered professional 
services furnished by the eligible professional or group practice 
during the applicable reporting period. In the CY 2013 PFS final rule 
with comment period (see Table 91, 77 FR 69194), to maintain the 
reporting criterion with which individual eligible professionals are 
familiar, we finalized the same satisfactory reporting criterion for 
the submission of individual quality measures via claims that we 
finalized in previous years: For the 12-month reporting period for the 
2014 PQRS incentive, report at least 3 measures, OR, if less than 3 
measures apply to the eligible professional, report 1-2 measures, and 
report each measure for at least 50 percent of the eligible 
professional's Medicare Part B FFS patients seen during the reporting 
period to which the measure applies. Measures with a 0 percent 
performance rate would not be counted. For an eligible professional who 
reports fewer than 3 measures via the claims-based reporting mechanism, 
the eligible professional would be subject to the Measures 
Applicability Validation (MAV) process, which would allow us to 
determine whether an eligible professional should have reported quality 
data codes for additional measures (77 FR 69188).
    For the reasons described below and based on our authority to 
revise the criteria for satisfactory reporting for the 2014 PQRS 
incentive under section 1848(m)(3)(d) of the Act, we propose to change 
the criterion for the satisfactory reporting of individual, claims-
based measures by individual eligible professionals for the 2014 PQRS 
incentive as follows: For the 12-month reporting period for the 2014 
PQRS incentive, report at least 9 measures, covering at least 3 of the 
National Quality Strategy domains, OR, if less than 9 measures apply to 
the eligible professional, report 1-8 measures, and report each measure 
for at least 50 percent of the Medicare Part B FFS patients seen during 
the reporting period to which the measure applies. Measures with a 0 
percent performance rate would not be counted. For an eligible 
professional who reports fewer than 9 measures via the claims-based 
reporting mechanism, the eligible professional would be subject to the 
MAV process, which would allow us to determine whether an eligible 
professional should have reported

[[Page 43359]]

quality data codes for additional measures.
    We note that this proposal would increase the number of measures an 
eligible professional is required to report via the claims-based 
reporting mechanism from 3 measures to 9. We understand that this is a 
significant increase in the number of measures an eligible 
professionals is required to report. However, we believe that the need 
to collect enough quality measures data to better capture the picture 
of the care being furnished to a beneficiary, especially when this data 
may be used to evaluate an eligible professional's quality performance 
under the Value-based Payment Modifier, justifies the increase in 
measures.
    We seek public comment on the proposed change to the criterion for 
the satisfactory reporting of individual quality measures via claims 
for individual eligible professionals for the 2014 PQRS incentive.
b. Proposed Changes to the Criterion for Satisfactory Reporting of 
Individual Quality Measures via Registry for Individual Eligible 
Professionals for the 2014 PQRS Incentive
    In the CY 2013 PFS final rule with comment period, to maintain 
reporting criterion with which individual eligible professionals are 
familiar, we finalized the same satisfactory reporting criterion for 
individual eligible professionals to report individual quality measures 
via registry that we finalized in previous years: For the 12-month 
reporting period for the 2014 PQRS incentive, report at least 3 
measures and report each measure for at least 80 percent of the 
eligible professional's Medicare Part B FFS patients seen during the 
reporting period to which the measure applies. Measures with a 0 
percent performance rate would not be counted (77 FR 69189). We propose 
to change this reporting criterion for individual eligible 
professionals reporting via registry for the 2014 PQRS incentive to the 
following: For the 12-month reporting period for the 2014 PQRS 
incentive, report at least 9 measures, covering at least 3 of the 
National Quality Strategy domains and report each measure for at least 
50 percent of the eligible professional's Medicare Part B FFS patients 
seen during the reporting period to which the measure applies. Measures 
with a 0 percent performance rate would not be counted.
    We note that this proposal would increase the number of measures an 
eligible professional is required to report via the registry-based 
reporting mechanism from 3 measures to 9 covering at least 3 of the 
National Quality Strategy domains. We understand that this is a 
significant increase in the number of measures an eligible professional 
is required to report. However, similar to the reasons we provided for 
proposing to increase the measure threshold from 3 measures to 9 for 
the claims-based reporting mechanism, we believe that the need to 
collect enough quality measures data to better capture the picture of 
the care being furnished to a beneficiary, especially when this data 
may be used to evaluate an eligible professional's quality performance 
under the Value-based Payment Modifier, justifies the change. We 
believe that collecting data on 9 measures applicable to an eligible 
professional's practice as opposed to 3 measures would provide us with 
a better picture of the overall quality of care furnished by that 
eligible professional for purposes of having PQRS reporting being used 
to assess quality performance under the Value-based Payment Modifier. 
We also note that, as PQRS has used this same 3-measure criterion since 
the registry-based reporting mechanism was introduced in 2010, it would 
be conceivable that we would eventually propose to increase the number 
of measures an eligible professional is required to report. Our 
proposal to increase the number of measures reported via claims and 
registry would align with our established reporting option for the EHR-
based reporting mechanism or the 2014 PQRS incentive, which requires 
the reporting of 9 measures covering 3 of the National Quality Strategy 
domains (77 FR 69189).
    In addition, we note that this proposal would also decrease the 
number of patients for which an eligible professional must report for 
each measure from 80 percent to 50 percent of an eligible 
professional's applicable patients. We are proposing to drop the 
percentage threshold from 80 to 50 percent primarily to align our 
percentage thresholds for registry reporting with the percentage 
threshold established for reporting via the claims-based reporting 
mechanism. We believe it is appropriate to drop the percentage 
threshold to 50, particularly since we are proposing to also increase 
the number of measures an eligible professional is required to report 
via the registry-based reporting mechanism from 3 to 9 measures 
covering at least 3 of the National Quality Strategy domains. The 
criteria for satisfactory reporting that we are proposing for the 2014 
PQRS incentive payment are described in Table 24.
    We seek public comment on the proposed changes to the criterion for 
the satisfactory reporting of individual quality measures via registry 
for individual eligible professionals for the 2014 PQRS incentive.
c. Proposed Changes to the Criterion for Satisfactory Reporting of 
Measures Groups via Claims for Individual Eligible Professionals for 
the 2014 PQRS Incentive
    In the CY 2013 PFS final rule with comment period, we finalized the 
following criteria for satisfactory reporting for individual eligible 
professionals to report measures groups via claims: Report at least 1 
measures group and report each measures group for at least 20 Medicare 
Part B FFS patients. Measures groups containing a measure with a zero 
percent performance rate will not be counted (77 FR 69192). Since 
finalizing this criterion, we have recently published and analyzed the 
2011 PQRS and eRx Experience Report, which provides a summary of PQRS 
reporting trends from 2007 through 2011, to determine where we may work 
to further streamline the reporting options available under the PQRS. 
The PQRS and eRx Experience Report stated that the number of eligible 
professionals who participated via claims-based measures groups 
reporting mechanism grew more than three-fold between 2008 and 2011. 
However, according to Appendix 8 of the PQRS and eRx Experience Report 
titled ``Eligible Professionals who Participated by Reporting Measures 
Groups through the Claims Reporting Mechanism for the Physician Quality 
Reporting System, by Specialty (2008 to 2011),'' only 4,472 eligible 
professionals used this reporting option. Meanwhile, the Experience 
Report further shows that the option to report measures groups via 
registry has grown at an even faster rate with 12,894 participants in 
2011. Therefore, in an effort to streamline the reporting options 
available under the PQRS and to eliminate reporting options that are 
not widely used, we are proposing to remove this satisfactory reporting 
criterion for the 2014 PQRS incentive. Please note that, since we are 
proposing to remove this reporting criterion, the only manner in which 
an eligible professional would be able to report a PQRS measures group 
would be via registry. We seek public comment on this proposal.
5. Proposed Criteria for Satisfactory Reporting for the 2016 PQRS 
Payment Adjustment for Individual Eligible Professionals Using the 
Claims and Registry Reporting Mechanisms
    Section 1848(a)(8) of the Act, as added by section 3002(b) of the

[[Page 43360]]

Affordable Care Act, provides that for covered professional services 
furnished by an eligible professional during 2015 or any subsequent 
year, if the eligible professional does not satisfactorily report data 
on quality measures for covered professional services for the quality 
reporting period for the year, the fee schedule amount for services 
furnished by such professional during the year shall be equal to the 
applicable percent of the fee schedule amount that would otherwise 
apply to such services. For 2016 and subsequent years, the applicable 
percent is 98.0 percent.
    In the CY 2013 PFS final rule, we finalized seven different 
criteria for the satisfactory reporting by individual eligible 
professionals of data in PQRS quality measures for the 2016 PQRS 
payment adjustment (see 77 FR 69200-69204 and Table 91 at 77 FR 69194). 
Although we are retaining five of the final criteria for satisfactory 
reporting by individual eligible professionals of data on PQRS quality 
measures for the 2016 PQRS payment adjustment, we propose to eliminate 
two criteria, revise another, and include two additional criteria 
(based on two of the existing criteria). Specifically, we propose to 
remove the following criterion we previously finalized for the CY 2016 
payment adjustment for individual eligible professionals reporting 
measures groups through claims (77 FR 69200 and Table 91, 77 FR 69164): 
Report at least 1 measures group and report each measures group for at 
least 20 Medicare Part B FFS patients (Measures groups containing a 
measure with a zero percent performance rate will not be counted). Our 
proposal to remove this criterion would correspond to the same proposal 
we are making, as discussed above, for the 2014 PQRS incentive for 
individual eligible professionals. As we indicated, we believe it is 
important to streamline the program and eliminate criteria for 
reporting options that are not widely used.
    We also propose to remove the following criterion we previously 
finalized for the 2016 payment adjustment for individual eligible 
professionals reporting individual measures through a qualified 
registry (77 FR 69200 and Table 91, 77 FR 69164): Report at least 3 
measures, and report each measure for at least 80 percent of the 
eligible professional's Medicare Part B FFS patients seen during the 
reporting period to which the measures applies (Measures with a zero 
percent performance rate will not be counted). Finally, to maintain 
some consistency and to otherwise align with the criteria we are 
proposing for the 2014 PQRS incentive for individual eligible 
professionals, we are proposing two other criteria for satisfactory 
reporting by individual eligible professionals for the 2016 PQRS 
payment adjustment using the claims and registry reporting mechanisms. 
Specifically, we propose the following criterion for reporting 
individual measures via claims by individual eligible professionals for 
the 2016 PQRS payment adjustment: For the 12-month reporting period for 
the 2014 PQRS incentive, report at least 9 measures, covering at least 
3 of the National Quality Strategy domains, OR, if less than 9 measures 
apply to the eligible professional, report 1-8 measures, and report 
each measure for at least 50 percent of the Medicare Part B FFS 
patients seen during the reporting period to which the measure applies. 
Measures with a 0 percent performance rate would not be counted. 
Similarly, for the same reasons we discussed previously, we propose the 
following criterion for reporting individual measures via qualified 
registry by individual eligible professionals for the 2016 PQRS payment 
adjustment: For the 12-month reporting period for the 2014 PQRS 
incentive, report at least 9 measures, covering at least 3 of the 
National Quality Strategy domains and report each measure for at least 
50% of the eligible professional's Medicare Part B FFS patients seen 
during the reporting period to which the measure applies. Measures with 
a 0 percent performance rate would not be counted.
    Please note that in the CY 2013 PFS final rule, we finalized the 
same criteria for satisfactorily reporting data on quality measures for 
covered professional services for the 2016 PQRS payment adjustment as 
those for the 2014 PQRS incentive for individual eligible professionals 
(77 FR 69200). However, if the proposals we are making in this proposed 
rule were finalized, there would be some differences between the 
criteria for satisfactory reporting for the 2016 PQRS payment 
adjustment and the 2014 PQRS incentive. In particular, there would be 
one more criterion for satisfactory reporting for the 2016 payment 
adjustment than for the 2014 PQRS incentive with respect to claims-
based reporting, but the other criteria would otherwise align. Although 
we considered, as an alternative, to propose to remove the criterion we 
previously finalized for the 2016 payment adjustment for individual 
eligible professionals reporting individual measures through claims, we 
believe it is still important to offer as many options as possible for 
the 2016 PQRS payment adjustment, particularly since the penalty phase 
is relatively new under the PQRS. We also note that it would remain 
true that if an individual eligible professional were to meet any of 
the criteria for satisfactory reporting for the 2014 PQRS incentive, 
the individual eligible professional would meet the requirements for 
satisfactory reporting for the 2016 PQRS payment adjustment (note, 
however, that the reverse would not necessarily be true since there 
would be one additional criterion for satisfactory reporting for the 
2016 PQRS payment adjustment that would not apply to the 2014 PQRS 
incentive).
    The criteria for satisfactory reporting that we are proposing for 
the 2016 PQRS payment adjustment are described in Table 25. We believe 
such alignment still serves to reduce reporting burden, and as we have 
noted previously, we believe that proposing similar criteria for 
satisfactory reporting by individual eligible professionals for the 
2014 PQRS incentive and 2016 PQRS payment adjustment is appropriate 
because the reporting period for the 2014 PQRS incentive and 2016 PQRS 
payment adjustment coincide. As we continue to implement the PQRS 
payment adjustment and fully implement the value-based payment modifier 
in 2017, it is our intent to ramp up the criteria for satisfactory 
reporting for the 2017 PQRS payment adjustment to be on par or more 
stringent than the criteria for satisfactory reporting for the 2014 
PQRS incentive.
    We seek public comment on our proposed satisfactory reporting 
criteria for individual eligible professionals for the 2016 PQRS 
payment adjustment, including the alternative proposal considered for 
individual eligible professionals reporting individual measures through 
the claims-based reporting mechanism.
6. Proposals Related to Satisfactory Participation in a Qualified 
Clinical Data Registry by Individual Eligible Professionals
    Section 601(b) of the American Taxpayer Relief Act of 2012 amends 
section 1848(m)(3) of the Act, by redesignating subparagraph (D) as 
subparagraph (F) and adding new subparagraph (D), to provide for a new 
standard for individual eligible professionals to satisfy the PQRS 
beginning in 2014, based on satisfactory participation in a qualified 
clinical data registry. Below, we set forth our proposals for 
implementing this provision, including the proposed requirements for 
qualified clinical data registries and our proposals for individual 
eligible professionals to

[[Page 43361]]

satisfactorily participate in a qualified clinical data registry with 
respect to the 2014 PQRS incentive and 2016 PQRS payment adjustment.
    On February 7, 2013, CMS published a Request for Information titled 
``Medicare Program; Request for Information on the Use of Clinical 
Quality Measures (CQMs) Reported Under the Physician Quality Reporting 
System (PQRS), the Electronic Health Record (EHR) Incentive Program, 
and Other Reporting Programs'' (78 FR 9057). The Request for 
Information included a solicitation for comments about section 601(b) 
of the American Taxpayer Relief Act of 2012. CMS received over 100 
comments on this Request for Information, and much of the information 
provided in these comments were used to shape the proposals set forth 
in this section.
a. Proposed Definition of a Qualified Clinical Data Registry
    Under section 1848(m)(3)(D) of the Act, as amended and added by 
section 601(b)(1) of the American Taxpayer Relief Act of 2012 (Pub. L. 
112-240, enacted January 2, 2013), for 2014 and subsequent years, the 
Secretary shall treat an eligible professional as satisfactorily 
submitting data on quality measures if, in lieu of reporting measures 
under subsection (k)(2)(C), the eligible professional is satisfactorily 
participating, as determined by the Secretary, in a qualified clinical 
data registry for the year. Section 1848(m)(3)(E) of the Act, as added 
by section 601(b)(1) of the American Taxpayer Relief Act of 2012, 
authorizes the Secretary to define a qualified clinical data registry 
under the PQRS. Specifically, the Secretary is required to establish 
requirements for an entity to be considered a qualified clinical data 
registry (including that the entity provide the Secretary with such 
information, at such times, and in such manner, as the Secretary 
determines necessary to carry out the provision). And in establishing 
such requirements, the Secretary must take certain factors into 
consideration.
    Generally, registries are entities that collect data related to 
patients with a specific diagnosis, condition, or procedure. In fact, 
the collection and submission of PQRS quality measures data on behalf 
of eligible professionals are the functions a traditional ``qualified 
registry'' currently performs under the PQRS for purposes of eligible 
professionals satisfactorily reporting. The majority of commenters in 
response to the February 7, 2013 Request for Information stated that 
these qualified clinical data registries should serve additional roles 
aimed at quality improvement other than collecting and transmitting 
quality data to CMS. The commenters saw qualified clinical data 
registries as entities that should be at the forefront of quality 
improvement. We agree with the commenters. Therefore, we believe that a 
``qualified clinical data registry'' specified under section 
1848(m)(3)(E) of the Act, as added by section 601(b) of the American 
Taxpayer Relief Act of 2012, should serve additional roles that foster 
quality improvement in addition to the collection and submission of 
quality measures data.
    Section 1848(m)(3)(E)(ii) of the Act, as added by section 601(b)(1) 
of the American Taxpayer Relief Act of 2012, provides that, when 
determining whether an entity should be considered a qualified clinical 
data registry, the Secretary shall take into consideration whether the 
entity:
     Has in place mechanisms for the transparency of data 
elements and specifications, risk models, and measures;
     Requires the submission of data from participants with 
respect to multiple payers;
     Provides timely performance reports to participants at the 
individual participant level; and
     Supports quality improvement initiatives for participants.
    As an example of quality improvement initiatives by a clinical data 
registry, we note that the Society of Thoracic Surgeons established the 
STS National Database in 1989 for the purpose of quality assessment, 
improvement, and patient safety among cardiothoracic surgeons. The STS 
National Database, which serves a traditional qualified registry under 
the PQRS, provides:
     A standardized, nationally benchmarked tool for assessing 
the care of patients undergoing cardiothoracic operations;
     The opportunity to participate in national quality 
improvement efforts for cardiothoracic surgery that have an impact at 
the local, regional, and national levels;
     A mechanism to target specific areas for clinical practice 
improvement;
     The ability to investigate regional and national practice 
patterns in cardiothoracic surgery; and
     The ability to conduct clinical and comparative 
effectiveness research using national aggregate data set.
    While we do not believe that it is necessary for a qualified 
clinical data registry to possess all of these characteristics for 
purposes of the PQRS, we do believe that it is important for a 
qualified clinical data registry to possess the following 
characteristics:
     Benchmarking capacity for assessing the care furnished to 
patients by the eligible professionals participating in the qualified 
clinical data registry. We believe it is important that a qualified 
clinical data registry possess benchmarking capacity in order to be 
able to compare the quality of care furnished by eligible professionals 
so that eligible professionals using the qualified clinical data 
registry are aware of how the care they furnished is rated as compared 
to other professionals. Eligible professionals would be able to use 
this information to adjust the care they provide, if appropriate. While 
having the capacity to benchmark performance nationally is preferable, 
we believe that a qualified clinical data registry should, at a 
minimum, possess the capacity to benchmark performance across the 
eligible professionals using the qualified clinical data registry.
     The ability to provide timely and frequent feedback to its 
eligible professionals. We believe it is important for eligible 
professionals using a clinical data registry to receive frequent and 
timely feedback on the quality measures data they report through the 
qualified clinical data registry. A traditional PQRS registry is 
required to provide at least 2 feedback reports to eligible 
professionals using the registry. Since we believe that qualified 
clinical data registries should possess a more robust system, we 
believe that qualified clinical data registries should provide timely 
feedback at least quarterly so eligible professionals could view their 
reporting at least 4 times during the yearly reporting period.
    Therefore, based on CMS' authority to define a qualified clinical 
data registry under section 1848(m)(3)(E) of the Act, as added by 
section 601(b) of the American Taxpayer Relief Act of 2012, and 
accounting for the considerations addressed in section 
1848(m)(3)(E)(ii) of the Act and for the reasons stated above, we 
propose to modify Sec.  414.90(b) to add a proposed definition for a 
qualified clinical data registry. Specifically, we propose to define a 
``qualified clinical data registry'' for purposes of the PQRS as a CMS-
approved entity (such as a registry, certification board, 
collaborative, etc.) that collects medical and/or clinical data for the 
purpose of patient and disease tracking to foster improvement in the 
quality of care furnished to patients.
    First, we propose that a qualified clinical data registry must be 
able to submit quality measures data or results to CMS for purposes of 
demonstrating that, for a reporting period, its eligible

[[Page 43362]]

professionals have satisfactorily participated in PQRS. We propose that 
a qualified clinical data registry must have in place mechanisms for 
the transparency of data elements and specifications, risk models, and 
measures. Second, with regard to the consideration under section 
1848(m)(3)(E)(ii)(II) of the Act, as added by section 601(b) of the 
American Taxpayer Relief Act of 2012 that requires the submission of 
data from participants with respect to multiple payers, we propose that 
the data a qualified clinical data registry submitted to CMS for 
purposes of demonstrating satisfactory participation be quality 
measures data on multiple payers, not just Medicare patients.
    Third, with regard to the consideration under section 
1848(m)(3)(E)(ii)(III) of the Act, as added by section 601(b) of the 
American Taxpayer Relief Act of 2012, that a qualified clinical data 
registry provide timely performance reports to participants at the 
individual participant level, we propose that a qualified clinical data 
registry must provide timely feedback at least quarterly on the 
measures for which the qualified clinical data registry would report on 
the individual eligible professional's behalf for purposes of the 
eligible professional meeting the criteria for satisfactory 
participation under PQRS.
    Fourth, to address section 1848(m)(3)(E)(ii)(IV) of the Act, as 
added by section 601(b) of the American Taxpayer Relief Act of 2012, 
regarding whether a qualified clinical data registry supports quality 
improvement initiatives for its participants, we propose to require 
that a qualified clinical data registry possess a method to benchmark 
the quality of care measures an eligible professional provides with 
that of other eligible professionals performing the same or similar 
functions. Benchmarking would require that a qualified clinical data 
registry provide metrics to compare the quality of care its 
participating eligible professional provides. For example, the National 
Committee for Quality Assurance (NCQA) provides national and regional 
benchmarks for certain measures. Adopting benchmarks such as those 
provided by NCQA could serve to satisfy this requirement.
    Please note that it is possible for an entity to serve as a 
traditional, qualified registry and/or a qualified clinical data 
registry under the PQRS.
b. Proposed Requirements for a Qualified Clinical Data Registry
    As we noted above, we are required, under section 1848(m)(3)(E)(i) 
of the Act, to establish requirements for an entity to be considered a 
qualified clinical data registry. Such requirements shall include a 
requirement that the entity provide the Secretary with such 
information, at such times, and in such manner, as the Secretary 
determines necessary to carry out this subsection. Section 
1848(m)(3)(E)(iv) of the Act, as added by section 601(b) of the 
American Taxpayer Relief Act of 2012, requires CMS to consult with 
interested parties in carrying out this provision.
    Pursuant to this authority to establish the requirements for an 
entity to be considered a qualified clinical data registry, we are 
proposing the following requirements that an entity must meet to serve 
as a qualified clinical data registry under the PQRS:
    First, we are proposing the following requirements to ensure that 
the entity seeking to become a qualified clinical data registry is 
well-established:
     Be in existence as of January 1 the year prior to the year 
for which the entity seeks to become a qualified clinical data registry 
(for example, January 1, 2013, to be eligible to participate for 
purposes of data collected in 2014). This proposed requirement is also 
required of a traditional qualified registry. We believe it is 
important for an entity to test out its business practices to ensure 
that the practices it adopts truly foster the improvement of quality 
care prior to seeking to become a qualified clinical data registry. We 
believe that entities that have been in existence for less than one 
year prior to the year for which the entity seeks to become a qualified 
clinical data registry have not had an adequate opportunity to do so.
     Have at least 100 clinical data registry participants by 
January 1 the year prior to the year for which the entity seeks to 
submit clinical quality measures data (for example, January 1, 2013, to 
be eligible to participate under the program with regard to data 
collected in 2014). Please note that not all participants would be 
required to participate in PQRS. We are proposing this requirement to 
ensure that the entity seeking to become a qualified clinical data 
registry is sufficient in size and technical capability. As we believe 
that a qualified clinical data registry should be more robust in 
technical capabilities than a traditional PQRS-qualified registry, we 
believe that a qualified clinical data registry should be sufficiently 
larger in size than a traditional PQRS-qualified registry. Therefore, 
whereas we only required a traditional PQRS-qualified registry to have 
at least 25 registry participants, we believe it is appropriate that we 
require that a qualified clinical data registry have at least 100 
participants.
     Not be owned or managed by an individual, locally-owned, 
single-specialty group (for example, single-specialty practices with 
only 1 practice location or solo practitioner practices would be 
precluded from becoming a qualified clinical data registry).
    In addition, for transparency purposes, we propose that a qualified 
clinical data registry must:
     Enter into and maintain with its participating 
professionals an appropriate Business Associate agreement that provides 
for the qualified clinical data registry's receipt of patient-specific 
data from the eligible professionals as well as the qualified clinical 
data registry's public disclosure of quality measure results.
     Describe to CMS the cost for eligible professionals that 
the qualified clinical data registry charges to submit data to CMS.
    We are also proposing to require qualified clinical data registries 
to meet the following requirements pertaining to the transmission of 
quality measures data to CMS:
     To ensure that the qualified clinical data registry is 
compliant with applicable privacy and security laws and regulations, 
the entity must describe its plan to maintain Data Privacy and Security 
for data transmission, storage and reporting.
     Comply with a CMS-specified secure method for quality data 
submission.
     Provide information on each measure to be reported by an 
eligible professional, including a summary of supporting evidence/
rationale, title, numerator, denominator, exclusions/exceptions, data 
elements and value sets in addition to measure level reporting rates, 
patient-level demographic data and/or the data elements needed to 
calculate the reporting rates by TIN/NPI.
     Submit an acceptable ``validation strategy'' to CMS by 
March 31 of the reporting year the entity seeks qualification (for 
example, if an entity wishes to become qualified for participation with 
regard to data collected in 2014, this validation strategy would be 
required to be submitted to CMS by March 31, 2014). A validation 
strategy would detail how the qualified clinical data registry will 
determine whether eligible professionals succeed in reporting clinical 
quality measures. Acceptable

[[Page 43363]]

validation strategies often include such provisions as the entity 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. For a template for data validation and integrity, 
please also see the requirements for certification of an EHR product by 
the Office of the National Coordinator for Health Information 
Technology (ONC) that are explained at http://www.healthit.gov/policy-researchers-implementers/2014-edition-final-test-method.
     Perform the validation outlined in the strategy and send 
evidence of successful results to CMS by June 30 of the year following 
the reporting period (for example, June 30, 2015, for data collected in 
the reporting periods occurring in 2014).
     Obtain and keep on file for at least 7 years signed 
documentation that each holder of an NPI whose data are submitted to 
the qualified clinical data registry has authorized the registry to 
submit quality measure results and numerator and denominator data and/
or patient-specific data on beneficiaries to CMS for the purpose of 
PQRS participation. This documentation would be required to be obtained 
at the time the eligible professional signs up with the qualified 
clinical data registry to submit quality measures data to the qualified 
clinical data registry and would be required to meet any applicable 
laws, regulations, and contractual business associate agreements.
     Upon request and for oversight purposes, provide CMS 
access to the qualified clinical data registry's database to review the 
beneficiary data on which the qualified clinical data registry-based 
submissions are based or provide to CMS a copy of the actual data.
     Prior to CMS posting the list of qualified clinical data 
registries for a particular year, verify the information contained on 
the list (includes names, contact information, measures, cost, etc.) 
and agree to furnish/support all of the services listed on the list.
     Make available to CMS samples of patient level data to 
audit the entity for purposes of validating the data submitted to CMS 
by the qualified clinical data registry, if determined to be necessary.
     The entity must provide information on how the entity 
collects quality measurement data, if requested.
     By March 31 of the year in which the entity seeks to 
participate in PQRS as a qualified clinical data registry, the entity 
must publically post (on the entity's Web site or other publication 
available to the public) a detailed description (rationale, numerator, 
denominator, exclusions/exceptions, data elements) of the quality 
measures it collects to ensure transparency of information to the 
public.
     The entity must report, on behalf of its individual 
eligible professional participants, a minimum of 9 measures that cross 
3 National Quality Strategy domains.
     The entity, on behalf of its individual eligible 
professional participants, must report on at least one outcomes-based 
measure (defined in this section below).
     The entity, on behalf of its individual eligible 
professional participants, must report on a set of measures from one or 
more of the following categories: CG-CAHPS; NQF endorsed measures 
(information of which is available at http://www.qualityforum.org/Home.aspx); current PQRS measures; measures used by boards or specialty 
societies; and measures used in regional quality collaboratives.
     The entity must demonstrate that it has a plan to publicly 
report their quality data through a mechanism where the public and 
registry participants can view data about individual eligible 
professionals, as well as view regional and national benchmarks. As an 
alternative, we considered requiring that the entity must benchmark 
within its own registry for purposes of determining relative quality 
performance where appropriate.
     The entity must demonstrate that it has a plan to risk 
adjust the quality measures data for which it collects and intends to 
transmit to CMS, where appropriate. Risk adjustment has been described 
as a corrective tool used to level the playing field regarding the 
reporting of patient outcomes, adjusting for the differences in risk 
among specific patients (http://www.sts.org/patient-information/what-risk-adjustment). Risk adjustment also makes it possible to compare 
performance fairly. For example, if an 86 year old female with diabetes 
undergoes bypass surgery, there is less chance for a good outcome when 
compared with a healthy 40 year old male undergoing the same procedure. 
To take factors into account which influence outcomes, for example, 
advanced age, emergency operation, previous heart surgery, a risk 
adjusted model is used to report surgery results.
    Should CMS find, pursuant to an audit, that a qualified clinical 
data registry has submitted inaccurate data, CMS proposes to disqualify 
the qualified clinical data registry, meaning the entity will not be 
allowed to submit quality measures data on behalf of its eligible 
professionals for purposes of meeting the criteria for satisfactory 
participation for the following year. Should an entity be disqualified, 
the entity must again become a qualified clinical data registry before 
it may submit quality measures data on behalf of its eligible 
professionals for purposes of the individual eligible professional 
participants meeting the criteria for satisfactory participation under 
the PQRS. Additionally, we propose that the inaccurate data collected 
would be discounted for purposes of an individual eligible professional 
meeting the criteria for satisfactory participation in a qualified 
clinical data registry. We seek comments on these proposals.
    As we noted, section 1848(m)(3)(E)(i) of the Act, as added by 
section 601(b) of the American Tax Relief Act of 2012, requires us to 
establish requirements for an entity to be considered a qualified 
clinical data registry, including that the entity provide us with such 
information, at such times, and in such manner, as we determine 
necessary to carry out the provision. Given the broad discretion 
afforded under the statute, we propose that qualified clinical data 
registries provide CMS with the quality measures data it collects from 
its eligible professional participants. We believe it is important that 
a qualified clinical data registry provide such data for a number of 
reasons. As we discuss in greater detail below, we believe such 
information is necessary for purposes of determining whether individual 
eligible professionals have satisfactorily participated in a clinical 
qualified data registry under the PQRS. In addition, as discussed in 
section K, we are proposing to use the quality measures data reported 
under the PQRS to assess eligible professionals with regard to applying 
the Value-based Payment Modifier in an upward, downward, and neutral 
adjustment to an eligible professional's Medicare Part B PFS charges. 
Therefore, we propose to require that qualified clinical data 
registries submit quality measures data to CMS. Specifically, to 
further ensure that the quality measures data elements are reported to 
CMS in standardized manner, we propose to require that qualified 
clinical data registries be able to collect all needed data elements 
and transmit the data on quality measures to CMS, upon request, in one 
of two formats, either via a CMS-approved XML format or via the Quality 
Reporting

[[Page 43364]]

Document Architecture (QRDA) category III format. The CMS-approved XML 
format is consistent with how traditional qualified registries under 
the PQRS transmit data on quality measures to CMS. While our preference 
would be to receive data on quality measures via the QRDA category III 
format only since the QRDA category III format is one of the formats we 
require for an EP's EHR or an EHR data submission vendor to submit 
quality measures data (see 77 FR 69183), we understand that the quality 
measures data collected by qualified clinical data registries vary and 
that these qualified clinical data registries may not be equipped to 
submit quality measures data to CMS using the QRDA category III format. 
In future years, it is our intention to require all qualified clinical 
data registries to provide quality measures data via the QRDA category 
III format.
    To ensure that the data provided by the qualified clinical data 
registry is correct, we propose to require that qualified clinical data 
registries provide CMS a signed, written attestation statement via 
email which states that the quality measure results and any and all 
data including numerator and denominator data provided to CMS are 
accurate and complete.
    We propose that, regardless of whether the eligible professional 
uses the XML or QRDA III format to report quality measures data to CMS, 
the qualified clinical data registry would be required to submit this 
data no later than the last Friday occurring 2 months after the end of 
the respective reporting period (that is, February 27, 2015 for 
reporting periods occurring in 2014). We also propose that, if a 
qualified clinical data registry is submitting quality measures data on 
behalf of individual eligible professionals that are part of the same 
group practice (but not participating in the PQRS GPRO), the qualified 
clinical data registry would have the option to report the quality 
measures data to CMS in a batch containing data for each of the 
individual eligible professionals within the group practice, rather 
than submitting individual files for each eligible professional.
    In conjunction with our proposal to require that qualified clinical 
data registries be able to provide data on quality measures in a CMS-
approved XML format, we propose to require that qualified clinical data 
registries report back to participants on the completeness, integrity, 
and accuracy of its participants' data. We believe that it would be 
beneficial to the participants to receive feedback on the data 
transmission process so that the participants are aware of any 
inaccuracies transmitted to CMS.
    Alternatively, with respect to the information CMS would require a 
qualified clinical data registry to furnish to CMS to determine that 
the eligible professionals have met the criteria for satisfactory 
participation for the 2014 PQRS incentive and 2016 PQRS payment 
adjustment, in lieu of accepting quality measures data for reporting 
periods occurring in 2014 only, we considered proposing that a 
qualified clinical data registry provide CMS with a list of the 
eligible professionals (containing the respective eligible 
professionals' TIN/NPI information) who participated in and reported 
quality data to the qualified clinical data registry in order to 
determine which individual eligible professionals met the criteria for 
satisfactory participation for the 2014 PQRS incentive and 2016 PQRS 
payment adjustment. We considered this alternative because we do not 
have experience collecting data from qualified clinical data 
registries, we are unfamiliar with the type of quality data qualified 
clinical data registries collect, and we are still building out our 
data infrastructure.
    We seek public comment on these proposals.
c. Proposed Process for Being Designated as a Qualified Clinical Data 
Registry
    Section 1848(m)(3)(E)(v) of the Act, as added by section 601(b) of 
the American Taxpayer Relief Act of 2012, requires the Secretary to 
establish a process to determine whether or not an entity meets the 
requirements established under section 1848(m)(3)(E)(i) of the Act. 
Such process may involve one or both of the following: (I) A 
determination by the Secretary; (II) A designation by the Secretary of 
one or more independent organizations to make such determination. This 
section sets forth our proposals for our process to determine whether 
or not an entity should be designated as a qualified clinical data 
registry.
    Consistent with what we require of traditional qualified registries 
under the PQRS, we propose that an entity must submit a self-nomination 
statement that indicates its intent to participate in PQRS as a 
qualified clinical data registry. We believe this self-nomination 
statement is necessary for CMS to anticipate how many clinical data 
registries would participate for a certain year as well as provide 
information to eligible professionals about potential participating 
clinical data registries. We propose that the self-nomination statement 
contain the following information:
     The name of the entity seeking to become a qualified 
clinical data registry.
     The entity's contact information, including phone number, 
email, and mailing address.
     A point of contact, including the contact's email address 
and phone number, for which to notify the entity of the status of its 
request to be considered a qualified clinical data registry.
     The measure title, description, and specifications for 
each measure the qualified clinical data registry would require its 
eligible professionals to report for purposes of participating in PQRS. 
In addition, the qualified clinical data registry must describe the 
rationale and evidence basis to support each measure it would require 
its eligible professionals to report.
     The reporting period start date the entity will cover as a 
clinical data registry.
    Since we believe that accepting these statements via email would be 
the most efficient method for collecting and processing self-nomination 
statements, we propose to accept self-nomination statements via email 
only. However, in the event that it is not technically feasible to 
collect this self-nomination statement via email, we propose that 
entities seeking to become qualified clinical data registries submit 
its self-nomination statement via a mailed letter to CMS. The self-
nomination statement would be mailed to the following address: Centers 
for Medicare & Medicaid Services, Center for Clinical Standards and 
Quality, Quality Measurement and Health Assessment Group, 7500 Security 
Boulevard, Mail Stop S3-02-01, Baltimore, MD 21244-1850.
    To ensure that CMS is able to process these self-nomination 
statements as early as possible, we propose that these self-nomination 
statements must be received by CMS by 5:00 p.m. Eastern Standard Time 
on January 31 of the year in which the clinical data registry seeks to 
be qualified (that is, January 31, 2014 for purposes of becoming a 
qualified clinical data registry for the reporting periods for the 2014 
PQRS incentive and 2016 PQRS payment adjustment). We understand that 
this is an early proposed deadline, particularly since this is a new 
reporting mechanism. However, it is necessary for us to propose a 
deadline of January 31 to ensure that we have sufficient time to 
analyze the self-nomination statements we receive, ensure that the 
entity meets the basic requirements for being designated as a qualified 
clinical data

[[Page 43365]]

registry, including whether or not the quality measures the entity 
intends to report on behalf of eligible professionals meet the 
requirements set forth in section I.11 of this proposed rule, and allow 
for sufficient time for eligible professionals to view a list of 
entities that are qualified as clinical data registries for the year 
prior to the end of the applicable reporting period for satisfactory 
participation in a qualified clinical data registry. We anticipate 
posting a list of the entities that are designated by CMS as qualified 
clinical data registries in the Fall of the same year.
    Since participation in a qualified clinical data registry is a new 
option for individual eligible professionals, we anticipate making 
changes to the requirements for becoming a qualified clinical data 
registry in future rulemaking as we gain more experience with this 
option. Since we believe it is important that the entity keep up with 
these changes, at this time, we propose that entities seeking to serve 
as qualified clinical data registries must self-nominate for each year 
that the entity seeks to participate. In the future, we anticipate 
moving towards a 2-year self-nomination process as the requirements for 
qualified clinical data registries become firmly established; however, 
at this time, we are proposing self-nomination for any year in which a 
qualified clinical data registry intends to participate under the PQRS.
    We seek public comment on these proposals.
d. Proposed Reporting Period for the Satisfactory Participation by 
Individual Eligible Professionals in a Qualified Clinical Data Registry 
for the 2014 PQRS Incentive
    Section 1848(m)(3)(D) of the Act, as redesignated and added by 
section 601(b) of the America Taxpayer Relief Act of 2012, authorizes 
the Secretary to treat an individual eligible professional as 
satisfactorily submitting data on quality measures under section 
1848(m)(A) of the Act if the eligible professional is satisfactorily 
participating in a qualified clinical data registry for the year. Given 
that satisfactory participation is with regard to the year, and to 
provide consistency with the reporting period applicable to individual 
eligible professionals who report quality measures data under section 
1848(m)(3)(A), we propose to modify Sec.  414.90(c)(5) to specify a 12-
month, calendar year (CY) reporting period from January 1, 2014 through 
December 31, 2014 for individual eligible professionals to 
satisfactorily participate in a qualified clinical data registry for 
purposes of the 2014 PQRS incentive. We are proposing a 12-month 
reporting period. Based on our experience with the 12 and 6-month 
reporting periods for the PQRS incentives, we believe that data on 
quality measures collected based on 12-months provides a more accurate 
assessment of actions performed in a clinical setting than data 
collected based on shorter reporting periods. In addition, we believe a 
12-month reporting period is appropriate given that the full calendar 
year would be utilized with regard to the participation by the 
individual eligible professional in the qualified clinical data 
registry. We invite public comment on the proposed 12-month, CY 2014 
reporting period for the satisfactory participation of individual 
eligible professionals in a qualified clinical data registry for the 
2014 PQRS incentive.
e. Proposed Criteria for Satisfactory Participation for Individual 
Eligible Professionals in a Qualified Clinical Data Registry for the 
2014 PQRS Incentive
    For 2014, in accordance with Sec.  414.90(c)(3), eligible 
professionals that satisfactorily report data on PQRS quality measures 
are eligible to receive an incentive equal to 0.5 percent of the total 
estimated Medicare Part B allowed charges for all covered professional 
services furnished by the eligible professional or group practice 
during the applicable reporting period. Section 1848(m)(3)(D) of the 
Act, as redesignated and added by section 601(b) of the America 
Taxpayer Relief Act of 2012, authorizes the Secretary to treat an 
individual eligible professional as satisfactorily submitting data on 
quality measures under section 1848(m)(A) of the Act if, in lieu of 
reporting measures under section 1848(k)(2)(C) of the Act, the eligible 
professional is satisfactorily participating in a qualified clinical 
data registry for the year. ``Satisfactory participation'' is a new 
standard under the PQRS and is a substitute for the underlying standard 
of ``satisfactory reporting'' data on covered professional services 
that eligible professionals must meet to earn a PQRS incentive or avoid 
the PQRS payment adjustment. Therefore, we propose to modify Sec.  
414.90 to add paragraph (c)(5) to indicate that individual eligible 
professionals shall be treated as satisfactorily reporting data on 
quality measures if individual eligible professionals satisfactorily 
participate in a qualified clinical data registry for purposes of the 
PQRS incentive. This section also contains the criterion we are 
proposing for individual eligible professionals to meet to 
satisfactorily participate in a qualified clinical data registry for 
purposes of the 2014 PQRS incentive.
    We understand that qualified clinical data registries may have 
different ways to measure success in quality reporting among its 
registry participants. However, for purposes of the 2014 PQRS 
incentive, CMS must establish a standard for satisfactory participation 
in a qualified clinical data registry. Therefore, we propose that, to 
meet the criteria for satisfactory participation for the 2014 PQRS 
incentive, an individual eligible professional would be required to: 
For the 12-month 2014 reporting period, report at least 9 measures 
available for reporting under the qualified clinical data registry 
covering at least 3 of the National Quality Strategy domains, and 
report each measure for at least 50 percent of the eligible 
professional's applicable patients. Of the measures reported via a 
qualified clinical data registry, the eligible professional must report 
on at least 1 outcome measure. We further propose that a qualified 
clinical data registry may submit data on more than 9 quality measures 
on behalf on an eligible professional. However, we propose that a 
qualified clinical data registry may not submit data on more than 20 
measures on behalf of an eligible professional. We propose to place a 
limit on the number of measures that a qualified clinical data registry 
may submit on behalf of an eligible professional at this time because 
we have no experience with qualified clinical data registries and the 
types of data on quality measures that they collect.
    We note that this proposed criterion for satisfactory participation 
is consistent with proposed requirements set forth (for example, the 
reporting period as well as the number of individual measures, domains, 
and applicable patients proposed to be reported) for meeting the 
criteria for the satisfactory reporting of individual PQRS quality 
measures using the traditional claims, registry, and EHR-based 
reporting mechanisms for the 2014 PQRS incentive (for example, the 
reporting period as well as the number of individual measures, domains, 
and applicable patients proposed to be reported). We believe it is 
important to propose a similar quality data reporting criterion for 
individual eligible professionals to satisfactorily participate in a 
qualified clinical data registry as for satisfactory reporting for the 
2014 PQRS incentive so that this proposed satisfactory participation 
option to

[[Page 43366]]

satisfy the PQRS is not disproportionately more advantageous or less 
burdensome than the other proposed criteria for satisfactory reporting 
for the 2014 PQRS incentive. However, this proposed criterion for 
satisfactory participation departs from the proposed criteria for 
satisfactory reporting for the 2014 PQRS incentive in a number of ways. 
First, an eligible professional using a qualified clinical data 
registry is required to report on at least 1 outcome measure. Second, 
whereas the proposed criteria for satisfactory reporting on individual 
PQRS quality measures require the reporting of at least 1 Medicare Part 
B FFS patient, this proposed criterion for satisfactory participation 
in a qualified clinical data registry for the 2014 PQRS incentive would 
not require reporting on Medicare patients. Please note that because we 
are also proposing more stringent requirements for an entity to become 
a qualified clinical data registry than a traditional qualified 
registry, such as requiring benchmarking capacity, we believe that 
individual eligible professionals who participate in a qualified 
clinical data registry would be doing more than just reporting quality 
data to the qualified data registry for PQRS purposes. Over time, as we 
gain more experience with the capabilities of qualified clinical data 
registries, we anticipate that the criteria for satisfactory 
participation will further depart from the criteria for satisfactory 
reporting under PQRS and incorporate other quality improvement 
functions that may be provided by a qualified clinical data registry to 
its participants as this option evolves.
    We seek public comment on the proposed criterion for the 
satisfactory participation by individual eligible professionals in a 
qualified clinical data registry for the 2014 PQRS incentive.
f. Proposed Reporting Period for the Satisfactory Participation for 
Individual Eligible Professionals in a Qualified Clinical Data Registry 
for the 2016 PQRS Payment Adjustment
    Section 1848(m)(3)(D) of the Act, as redesignated and added by 
section 601(b) of the American Tax Relief Act of 2012, authorizes the 
Secretary to treat an individual eligible professional as 
satisfactorily submitting data on quality measures under section 
1848(m)(A) of the Act if the eligible professional is satisfactorily 
participating in a qualified clinical data registry for the year. Given 
that satisfactory participation is with regard to the year, and to 
provide consistency with how individual eligible professionals report 
quality measures data to a qualified clinical data registry, we propose 
to modify Sec.  414.90(e)(2) to specify a 12-month, calendar year (CY) 
reporting period from January 1, 2014 through December 31, 2014, for 
individual eligible professionals to satisfactorily participate in a 
qualified clinical data registry for purposes of the 2016 PQRS payment 
adjustment. We are proposing a 12-month reporting period because, based 
on our experience with the 12 and 6-month reporting periods for the 
PQRS incentives, we believe that data on quality measures collected 
based on 12-months provides a more accurate assessment of actions 
performed in a clinical setting than data collected based on shorter 
reporting period. We also believe that a 12-month reporting period is 
appropriate given that the full calendar year would be utilized with 
regard to the participation by the individual eligible professional in 
the qualified clinical data registry.
    We are proposing a 12-month reporting period occurring 2 years 
prior to the application of the 2016 PQRS payment adjustment for 
individual eligible professionals to allow time to perform all 
reporting analyses, and make determinations about whether the 
individual eligible professional satisfactorily participated in a 
qualified clinical data registry, prior to applying payment adjustments 
on eligible professionals' Medicare Part B PFS claims in 2016. However, 
in future years, we may propose alternative reporting periods that 
could occur closer in time to the application of the PQRS payment 
adjustment. We invite public comment on the proposed 12-month, CY 2014 
reporting period (that is, January 1, 2014-December 31, 2014) for the 
satisfactory participation of individual eligible professionals in a 
qualified clinical data registry for the 2016 PQRS payment adjustment.
g. Proposed Criteria for the Satisfactory Participation for Individual 
Eligible Professionals in a Qualified Clinical Data Registry for the 
2016 PQRS Payment Adjustment
    Section 1848(a)(8) of the Act provides that for covered 
professional services furnished by an eligible professional during 2015 
or any subsequent year, if the eligible professional does not 
satisfactorily report data on quality measures for covered professional 
services for the quality reporting period for the year, the fee 
schedule amount for services furnished by such professional during the 
year shall be equal to the applicable percent of the fee schedule 
amount that would otherwise apply to such services. For 2016 and 
subsequent years, the applicable percent is 98.0 percent.
    Section 1848(m)(3)(D) of the Act, as redesignated and added by 
section 601(b) of the American Tax Relief Act of 2012, authorizes the 
Secretary to treat an individual eligible professional as 
satisfactorily submitting data on quality measures under section 
1848(m)(A) of the Act if, in lieu of reporting measures under section 
1848(k)(2)(C) of the Act, the eligible professional is satisfactorily 
participating in a qualified clinical data registry for the year. 
``Satisfactory participation'' is a new standard under the PQRS and is 
a substitute for the underlying standard of ``satisfactory reporting'' 
data on covered professional services that eligible professionals must 
meet to earn a PQRS incentive or avoid the PQRS payment adjustment. 
Therefore, we propose to modify Sec.  414.90 to add paragraph (e)(2) to 
indicate that individual eligible professionals shall be treated as 
satisfactorily reporting data on quality measures, if the individual 
eligible professional satisfactorily participates in a qualified 
clinical data registry. This section also contains the criterion we are 
proposing for individual eligible professionals to meet to 
satisfactorily participate in a qualified clinical data registry for 
purposes of the 2016 PQRS payment adjustment.
    We propose that, for purposes of the 2016 PQRS payment adjustment 
(which would be based on data reported during the 12-month period that 
falls in CY 2014), the exact same requirement we proposed above for 
satisfactory participation for the 2014 PQRS incentive. We believe it 
is appropriate to propose identical criteria for meeting the new 
standard for satisfactory participation given that the proposed 12-
month reporting period for satisfactory participation in a qualified 
clinical data registry for the respective 2014 PQRS incentive and 2016 
PQRS payment adjustments coincide.
    We seek public comment on the proposed criterion for the 
satisfactory participation by individual eligible professionals in a 
qualified clinical data registry for the 2016 PQRS payment adjustment.
    Tables 24 and 25 provide a summary of the proposed criteria for 
satisfactory reporting and satisfactory participation we discussed 
above for individual eligible professionals for the 2014 PQRS incentive 
and 2016 PQRS payment adjustment respectively.

[[Page 43367]]



   Table 24--Summary of Proposals for the 2014 PQRS Incentive: Proposed Criteria for Satisfactory Reporting of
   Individual Quality Measures via Claims and Registries and Proposed Satisfactory Participation Criterion for
                     Individual Eligible Professionals in Qualified Clinical Data Registries
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed satisfactory
                                                                                       reporting  criteria and
          Reporting period                Measure type        Reporting  mechanism   satisfactory  participation
                                                                                               criteria
----------------------------------------------------------------------------------------------------------------
12-month (Jan 1-Dec 31)............  Individual Measures...  * Claims..............  Report at least 9 measures
                                                                                      covering at least 3 of the
                                                                                      National Quality Strategy
                                                                                      domains, OR, If less than
                                                                                      9 measures apply to the
                                                                                      eligible professional,
                                                                                      then the eligible
                                                                                      professional must report 1-
                                                                                      8 measures for which there
                                                                                      is Medicare patient data;
                                                                                      and Report each measure
                                                                                      for at least 50 percent of
                                                                                      the Medicare Part B FFS
                                                                                      patients seen during the
                                                                                      reporting period to which
                                                                                      the measure applies.
                                                                                      Measures with a 0 percent
                                                                                      performance rate would not
                                                                                      be counted.
12-month (Jan 1-Dec 31)............  Individual Measures...  Qualified Registry....  Report at least 9 measures,
                                                                                      covering at least 3 of the
                                                                                      National Quality Strategy
                                                                                      domains and report each
                                                                                      measure for at least 50%
                                                                                      of the eligible
                                                                                      professional's Medicare
                                                                                      Part B FFS patients seen
                                                                                      during the reporting
                                                                                      period to which the
                                                                                      measure applies. Measures
                                                                                      with a 0 percent
                                                                                      performance rate would not
                                                                                      be counted.
12-month (Jan 1-Dec 31)............  Measures selected by    Qualified Clinical      Report at least 9 measures
                                      Qualified Clinical      Data Registry.          available for reporting
                                      Data Registry.                                  under a qualified clinical
                                                                                      data registry covering at
                                                                                      least 3 of the National
                                                                                      Quality Strategy domains,
                                                                                      and report each measure
                                                                                      for at least 50% of the
                                                                                      eligible professional's
                                                                                      patients. Of the measures
                                                                                      reported via a clinical
                                                                                      data registry, the
                                                                                      eligible professional must
                                                                                      report on at least 1
                                                                                      outcome measure.
----------------------------------------------------------------------------------------------------------------
*Subject to the MAV process.


     Table 25--Summary of Proposals for the 2016 PQRS Payment Adjustment: Proposed Criteria for Satisfactory
   Reporting of Individual Quality Measures via Claims and Registries and Proposed Satisfactory Participation
              Criterion for Individual Eligible Professionals in Qualified Clinical Data Registries
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed satisfactory
          Reporting period                Measure type         Reporting mechanism          reporting  and
                                                                                        participation criteria
----------------------------------------------------------------------------------------------------------------
12-month (Jan 1-Dec 31)............  Individual Measures...  *Claims...............  Report at least 9 measures
                                                                                      covering at least 3 of the
                                                                                      National Quality Strategy
                                                                                      domains, OR, If less than
                                                                                      9 measures apply to the
                                                                                      eligible professional,
                                                                                      then the eligible
                                                                                      professional must report 1-
                                                                                      8 measures for which there
                                                                                      is Medicare patient data;
                                                                                      and Report each measure
                                                                                      for at least 50 percent of
                                                                                      the Medicare Part B FFS
                                                                                      patients seen during the
                                                                                      reporting period to which
                                                                                      the measure applies.
12-month (Jan 1-Dec 31)............  Individual Measures...  Registry..............  Report at least 9 measures,
                                                                                      covering at least 3 of the
                                                                                      National Quality Strategy
                                                                                      domains and report each
                                                                                      measure for at least 50%
                                                                                      of the eligible
                                                                                      professional's Medicare
                                                                                      Part B FFS patients seen
                                                                                      during the reporting
                                                                                      period to which the
                                                                                      measure applies. Measures
                                                                                      with a 0 percent
                                                                                      performance rate would not
                                                                                      be counted.
12-month (Jan 1-Dec 31)............  Measures selected by    Qualified Clinical      Report at least 9 measures
                                      the Qualified           Data Registry.          available for reporting
                                      Clinical Data                                   under a qualified clinical
                                      Registry.                                       data registry covering at
                                                                                      least 3 of the National
                                                                                      Quality Strategy domains,
                                                                                      and report each measure
                                                                                      for at least 50 percent of
                                                                                      the eligible
                                                                                      professional's patients.
                                                                                      Of the measures reported
                                                                                      via a clinical data
                                                                                      registry, the eligible
                                                                                      professional must report
                                                                                      on at least 1 outcome
                                                                                      measure.
----------------------------------------------------------------------------------------------------------------
*Subject to the MAV process.

7. Proposed Criteria for Satisfactory Reporting for the 2014 PQRS 
Incentive for Group Practices in the GPRO
    For 2014, in accordance with Sec.  414.90(c)(3), eligible 
professionals that satisfactorily report data on PQRS quality measures 
are eligible to receive an incentive equal to 0.5 percent of the total 
estimated Medicare Part B allowed charges for all covered professional 
services furnished by the eligible professional or group practice 
during the applicable reporting period. We finalized criteria for the 
satisfactory reporting for group practices participating in the GPRO 
for the 2014 PQRS incentive in the CY 2013 PFS final rule with comment 
period (see

[[Page 43368]]

Table 93, 77 FR 69195). In this section, we propose to change some of 
the criteria for satisfactory reporting for group practices under the 
GPRO using the registry and GPRO Web interface reporting mechanisms.
    Group practices may currently report PQRS quality measures data to 
meet the criteria for satisfactory reporting for the 2014 PQRS 
incentive via the registry, EHR, and GPRO web interface reporting 
mechanisms. For the 2014 PQRS incentive, we finalized the following 
criterion for the satisfactory reporting of PQRS quality measures via 
the GPRO web interface for group practices comprised of 25-99 eligible 
professionals: Report on all measures included in the web interface; 
and populate data fields for the first 218 consecutively ranked and 
assigned beneficiaries in the order in which they appear in the group's 
sample for each module or preventive care measure. If the pool of 
eligible assigned beneficiaries is less than 218, then report on 100 
percent of assigned beneficiaries (77 FR 69195). We established this 
same criterion for the group practices of 25-99 eligible professionals 
for the 2013 PQRS incentive. Unfortunately, there has been low 
participation for this reporting option. We believe this is due to the 
fact that reporting using the GPRO web interface is more beneficial to 
larger practices because larger practices are better able to report on 
a more varied patient population. Therefore, to streamline the PQRS and 
eliminate reporting options that are largely unused, we propose to 
eliminate this criterion under the GPRO for the 2014 PQRS incentive. As 
a result, group practices comprised of 25-99 eligible professionals 
would no longer have the option to report PQRS quality measures using 
the GPRO web interface for the 2014 PQRS incentive. We do not believe 
this harms these smaller groups' practices, as group practices in the 
GPRO would still be able to report PQRS quality measures using either 
the registry or EHR-based reporting mechanisms.
    For reporting under the GPRO using the registry-based reporting 
mechanism, we finalized the following criterion for the satisfactory 
reporting of PQRS quality measures for group practices comprised of 2 
or more eligible professionals for the 2014 PQRS incentive in the CY 
2013 final rule with comment period: Report at least 3 measures, and 
report each measure for at least 80 percent of the group practice's 
Medicare Part B FFS patients seen during the reporting period to which 
the measure applies. Measures with a 0 percent performance rate will 
not be counted (77 FR 69196). For the same reasons we are proposing to 
increase the number of measures an individual eligible must report as 
well as decrease the percentage threshold for individual eligible 
professionals reporting via registry for the 2014 PQRS incentive, we 
propose the following modified criteria for the satisfactory reporting 
of individual quality measures under the GPRO for the registry-based 
reporting mechanism: Report at least 9 measures covering at least 3 of 
the National Quality Strategy domains, and report each measure for at 
least 50% of the group practice's applicable seen during the reporting 
period to which the measure applies. Measures with a 0 percent 
performance rate will not be counted.
    In addition, patient surveys are important tools for assessing 
beneficiary experience of care and outcomes. Many surveys are being 
used in both the private and public sectors, including the Medicare 
Health Outcomes Survey used by Medicare Advantage (MA) plans, Consumer 
Assessment of Healthcare Providers and Systems (CAHPS) survey tools, 
and Health Resources Services Administration's (HRSA's) Health Center 
Patient Satisfaction Survey. Over the past two years, we have developed 
a Consumer Assessment of Healthcare Providers and Systems (CAHPS) 
survey for use with the Medicare Shared Savings Program and the PQRS. 
In 2012, we field tested the survey with a sample of 6,750 Medicare 
Fee-for-Service beneficiaries receiving care from nine group practices 
that participated in the Physician Group Practice Transition 
Demonstration. Subsequent to the field test, we refined the survey and 
in the spring of 2013 administered it for all Accountable Care 
Organizations (ACOs) participating in the Pioneer ACO program and the 
Medicare Shared Savings Program during 2012. More information about the 
survey is available at the Federal Register (77 FR 73032 and 78 FR 
17676).
    Because we believe these patient surveys are important tools for 
assessing beneficiary experience of care and outcomes, under our 
authority under section 1848(m)(3)(C)(i) of the Act to select the 
measures for which a group practice must report, we propose to provide 
group practices comprised of 25 or more eligible professionals with a 
new satisfactory reporting criterion that would include the option to 
complete the CG CAHPS survey along with reporting 6 other PQRS measures 
for purposes of meeting the criteria for satisfactory reporting for the 
2014 PQRS incentive and 2016 PQRS payment adjustment.
    We further propose that the survey would be administered following 
the close of the PQRS registration period. CMS also would provide each 
group a detailed report about the results of the survey. In addition, 
we propose to assign beneficiaries to a group practice using the same 
assignment methodology that we use for the GPRO web interface (77 FR 
69195) . This method focuses on assigning beneficiaries to a group 
based on whether the group provided the plurality of primary care 
services. Because we propose to assign beneficiaries to a group based 
on the provision of primary care services, this survey is not an 
appropriate option for groups of physicians (for example, such as a 
group of surgeons) that do not provide primary care services. In 
accordance with section 1848(m)(3)(C)(ii) of the Act, which requires 
the GPRO to provide for the use of a statistical sampling model, we 
propose that the survey would be administered by certified survey 
vendor on behalf of the group practice for a sample of group's assigned 
beneficiaries. As noted earlier, to complete this survey, a group 
practice must indicate its intent to report the CG CAHPS survey when it 
registers to participate in the PQRS via the GPRO.
    Please note that the CAHPS survey measures only cover 1 National 
Quality Strategy domain. In order to be consistent with other group 
practice reporting criteria we are proposing that require the reporting 
of measures covering at least 3 National Quality Strategy domains, we 
are proposing that, if a group practice reports the CAHPS measures via 
a certified survey vendor, the group practice would be required to 
report on at least 6 additional measures covering at least 2 National 
Quality Strategy domains.
    Specifically, we are proposing the following criteria for 
satisfactory reporting for the 2014 PQRS incentive: For the 12-month 
reporting period for the 2014 PQRS incentive, report all CAHPS survey 
measures via a certified vendor, and report at least 6 measures 
covering at least 2 of the National Quality Strategy domains using the 
qualified registry, direct EHR product, EHR data submission vendor, or 
GPRO web interface reporting mechanisms.
    We seek public comment on our proposed criterion for the 
satisfactory reporting of data on these PQRS quality measures under the 
GPRO for the 2014 PQRS incentive.

[[Page 43369]]

8. Criteria for Satisfactory Reporting for the 2016 PQRS Payment 
Adjustment for Group Practices in the GPRO
    This section addresses the proposed criteria for satisfactory 
reporting for group practices in the GPRO for the 2016 PQRS payment 
adjustment using the registry, GPRO web interface, and certified survey 
vendor reporting mechanisms. In the CY 2013 PFS final rule with comment 
period, we finalized the same criteria for satisfactorily reporting 
data on quality measures for the 2016 PQRS payment adjustment that 
apply for the 2014 PQRS incentive for the PQRS GPRO (77 FR 69200). We 
are making three of the same proposals for the criteria for 
satisfactory reporting under the GPRO for the 2016 PQRS payment 
adjustment that we are proposing for the 2014 PQRS incentive. 
Specifically, we propose to eliminate the following criterion for 
satisfactory reporting of PQRS quality measures via the GPRO web 
interface for group practices comprised of 25-99 eligible 
professionals: Report on all measures included in the web interface; 
and populate data fields for the first 218 consecutively ranked and 
assigned beneficiaries in the order in which they appear in the group's 
sample for each module or preventive care measure. If the pool of 
eligible assigned beneficiaries is less than 218, then report on 100 
percent of assigned beneficiaries. For the same reasons discussed 
previously and to maintain consistent criteria for the 2016 PQRS 
payment adjustment and 2014 PQRS incentive, we believe this proposed 
change is appropriate. We also note that if this proposal is finalized, 
only groups of 100 or more eligible professionals would be able to use 
the web interface reporting mechanism to report quality data under the 
GPRO.
    Second, we propose to remove the following criterion for 
satisfactory reporting via registry under the GPRO for the 2016 PQRS 
payment adjustment: Report at least 3 measures, and report each measure 
for at least 80 percent of the group practice's Medicare Part B FFS 
patients seen during the reporting period to which the measure applies. 
Measures with a 0 percent performance rate will not be counted. This 
would allow us to maintain consistent criteria for the 2016 PQRS 
payment adjustment and 2014 PQRS incentive.
    Consistent with our proposal to provide group practices comprised 
of 25 or more eligible professionals with a new satisfactory reporting 
criterion that would include the option to complete the CG CAHPS survey 
along with reporting 6 other PQRS measures for purposes of meeting the 
criteria for satisfactory reporting for the 2014 PQRS incentive, we 
also propose the same criterion for purposes of meeting the criteria 
for satisfactory reporting for the 2016 PQRS payment adjustment. 
Specifically, we are proposing the following criteria for satisfactory 
reporting for the 2016 PQRS payment adjustment: For the 12-month 
reporting period for the 2016 PQRS payment adjustment, report all CAHPS 
survey measures via a certified vendor, and report at least 6 measures 
covering at least 2 of the National Quality Strategy domains using the 
qualified registry, direct EHR product, EHR data submission vendor, or 
GPRO web interface reporting mechanisms. As noted earlier, to complete 
this survey, a group practice must indicate its intent to report the CG 
CAHPS survey when it registers to participate in the PQRS via the GPRO.
    In addition, we are proposing the same criteria for satisfactory 
reporting of individual quality measures under the GPRO for the 
registry-based reporting mechanism for the 2016 PQRS payment adjustment 
that we proposed above for the 2014 PQRS Incentive: Report at least 9 
measures covering at least 3 of the National Quality Strategy domains, 
and report each measure for at least 50 percent of the group practice's 
applicable patients seen during the reporting period to which the 
measure applies. Measures with a 0 percent performance rate will not be 
counted. In addition to the reasons we noted previously for modifying 
the existing registry satisfactory reporting criterion to increase the 
number of measures reported from 3 to 9, we believe it is appropriate 
to continue to align, as closely as possible, the criteria for 
satisfactory reporting for both the 2016 PQRS payment adjustment and 
2014 PQRS Incentive.
    We note that the criteria for satisfactory reporting under the GPRO 
for the 2014 PQRS incentive and the 2016 PQRS payment adjustment would 
align (such that a group practice would avoid the 2016 PQRS payment 
adjustment by meeting any of the criteria for satisfactory reporting 
adopted for the 2014 PQRS incentive for the 12-month reporting period). 
We believe this is appropriate since the reporting period for the 2014 
PQRS incentive and 2016 PQRS payment adjustment coincide. We seek 
public comment on these proposals as well as on whether we should offer 
alternative criteria for group practices participating in the PQRS GPRO 
to satisfy the 2016 PQRS payment adjustment similar to what we have 
established for individual eligible professionals reporting via claims.
    Tables 26 and 27 provides a summary of our proposed criteria for 
the satisfactory reporting of data on PQRS quality measures via the 
GPRO for the 2014 PQRS incentive and 2016 PQRS payment adjustment.

Table 26--Summary of Proposals for the 2014 PQRS Incentive: Proposed Criteria for Satisfactory Reporting of Data
                                      on PQRS Quality Measures via the GPRO
----------------------------------------------------------------------------------------------------------------
          Reporting period            Reporting  mechanism     Group practice size   Proposed reporting criteria
----------------------------------------------------------------------------------------------------------------
12-month (Jan 1-Dec 31)............  Qualified Registry....  2 + eligible            Report at least 9 measures
                                                              professionals.          covering at least 3 of the
                                                                                      National Quality Strategy
                                                                                      domains, and report each
                                                                                      measure for at least 50
                                                                                      percent of the group
                                                                                      practice's applicable
                                                                                      patients seen during the
                                                                                      reporting period to which
                                                                                      the measure applies.
                                                                                      Measures with a 0 percent
                                                                                      performance rate will not
                                                                                      be counted.
12-month (Jan 1-Dec 31)............  Certified Survey        25+ eligible            Report all CG CAHPS survey
                                      Vendor + Qualified      professionals.          measures via certified
                                      Registry, direct EHR                            survey vendor, and report
                                      product, EHR data                               at least 6 measures
                                      submission vendor, or                           covering at least 2 of the
                                      GPRO web interface.                             National Quality Strategy
                                                                                      domains using the
                                                                                      qualified registry, direct
                                                                                      EHR product, EHR data
                                                                                      submission vendor, or GPRO
                                                                                      web interface reporting
                                                                                      mechanisms.
----------------------------------------------------------------------------------------------------------------


[[Page 43370]]


     Table 27--Summary of Proposals for the 2016 PQRS Payment Adjustment: Proposed Criteria for Satisfactory
                             Reporting of Data on PQRS Quality Measures via the GPRO
----------------------------------------------------------------------------------------------------------------
          Reporting period            Reporting  mechanism     Group practice size   Proposed reporting criteria
----------------------------------------------------------------------------------------------------------------
12-month (Jan 1-Dec 31)............  Qualified Registry....  2 + eligible            Report at least 9 measures
                                                              professionals.          covering at least 3 of the
                                                                                      National Quality Strategy
                                                                                      domains, and report each
                                                                                      measure for at least 50
                                                                                      percent of the group
                                                                                      practice's applicable
                                                                                      patients seen during the
                                                                                      reporting period to which
                                                                                      the measure applies.
                                                                                      Measures with a 0 percent
                                                                                      performance rate will not
                                                                                      be counted.
12-month (Jan 1-Dec 31)............  Certified Survey        25+ eligible            Report all CG CAHPS survey
                                      Vendor + Qualified      professionals.          measures via certified
                                      Registry, direct EHR                            survey vendor, and report
                                      product, EHR data                               at least 6 measures
                                      submission vendor, or                           covering at least 2 of the
                                      GPRO web interface.                             National Quality Strategy
                                                                                      domains using the
                                                                                      qualified registry, direct
                                                                                      EHR product, EHR data
                                                                                      submission vendor, or GPRO
                                                                                      web interface reporting
                                                                                      mechanisms.
----------------------------------------------------------------------------------------------------------------

9. Statutory Requirements and Other Considerations for the Selection of 
PQRS Quality Measures for Meeting the Criteria for Satisfactory 
Reporting for 2013 and Beyond for Individual Eligible Professionals and 
Group Practices
    CMS undergoes an annual Call for Measures that solicits new 
measures from the public for possible inclusion in the PQRS for 2014 
and beyond. During the Call for Measures, we request measures for 
inclusion in PQRS that meet the following statutory and non-statutory 
criteria.
    Sections 1848(k)(2)(C) and 1848(m)(3)(C)(i) of the Act, 
respectively, govern the quality measures reported by individual 
eligible professionals and group practices reporting under the PQRS. 
Under section 1848(k)(2)(C)(i) of the Act, the PQRS quality measures 
shall be such measures selected by the Secretary from measures that 
have been endorsed by the entity with a contract with the Secretary 
under section 1890(a) of the Act (currently, that is the National 
Quality Forum, or NQF). However, in the case of a specified area or 
medical topic determined appropriate by the Secretary for which a 
feasible and practical measure has not been endorsed by the NQF, 
section 1848(k)(2)(C)(ii) of the Act authorizes the Secretary to 
specify a measure that is not so endorsed as long as due consideration 
is given to measures that have been endorsed or adopted by a consensus 
organization identified by the Secretary, such as the AQA alliance. In 
light of these statutory requirements, we believe that, except in the 
circumstances specified in the statute, each PQRS quality measure must 
be endorsed by the NQF. Additionally, section 1848(k)(2)(D) of the Act 
requires that for each PQRS quality measure, ``the Secretary shall 
ensure that eligible professionals have the opportunity to provide 
input during the development, endorsement, or selection of measures 
applicable to services they furnish.''
    The statutory requirements under section 1848(k)(2)(C) of the Act, 
subject to the exception noted previously, require only that the 
measures be selected from measures that have been endorsed by the 
entity with a contract with the Secretary under section 1890(a) (that 
is, the NQF) and are silent for how the measures that are submitted to 
the NQF for endorsement were developed. The basic steps for developing 
measures applicable to physicians and other eligible professionals 
prior to submission of the measures for endorsement may be carried out 
by a variety of different organizations. We do not believe there needs 
to be any special restrictions on the type or make-up of the 
organizations carrying out this basic process of development of 
physician measures, such as restricting the initial development to 
physician-controlled organizations. Any such restriction would unduly 
limit the basic development of quality measures and the scope and 
utility of measures that may be considered for endorsement as voluntary 
consensus standards for purposes of the PQRS.
    In addition to section 1848(k)(2)(C) of the Act, section 1890A of 
the Act, which was added by section 3014(b) of the Affordable Care Act, 
requires that the entity with a contract with the Secretary under 
subsection 1890(a) of the Act (currently that, is the NQF) convene 
multi-stakeholder groups to provide input to the Secretary on the 
selection of certain categories of quality and efficiency measures. 
These categories are described in section 1890(b)(7)(B) of the Act, and 
include such measures as the quality measures selected for reporting 
under the PQRS. Pursuant to section 3014 of Affordable Care Act, the 
NQF convened multi-stakeholder groups by creating the Measure 
Applications Partnership (MAP). Section 1890(A)(a) of the Act requires 
that the Secretary establish a pre-rulemaking process in which the 
Secretary must make publicly available by December 1st of each year a 
list of the quality and efficiency measures that the Secretary is 
considering for selection through rulemaking for use in the Medicare 
program. The NQF must provide CMS with the MAP's input on selecting 
measures by February 1st of each year. The list of measures under 
consideration for 2013 is available at http://www.qualityforum.org/map/
.
    As we noted above, section 1848(k)(2)(C)(ii) of the Act provides an 
exception to the requirement that the Secretary select measures that 
have been endorsed by the entity with a contract under section 1890(a) 
of the Act (that is, the NQF). We may select measures under this 
exception if there is a specified area or medical topic for which a 
feasible and practical measure has not been endorsed by the entity, as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. 
Under this exception, aside from NQF endorsement, we requested that 
stakeholders apply the following considerations when submitting 
measures for possible inclusion in the PQRS measure set:
     High impact on healthcare.
     Measures that are high impact and support CMS and HHS 
priorities for improved quality and efficiency of care for Medicare 
beneficiaries.
     Measures that address gaps in the quality of care 
delivered to Medicare beneficiaries.
     Address Gaps in the PQRS measure set.
     Measures impacting chronic conditions (chronic kidney 
disease, diabetes mellitus, heart failure, hypertension and 
musculoskeletal).

[[Page 43371]]

     Measures applicable across care settings (such as, 
outpatient, nursing facilities, domiciliary, etc.).
     Broadly applicable measures that could be used to create a 
core measure set required of all participating eligible professionals.
     Measures groups that reflect the services furnished to 
beneficiaries by a particular specialty.
10. Proposed PQRS Quality Measures
    Taking into consideration the statutory and non-statutory criteria 
we described previously, this section contains our proposals for the 
inclusion or removal of measures in PQRS for 2014 and beyond. We are 
classifying all proposed measures against six domains based on the 
National Quality Strategy's six priorities, as follows:
    (1) Person and Caregiver-Centered Experience and Outcomes. These 
are measures that reflect the potential to improve patient-centered 
care and the quality of care delivered to patients. They emphasize the 
importance of collecting patient-reported data and the ability to 
impact care at the individual patient level as well as the population 
level through greater involvement of patients and families in decision 
making, self-care, activation, and understanding of their health 
condition and its effective management.
    (2) Patient Safety. These are measures that reflect the safe 
delivery of clinical services in both hospital and ambulatory settings 
and include processes that would reduce harm to patients and reduce 
burden of illness. These measures should enable longitudinal assessment 
of condition-specific, patient-focused episodes of care.
    (3) Communication and Care Coordination. These are measures that 
demonstrate appropriate and timely sharing of information and 
coordination of clinical and preventive services among health 
professionals in the care team and with patients, caregivers, and 
families to improve appropriate and timely patient and care team 
communication.
    (4) Community/Population Health. These are measures that reflect 
the use of clinical and preventive services and achieve improvements in 
the health of the population served. These are outcome-focused and have 
the ability to achieve longitudinal measurement that will demonstrate 
improvement or lack of improvement in the health of the US population.
    (5) Efficiency and Cost Reduction. These are measures that reflect 
efforts to significantly improve outcomes and reduce errors. These 
measures also impact and benefit a large number of patients and 
emphasize the use of evidence to best manage high priority conditions 
and determine appropriate use of healthcare resources.
    (6) Effective Clinical Care. These are measures that reflect 
clinical care processes closely linked to outcomes based on evidence 
and practice guidelines.
    Please note that the PQRS quality measure specifications for any 
given proposed PQRS individual quality measure may differ from 
specifications for the same quality measure used in prior years. For 
example, for the proposed PQRS quality measures that were selected for 
reporting in 2013 and beyond, please note that detailed measure 
specifications, including the measure's title, for the proposed 
individual PQRS quality measures for 2013 and beyond may have been 
updated or modified during the NQF endorsement process or for other 
reasons. In addition, due to our desire to align measure titles with 
the measure titles that were proposed for 2013, 2014, 2015, and 
potentially subsequent years of the EHR Incentive Program, we note that 
the measure titles for measures available for reporting via EHR may 
change. To the extent that the EHR Incentive Program updates its 
measure titles to include version numbers (77 FR 13744), we intend to 
use these version numbers to describe the PQRS EHR measures that will 
also be available for reporting for the EHR Incentive Program. We will 
continue to work toward complete alignment of measure specifications 
across programs whenever possible.
    Through NQF's measure maintenance process, NQF endorsed measures 
are sometimes updated to incorporate changes that we believe do not 
substantively change the nature of the measure. Examples of such 
changes could be updated diagnosis or procedure codes or changes to 
exclusions to the patient population or definitions. We believe these 
types of maintenance changes are distinct from more substantive changes 
to measures that result in what are considered new or different 
measures, and that they do not trigger the same agency obligations 
under the Administrative Procedure Act. In the CY 2013 PFS final rule 
with comment period, we finalized our proposal providing that if the 
NQF updates an endorsed measure that we have adopted for the PQRS in a 
manner that we consider to not substantively change the nature of the 
measure, we would use a subregulatory process to incorporate those 
updates to the measure specifications that apply to the program (77 FR 
69207). We believe this adequately balances our need to incorporate 
non-substantive NQF updates to NQF-endorsed measures in the most 
expeditious manner possible, while preserving the public's ability to 
comment on updates that so fundamentally change an endorsed measure 
that it is no longer the same measure that we originally adopted. We 
also note that the NQF process incorporates an opportunity for public 
comment and engagement in the measure maintenance process. We will 
revise the Specifications Manual and post notices to clearly identify 
the updates and provide links to where additional information on the 
updates can be found. Updates will also be available on the CMS PQRS 
Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html.
    With respect to the PQRS EHR measures that are also reportable 
under the EHR Incentive Program (i.e., electronically specified 
clinical quality measures), please note that the updates to these 
measures will be provided on the EHR Incentive Program Web site. We 
understand that the EHR Incentive Program may accept versions of 
electronically specified clinical quality measures that may be 
outdated. We propose that for purposes of the PQRS, eligible 
professionals must report the most recent, updated version of a 
clinical quality measure. For example, for purposes of reporting 
clinical quality measures that are electronically specified during the 
PQRS reporting periods that occur in 2014, we would only accept the 
reporting of clinical quality measures that are electronically 
specified using versions of the electronic specifications that were 
updated and posted on June 2013, available at http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. We also understand, for purposes of the EHR Incentive 
Program, that once direct EHR products and EHR data submission vendors 
are issued a 2014 Edition certification for clinical quality measures, 
they will not necessarily be required to have such technology retested 
and recertified against the most recent, updated version of a clinical 
quality measure when such versions are made available. We propose that 
for purposes of PQRS, however, that the eligible professional's direct 
EHR product or EHR data submission vendor must be tested and certified 
to the most recent, updated version of an electronically specified 
clinical quality

[[Page 43372]]

measure. For example, for purposes of reporting clinical quality 
measures that are electronically specified during the PQRS reporting 
periods that occur in 2014, we would only accept the reporting of 
clinical quality measures from direct EHR products or EHR data 
submission vendors that have been tested and certified to versions of 
the electronic specifications that were updated and posted on June 
2013. We seek comment on our proposals to require eligible 
professionals to both use the most recent, updated version of an 
electronically specified clinical quality measure to report for PQRS 
and to use a direct EHR product or EHR data submission vendor that has 
been tested and certified to the most recent, updated version of the 
clinical quality measure's electronic specifications for PQRS purposes.
a. Proposed Individual PQRS Measures and Measures Within Measures 
Groups Available for Reporting for 2014 and Beyond
(1) Proposed PQRS Core Measures Available for Reporting for 2014 and 
Beyond
    In the CY 2013 PFS final rule with comment period, we finalized the 
HHS Million Hearts Measures as a recommended set of core measures for 
which we encourage eligible professionals to report in PQRS (77 FR 
69209). In addition to the HHS Million Hearts Measures we previously 
finalized, we are proposing to include the measures specified in Table 
28 as additional recommended core measures for 2014 and beyond (in the 
table we also identify the applicable PQRS reporting mechanism through 
which each measure could be submitted). These additional proposed 
recommended core measures were also finalized as recommended core 
measures in the EHR Incentive Program for 2014. Therefore, due to our 
desire to align with the recommended measures available under the EHR 
Incentive Program, we are proposing the additional recommended measures 
specified in Table 28 for 2014 and beyond.
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(2) Proposed Individual PQRS Measures Available for Reporting for 2014 
and Beyond
    Table 29 contains the measures we are proposing to include in the 
PQRS measure set for 2014 and beyond. Please note that our rationale 
for proposing each of these measures is found below the measure 
description. We have also indicated the PQRS reporting mechanism or 
mechanisms through which each proposed measure could be submitted.
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    In Table 30, we specify the measures we are proposing to remove 
from reporting under the PQRS. Please note that the rationale we have 
for each measure we are proposing to remove is specified after the 
measure title and description.

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b. Proposed PQRS Measures Groups
    Section 414.90(b) defines a measures group as ``a subset of four or 
more Physician Quality Reporting System measures that have a particular 
clinical condition or focus in common. The denominator definition and 
coding of the measures group identifies the condition or focus that is 
shared across the measures within a particular measures group.'' As we 
discussed in section IV.I.4. above, we propose to increase the number 
of measures reported by individual eligible professionals via claims 
and registry from 3 to 9. Since we are proposing to increase the number 
of individual measures to be reported via claims and registry, we 
believe it is also appropriate to increase the number of measures that 
would be reported in a measures group. Specifically, we propose to 
modify the minimum amount of measures that may be included in a PQRS 
measures group from four to six. Therefore, we are proposing to modify 
the definition of a measures group at Sec.  414.90(b) to indicate that 
a measures group would consist of at least six measures. Consequently, 
we are proposing to add additional measures to measures groups that 
previously contained less than six measures. We believe that, although 
it is appropriate to increase the number of measures in a measures 
group, we do not believe it would be appropriate to increase the 
minimum number of reportable measures in a measures group to 9, such as 
we are proposing for individual eligible professionals who report 
individual quality measures via claims and registry. Unlike reporting 
individual measures, where an eligible professional would be able to 
report on any 9 measures of his/her choosing, an eligible professional 
is required to report on ALL the measures contained in a measures 
group. We believe increasing the number of minimum measures in a 
measures group to six is reasonable, as it would only require the 
eligible professional to report on an additional two measures.
    Tables 31 through 53 specify our proposed measures groups in light 
of our proposal to increase the minimum number of measures in a 
measures group in previously established measures groups, so that each 
measures group contains at least 6 measures (77 FR 69272).
    In addition to the measures groups that we finalized for 2013 and 
beyond, we are proposing the following three additional measures 
groups, which are identified in Tables 54 through 56:
     Optimizing Patient Exposure to Ionizing Radiation: This 
measures group represents a new clinical theme for eligible 
professionals to report and addresses a clinical gap. This measure set 
includes measures collecting data for standardized nomenclature, count 
of high dose radiation, reporting to a radiation dose index registry, 
availability of CT images for follow-up/comparison, and search of CT 
images through a secure, authorized, media-free, shared archive, and CT 
follow-up for incidental pulmonary nodules. This would be a measures 
group that specialty Radiologists and other eligible professionals 
within this scope of practice could report.
     General Surgery: Addition of a General Surgery Measures 
Group including procedures such as ventral hernia, appendectomy, AV 
fistula, cholecystectomy, thyroidectomy, mastectomy, lymphadenectomy, 
sentinel lymph node biopsy (SLNB), or lumpectomy/breast biopsy would 
allow surgeons another opportunity to report via measures group 
reporting.
     Gastrointestinal Surgery: This measures group could be 
reported by specialized general surgical eligible professionals that 
focus on bariatric and colectomy procedures. PQRS currently has another 
measures group in which Surgeons and other eligible professionals may 
report: Perioperative Measures Group. However, these measures address a 
gap in that it would produce data that specifically evaluate iatrogenic 
injury to adjacent organ, anastomotic leak intervention, and unplanned 
reoperation.
    Please note that, since we are proposing to eliminate the option to 
report measures groups via claims, all measures groups proposed for 
2014 and beyond would be reportable through registry-based reporting 
only.
    [yen] Titles and descriptions in these tables are aligned with the 
2014 Physician Quality Reporting System Claims and Registry measure 
titles and descriptions, and may differ from existing measures in other 
programs. Please reference the National Quality Forum (NQF) and 
Physician Quality Reporting System numbers for clarification.
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BILLING CODE 4120-01-C
    We seek public comment on these proposals.
c. Proposed Reporting Mechanism Changes to PQRS Individual Measures for 
2014 and Beyond
    In addition to the measures and measures groups we are proposing to 
include or remove from the existing PQRS measure set, we propose to 
modify how existing PQRS measures can be reported. Specifically, we 
propose that the following measures would no longer be reportable 
through the claims-based reporting mechanism:
     PQRS 9 (NQF 0105): Major Depressive 
Disorder (MDD): Antidepressant Medication during Acute Phase for 
Patients with MDD: Percentage of patients aged 18 years and older 
diagnosed with new episode of MDD and documented as treated with 
antidepressant medication during the entire 84-day (12-week) acute 
treatment phase. Rationale: 2012 claims data indicates that a low 
threshold of eligible professionals reported this measure. This 
proposal is also supported because there are still a sufficient number 
of measures for these eligible professionals to report via claims.
     PQRS 64 (NQF 0001): Asthma: Assessment 
of Asthma Control--Ambulatory Care Setting: Percentage of patients aged 
5 through 50 years with a diagnosis of asthma who were evaluated at 
least once for asthma control (comprising asthma impairment and asthma 
risk). Rationale: 2012 claims data indicates that a low threshold of 
eligible professionals reported this measure. This measure is contained 
within the asthma measures group.
     PQRS 53: Asthma: Pharmacologic Therapy for 
Persistent Asthma--Ambulatory Care Setting. Rationale: Changing PQRS 
measure 64 to a

[[Page 43475]]

registry only measure would affect this measure. There would be no way 
to use the MAV with this measure because it is part of the MAV cluster 
associated with PQRS 64.
     PQRS 65 (NQF 0069): Appropriate 
Treatment for Children with Upper Respiratory Infection (URI): 
Percentage of children aged 3 months through 18 years with a diagnosis 
of URI who were not prescribed or dispensed an antibiotic prescription 
on or within 3 days of the initial date of service. Rationale: 2012 
claims data indicates that a low threshold of eligible professionals 
reported this measure. This proposal is also supported because there 
are still a sufficient amount of measures for these eligible 
professionals to report via claims.
     PQRS 66 (NQF 0002): Appropriate Testing 
for Children with Pharyngitis: Percentage of children aged 2 through 18 
years with a diagnosis of pharyngitis, who were prescribed an 
antibiotic and who received a group A streptococcus (strep) test for 
the episode. A higher rate represents better performance (that is, 
appropriate testing). Rationale: 2012 claims data indicates that a low 
threshold of eligible professionals reported this measure. This 
proposal is also supported because there are still a sufficient amount 
of measures for these eligible professionals to report via claims.
     PQRS 87 (NQF 0398): Hepatitis C: HCV 
Ribonucleic Acid (RNA) Testing at Week 12 of Treatment: Percentage of 
patients aged 18 years and older with a diagnosis of chronic hepatitis 
C who are receiving antiviral treatment for whom quantitative HCV RNA 
testing was performed at no greater than 12 weeks from the initiation 
of antiviral treatment. Rationale: 2012 claims data indicates that a 
low threshold of eligible professionals reported this measure. This 
proposal is also supported because there are still a sufficient amount 
of measures for these eligible professionals to report via claims.
     PQRS 89 (NQF 0401): Hepatitis C: 
Counseling Regarding Risk of Alcohol Consumption: Percentage of 
patients aged 18 years and older with a diagnosis of hepatitis C who 
were counseled about the risks of alcohol use at least once within 12-
months. Rationale: 2012 claims data indicates that a low threshold of 
eligible professionals reported this measure. This proposal is also 
supported because there are still a sufficient amount of measures for 
these eligible professionals to report via claims.
     PQRS 90 (NQF 0394): Hepatitis C: 
Counseling Regarding Use of Contraception Prior to Antiviral Therapy: 
Percentage of female patients aged 18 through 44 years and all men aged 
18 years and older with a diagnosis of chronic Hepatitis C who are 
receiving antiviral treatment who were counseled regarding 
contraception prior to the initiation of treatment. Rationale: 2012 
claims data indicates that a low threshold of eligible professionals 
reported this measure. This proposal is also supported because there 
are still a sufficient amount of measures for these eligible 
professionals to report via claims
     PQRS 116 (NQF 0058): Antibiotic 
Treatment for Adults with Acute Bronchitis: Avoidance of Inappropriate 
Use: Percentage of adults aged 18 through 64 years with a diagnosis of 
acute bronchitis who were not prescribed or dispensed an antibiotic 
prescription on or within 3 days of the initial date of service. 
Rationale: 2012 claims data indicates that a low threshold of eligible 
professionals reported this measure. This proposal is also supported 
because there are still a sufficient amount of measures for these 
eligible professionals to report via claims.
     PQRS 126: DM: Diabetic Foot and Ankle Care, 
Peripheral Neuropathy-Neurological Evaluation. Rationale: 2012 claims 
data indicates that a low threshold of eligible professionals reported 
this measure. This proposal is also supported because there are still a 
sufficient amount of measures for these eligible professionals to 
report via claims.
     PQRS 127 (NQF 0416): Diabetes Mellitus: 
Diabetic Foot and Ankle Care, Ulcer Prevention--Evaluation of Footwear: 
Percentage of patients aged 18 years and older with a diagnosis of 
diabetes mellitus who were evaluated for proper footwear and sizing. 
Rationale: 2012 claims data indicates that a low threshold of eligible 
professionals reported this measure. This proposal is also supported 
because there are still a sufficient amount of measures for these 
eligible professionals to report via claims.
     PQRS 176 (AQA Adopted): Rheumatoid Arthritis 
(RA): Tuberculosis Screening: Percentage of patients aged 18 years and 
older with a diagnosis of RA who have documentation of a tuberculosis 
(TB) screening performed and results interpreted within 6 months prior 
to receiving a first course of therapy using a biologic disease-
modifying anti-rheumatic drug (DMARD). Rationale: 2012 claims data 
indicates that a low threshold of eligible professionals reported this 
measure. This proposal is also supported because there are still a 
sufficient amount of measures for these eligible professionals to 
report via claims.
     PQRS 177 (AQA Adopted): Rheumatoid Arthritis 
(RA): Periodic Assessment of Disease Activity: Percentage of patients 
aged 18 years and older with a diagnosis of RA who have an assessment 
and classification of disease activity within 12 months. Rationale: 
2012 claims data indicates that a low threshold of eligible 
professionals reported this measure. This proposal is also supported 
because there are still a sufficient amount of measures for these 
eligible professionals to report via claims.
     PQRS 178 (AQA Adopted): Rheumatoid Arthritis 
(RA): Functional Status Assessment: Percentage of patients aged 18 
years and older with a diagnosis of RA for whom a functional status 
assessment was performed at least once within 12 months. Rationale: 
2012 claims data indicates that a low threshold of eligible 
professionals reported this measure. This proposal is also supported 
because there are still a sufficient amount of measures for these 
eligible professionals to report via claims.
     PQRS 179 (AQA Adopted): Rheumatoid Arthritis 
(RA): Assessment and Classification of Disease Prognosis: Percentage of 
patients aged 18 years and older with a diagnosis of RA who have an 
assessment and classification of disease prognosis at least once within 
12 months. Rationale: 2012 claims data indicates that a low threshold 
of eligible professionals reported this measure. This proposal is also 
supported because there are still a sufficient amount of measures for 
these eligible professionals to report via claims.
     PQRS 148 (NQF 0322): Back Pain: Initial 
Visit: Percentage of patients aged 18 through 79 years with a diagnosis 
of back pain or undergoing back surgery who had back pain and function 
assessed during the initial visit to the clinician for the episode of 
back pain. Rationale: We believe this measure (which is only reportable 
when reporting the entire Back Pain measures group) is more 
appropriately reported via registry.
     PQRS 149 (NQF 0319): Back Pain: Physical 
Exam: Percentage of patients aged 18 through 79 years with a diagnosis 
of back pain or undergoing back surgery who received a physical 
examination at the initial visit to the clinician for the episode of 
back pain. Rationale: We believe this measure (which is only reportable 
when reporting the entire Back Pain measures group) is more 
appropriately reported via registry.

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     PQRS 150 (NQF 0314): Back Pain: Advice 
for Normal Activities: Percentage of patients aged 18 through 79 years 
with a diagnosis of back pain or undergoing back surgery who received 
advice for normal activities at the initial visit to the clinician for 
the episode of back pain. Rationale: We believe this measure (which is 
only reportable when reporting the entire Back Pain measures group) is 
more appropriately reported via registry.
     PQRS 151 (NQF 0313): Back Pain: Advice 
Against Bed Rest: Percentage of patients aged 18 through 79 years with 
a diagnosis of back pain or undergoing back surgery who received advice 
against bed rest lasting four days or longer at the initial visit to 
the clinician for the episode of back pain. Rationale: We believe this 
measure (which is only reportable when reporting the entire Back Pain 
measures group) is more appropriately reported via registry.
d. The Clinician Group (CG) Consumer Assessment of Healthcare Providers 
and Systems (CAHPS) Survey
    Because we believe these patient surveys are important tools for 
assessing beneficiary experience of care and outcomes, under our 
authority under section 1848(m)(3)(C) of the Act to select the measures 
for which a group practice must report, we previously proposed a new 
satisfactory reporting criterion in this section to provide group 
practices comprised of 25 or more eligible professionals the option to 
complete the CG CAHPS survey for purposes of satisfying the 2014 PQRS 
incentive and 2016 PQRS payment adjustment. Specifically, the survey 
measures that we propose to use for the PQRS program includes the 
following 12 summary survey measures:
     Getting timely care, appointments, and information;
     How well providers Communicate;
     Patient's Rating of Provider;
     Access to Specialists;
     Health Promotion & Education;
     Shared Decision Making;
     Health Status/Functional Status;
     Courteous and Helpful Office Staff;
     Care Coordination;
     Between Visit Communication;
     Helping Your to Take Medication as Directed; and
     Stewardship of Patient Resources.
    The first seven measures proposed above are the same ones used in 
the Medicare Shared Savings Programs. As stated previously, we believe 
it is important to align measures across programs to the extent 
possible. The remaining five measures proposed above address arreas of 
high importance to Medicare and are areas where patient experience can 
inform the quality of care related to care coordination and efficiency. 
Please note that the group practice would bear the cost of having this 
survey administered. We seek public comment on these proposed measures.
11. Statutory Requirements and Other Considerations for the Selection 
of PQRS Quality Measures for Meeting the Criteria for Satisfactory 
Participation in a Qualified Clinical Data Registry for 2014 and Beyond 
for Individual Eligible Professionals
    For the measures for which eligible professionals participating in 
a qualified clinical data registry must report, section 1848(m)(3)(D) 
of the Act, as amended and added by section 601(b) of the American Tax 
Relief Act of 2012, provides that the Secretary shall treat eligible 
professionals as satisfactorily submitting data on quality measures if 
they satisfactorily participate in a qualified clinical data registry. 
Section 1848(m)(3)(E) of the Act, as added by section 601(b) of the 
American Tax Relief Act of 2012, provides some flexibility with regard 
to the types of measures applicable to satisfactory participation in a 
qualified clinical data registry, by specifying that with respect to 
measures used by a qualified clinical data registry, sections 
1890(b)(7) and 1890A(a) of the Act shall not apply, and measures 
endorsed by the entity with a contract with the Secretary under section 
1890(a) of the Act may be used. We propose to provide to qualified 
clinical data registries flexibility with regard to choosing the 
quality measures data available for individual eligible professionals 
to choose from to report to CMS using these qualified clinical data 
registries. We believe it is preferable for the qualified clinical data 
registries with flexibility in selecting measures since we believe 
these clinical data registries would know best what measures should be 
reported to achieve the goal of improving the quality of care furnished 
by their eligible professionals. Although we are proposing to allow 
these clinical data registries to determine the quality measures from 
which individual eligible professionals would choose to have reported 
to CMS, to ensure that CMS receives the same type of data that could be 
uniformly analyzed by CMS and sufficient measure data, we believe it is 
important to set parameters on the measures to be reported on and the 
types of measures should be reported to CMS. Therefore, we are 
proposing the following requirements for the measures that must be 
reported to CMS by a qualified clinical data registry for the purpose 
of its individual eligible professionals meeting the criteria for 
satisfactory participation under the PQRS:
     The qualified clinical data registry must have at least 9 
measures, covering at least 3 of the 6 National Quality Strategy 
domains, available for reporting. The 6 National Quality Strategy 
domains are as follows:
    ++ Person and Caregiver-Centered Experience and Outcomes. These are 
measures that reflect the potential to improve patient-centered care 
and the quality of care delivered to patients. They emphasize the 
importance of collecting patient-reported data and the ability to 
impact care at the individual patient level as well as the population 
level through greater involvement of patients and families in decision 
making, self-care, activation, and understanding of their health 
condition and its effective management.
    ++ Patient Safety. These are measures that reflect the safe 
delivery of clinical services in both hospital and ambulatory settings 
and include processes that would reduce harm to patients and reduce 
burden of illness. These measures should enable longitudinal assessment 
of condition-specific, patient-focused episodes of care.
    ++ Communication and Care Coordination. These are measures that 
demonstrate appropriate and timely sharing of information and 
coordination of clinical and preventive services among health 
professionals in the care team and with patients, caregivers, and 
families in order to improve appropriate and timely patient and care 
team communication.
    ++ Community/Population Health. These are measures that reflect the 
use of clinical and preventive services and achieve improvements in the 
health of the population served. These are outcome-focused and have the 
ability to achieve longitudinal measurement that will demonstrate 
improvement or lack of improvement in the health of the US population.
    ++ Efficiency and Cost Reduction. These are measures that reflect 
efforts to significantly improve outcomes and reduce errors. These 
measures also impact and benefit a large number of patients and 
emphasize the use of evidence to best manage high priority conditions 
and determine appropriate use of healthcare resources.
    ++ Effective Clinical Care. These are measures that reflect 
clinical care processes closely linked to outcomes based on evidence 
and practice guidelines.

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     The qualified clinical data registry must have at least 1 
outcome measure available for reporting, which is a measure that 
assesses the results of health care that are experienced by patients 
(that is, patients' clinical events; patients' recovery and health 
status; patients' experiences in the health system; and efficiency/
cost).
     The qualified clinical data registry may report on process 
measures, which are measures that focus on a process which leads to a 
certain outcome, meaning that a scientific basis exists for believing 
that the process, when executed well, will increase the probability of 
achieving a desired outcome.
     The outcome and process measures reported must contain 
denominator data. That is, the lower portion of a fraction used to 
calculate a rate, proportion, or ratio. The denominator must describe 
the population eligible (or episodes of care) to be evaluated by the 
measure. This should indicate age, condition, setting, and timeframe 
(when applicable). For example, ``Patients aged 18 through 75 years 
with a diagnosis of diabetes.''
     The outcome and process measures reported must contain 
numerator data. That is, the upper portion of a fraction used to 
calculate a rate, proportion, or ratio. The numerator must detail the 
quality clinical action expected that satisfies the condition(s) and is 
the focus of the measurement for each patient, procedure, or other unit 
of measurement established by the denominator (that is, patients who 
received a particular service or providers that completed a specific 
outcome/process).
     The qualified clinical data registry must provide 
denominator exceptions for the measures, where approriate. That is, 
those conditions that should remove a patient, procedure or unit of 
measurement from the denominator of the performance rate only if the 
numerator criteria are not met. Denominator exceptions allow for 
adjustment of the calculated score for those providers with higher risk 
populations. Denominator exceptions allow for the exercise of clinical 
judgment and should be specifically defined where capturing the 
information in a structured manner fits the clinical workflow. Generic 
denominator exception reasons used in measures fall into three general 
categories: Medical, Patient, or System reasons.
     The qualified clinical data registry must provide 
denominator exclusions for the measures for which it will report to 
CMS, where appropriate. That is, those patients with conditions who 
should be removed from the measure population and denominator before 
determining if numerator criteria are met. (For example, Patients with 
bilateral lower extremity amputations would be listed as a denominator 
exclusion for a measure requiring foot exams.)
     The qualified clinical data registry must provide to CMS 
descriptions for the measures for which it will report to CMS by no 
later than March 31, 2014. The descriptions must include: name/title of 
measures, NQF  (if NQF endorsed), descriptions of the 
denominator, numerator, and when applicable, denominator exceptions and 
denominator exclusions of the measure.
    We request comments on these proposals.
12. Proposals for PQRS Informal Review
    Section 414.90(j) provides that eligible professionals and group 
practices may request an informal review of the determination that an 
eligible professional or group practice did not satisfactorily submit 
data on quality measures under the PQRS. Because we believe it is 
important to also allow eligible professionals who attempt to 
satisfactorily participate in a qualified clinical data registry to be 
able to request an informal review of the determination that the 
eligible professional satisfactorily participated in a qualified 
clinical data registry, we are proposing to modify Sec.  414.90(j) to 
allow individual eligible professionals who attempt to satisfactorily 
participate in a qualified clinical data registry the opportunity to 
request an informal review. We are not proposing to make any changes to 
the informal review process itself; rather, we propose to make the 
existing informal review process available to individual eligible 
professionals with regard to a determination that the individual 
eligible professional did not satisfactorily participate in a qualified 
clinical data registry.
    We seek public comment on this proposal.
13. Plan for the Future of PQRS for the 2017 PQRS Payment Adjustment 
and Beyond
a. Future PQRS Reporting Periods
    Under Sec.  414.90(h)(1), the reporting period for the PQRS payment 
adjustment, for the payment adjustment year, is the 12-month period 
from January 1 through December 31 that falls 2 years prior to the year 
in which the payment adjustment is applied. When we first proposed the 
reporting periods for the PQRS payment adjustment, we received many 
comments from stakeholders who opposed basing the PQRS payment 
adjustment year on a reporting period occurring two years prior to the 
payment adjustment year (77 FR 69176). Stakeholders requested that CMS 
establish reporting periods occurring closer to the year in which the 
payment adjustment is applied. Although we understood the commenters' 
concerns, we stated it was not operationally feasible to create a full 
calendar year reporting period for the PQRS payment adjustment any 
later than two years prior to the adjustment year and still avoid 
retroactive payments or the reprocessing of claims. Although it is 
still operationally infeasible to establish a 12-month reporting period 
occurring any later than two years prior to the adjustment year for 
reporting via claims, we are seeking comment about this issue again. In 
particular, in future years, should CMS consider establishing a 
reporting period that occurs closer to the adjustment year for certain 
PQRS reporting mechanisms, such as the registry, EHR, and GPRO web 
interface reporting mechanisms? Also, should the reporting periods 
still be structured as 12-month reporting periods occurring in a 
calendar year or multiple years? What length of time should be used for 
the reporting period? For example, should the PQRS allow for shorter, 
quarterly reporting periods? We would consider such comments to the 
extent we address or revisit the reporting period for the PQRS payment 
adjustment in future rulemaking.
b. Plan for the Future of the PQRS GPRO
    The PQRS GPRO has undergone significant changes since it was first 
introduced in 2010. Given stakeholder feedback with claims that 
constant changes to the GPRO has caused confusion for GPRO 
participants, we did not propose many changes to the GPRO for the 2014 
PQRS incentive or 2016 PQRS payment adjustment. However, we continue to 
receive stakeholder feedback urging CMS to reconsider certain policies 
related to the GPRO, such as:
     The definition of a PQRS group practice that limits the 
practice to a single TIN. A group practice in PQRS is currently defined 
at Sec.  414.90(b) as ``a single Tax Identification Number (TIN) with 2 
or more eligible professionals, as identified by their individual 
National Provider Identifier (NPI), who have reassigned their billing 
rights to the TIN.'' Therefore, for group practices, CMS uses the TIN 
as the billing unit. Any PQRS incentive payments earned

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are paid to the TIN holder of record. Stakeholders believe that 
limiting the definition of a group practice to ``a single TIN'' causes 
operational challenges to group practices that may operate as one 
healthcare entity but, due to business purposes, bill Medicare using 
multiple TINs.
    This definition has become increasingly problematic particularly as 
some CMS programs with quality reporting components allow group 
practices containing multiple TINs to participate in these programs as 
a single group practice. We understand this concern. Therefore, we seek 
comment on whether we should modify the current definition of group 
practice to account for multiple TINs (that is, change the 
identification unit(s) to recognize a group practice). In addition, if 
we allow groups with multiple TINs to participate in PQRS as a single 
group practice, we seek comment on what parameters we should put in 
place. For example, if we allow multiple TINs to participate in PQRS as 
a single group practice, should we place geographical restrictions? 
Should we require that groups wishing to participate as a single group 
practice provide care for the same beneficiaries?
     Self-Nomination/Registration Process. We currently require 
group practices to self-nominate for each program year the group 
practices wish to participate in PQRS using the GPRO. Stakeholders have 
commented that annual self-nomination is duplicative, particularly when 
no changes to a group practice's composition have been made. We 
therefore seek comment as to whether, in future years, we should move 
away from requiring group practices to self-nominate/register for the 
GPRO each year. Once a group practice is approved to participate in 
PQRS as a GPRO, should we automatically assume that a group practice 
would participate in PQRS as a GPRO for future years until the group 
practice indicates otherwise?
     Satisfactory Reporting Criterion for Group Practices Using 
the GPRO web interface. Currently, if the pool of assigned 
beneficiaries for a group practice using the GPRO web interface is less 
than the specified reporting threshold (i.e., 411 assigned 
beneficiaries for group practices comprised of 100 or more eligible 
professionals), then the group practice is required to report on 100 
percent of assigned beneficiaries for purposes of both the PQRS 
incentive and payment adjustment. Conceivably, a group practice could 
have as few as one beneficiary assigned to the group practice and still 
qualify for the PQRS incentive or avoid the PQRS payment adjustment as 
long as the group practice successfully reports the measures included 
in the web interface for that one beneficiary. As data collected from 
the GPRO web interface starts getting used to calculate performance 
benchmarks for the Value-based Payment Modifier and/or Physician 
Compare, we question whether performance results from group practices 
with few assigned beneficiaries could skew the benchmark calculations. 
We, therefore, invite comment on whether we should establish minimum 
reporting thresholds for group practices using the GPRO web interface 
as well as seek comment on what the appropriate thresholds should be. 
Or, should we consider requiring group practices to be in existence 
prior to the start of the reporting period to use the GPRO web 
interface?
c. Future of Use of the Claims-Based Reporting Mechanism in PQRS
    According to the 2011 PQRS and eRx Experience Report, approximately 
72 percent of eligible professionals (229,282 out of 320,422 eligible 
professionals) participating in PQRS in 2011 did so using the claims-
based reporting mechanism. The claims-based reporting mechanism is the 
most widely used PQRS reporting mechanism. Unfortunately, the claims-
based reporting mechanism is also the reporting mechanism that allows 
for the most errors in reporting. Unlike the registry and EHR-based 
reporting mechanisms, where the quality measures data is submitted at 
the end of the reporting period, eligible professionals must report 
quality measures data at the time they submit their claims for payment 
for services. Therefore, registry and EHR users are at an advantage as 
they are able to analyze their quality data at the end of the year for 
any changes that may need to be made due to follow up care. In 
addition, it is burdensome for CMS to analyze quality measures data 
from the claims-based reporting mechanism because it takes several 
months to analyze all claims for which reporting G-codes are submitted 
to CMS.
    For these reasons, we seek comment as to whether CMS should 
eliminate the claims-based reporting mechanism beginning with the 
reporting period (calendar year 2017) for the 2019 PQRS payment 
adjustment.
d. Future Submission Timelines for the Registry, EHR, GPRO Web 
Interface and Qualified Clinical Data Registry Reporting Mechanisms
    In the CY 2013 PFS final rule, we finalized the following deadlines 
for submitting quality measures data via claims, registry, EHR, and the 
GPRO web interface:
     For an eligible professional submitting PQRS quality 
measures data via claims, an eligible professional is required to 
submit no later than the last Friday of the second month after the end 
of the reporting period, that is, processed by February 28, 2014 for 
the reporting periods that end December 31, 2013 (77 FR 69178).
     For eligible professionals and group practices submitting 
quality measures data via registry and EHR, the registry or EHR is 
required to submit quality measures data no later than the last Friday 
of the February following the applicable reporting period (for example, 
February 28, 2014 for reporting periods occurring in 2013) (77 FR 
69182).
     For group practices submitting quality measures data via 
the GPRO web interface, we stated we would provide group practices that 
are selected to participate in the GPRO using GPRO web interface 
reporting option with access to the GPRO web interface by no later than 
the first quarter of the year following the end of the reporting period 
under which the group practice intends to report (77 FR 69187). For 
example, for group practices selected for the GPRO for the 2013 
incentive using the GPRO web interface tool, group practices selected 
to participate in the GPRO would be provided with access to the GPRO 
web interface by no later than the first quarter of 2014 for purposes 
of reporting for the applicable 2013 reporting period for the 
incentive.
    We have received feedback from eligible professionals, group 
practices, and vendors that the submission deadlines come too soon 
after the close of the reporting period. Vendors, in particular, find 
it difficult to meet the submission deadlines in time to submit quality 
measures data on behalf of all their participating eligible 
professionals and group practices. While it is not technically feasible 
to allow for submission of quality measures data reported via claims 
any later than the last Friday of the second month after the end of the 
respective reporting period, we are exploring alternative deadlines for 
quality measures data that is submitted via registry, EHR, the GPRO web 
interface, and the newly proposed qualified clinical data registry.

[[Page 43479]]

Specifically, we are exploring ways to collect quality measures data on 
a quarterly basis, rather than allowing for submission of quality 
measures data only once following a respective reporting period. We 
seek public comment on allowing for quarterly submission of quality 
measures data as well as other alternatives that would allow CMS with 
the time necessary to perform quality measures data analysis prior to 
the assessment of PQRS payment adjustments.
e. Integration of Clinical Quality Measures Reported Under the Hospital 
Inpatient Quality Reporting (IQR) Program
    We received feedback that, for certain hospital-based physicians 
who bill Medicare Part B services and therefore are able to participate 
in PQRS, the measures CMS has adopted under the PQRS do not adequately 
capture the nature of their practice. These physicians believe that 
measures such as those available in the Hospital IQR Program are more 
relevant to the quality of care these physicians provide. Therefore, 
under Section I.9, we proposed to include measures available under the 
Hospital IQR Program that have been retooled to be reported under the 
PQRS during the 12-month 2014 PQRS incentive and 12-month 2016 PQRS 
payment adjustment reporting periods via the registry-based reporting 
mechanism. We seek comment on whether additional Hospital IQR measures 
should be retooled for use in the PQRS in the same manner. In addition, 
we seek comment on whether CMS should attribute the reporting periods 
and performance results from the hospital IQR program to individual 
eligible professionals or group practices who elect to have their 
hospital's performance scores attributed to them.
f. Feedback Reports
    For eligible professionals reporting PQRS quality measures data via 
claims, CMS provides each eligible professional who submits a valid 
reporting quality data code (QDC) two feedback reports each year that 
provides detailed information on an eligible professional's reporting 
performance. These feedback reports only provide data on PQRS reporting 
performance. Given our efforts to align with the Value-based Payment 
Modifier, we are exploring ways to merge the feedback reports provided 
to participants in the PQRS and Value-based Payment Modifier so that an 
eligible professional would receive one, merged feedback report showing 
reporting data for the PQRS and performance data for the Value-based 
Payment Modifier. We seek public comment on whether feedback reports 
for the PQRS and Value-based Payment Modifier should be merged.

I. Electronic Health Record (EHR) Incentive Program

    The HITECH Act (Title IV of Division B of the ARRA, together with 
Title XIII of Division A of the ARRA) authorizes incentive payments 
under Medicare and Medicaid for the adoption and meaningful use of 
certified EHR technology (CEHRT). Section 1848(o)(2)(B)(iii) of the Act 
requires that in selecting clinical quality measures (CQMs) for 
eligible professionals (EPs) to report under the EHR Incentive Program, 
and in establishing the form and manner of reporting, the Secretary 
shall seek to avoid redundant or duplicative reporting otherwise 
required. As such, we have taken steps to establish alignments among 
various quality reporting and payment programs that include the 
submission of CQMs.
    For CY 2012 and subsequent years, Sec.  495.8(a)(2)(ii) requires an 
EP to successfully report the clinical quality measures selected by CMS 
to CMS or the states, as applicable, in the form and manner specified 
by CMS or the states, as applicable. In the EHR Incentive Program Stage 
2 Final Rule, we established clinical quality measure reporting options 
for the Medicare EHR Incentive Program for CY 2014 and subsequent years 
that include one individual reporting option that aligns with the 
PQRS's EHR reporting option (77 FR 54058) and two group reporting 
options that align with the PQRS GPRO and Medicare Shared Savings 
Program (MSSP) and Pioneer ACOs (77 FR 54076 to 54078). In this 
proposed rule, we are proposing two additional aligned options for EPs 
to report CQMs for the Medicare EHR Incentive Program for CY 2014 and 
subsequent years with the intention of minimizing the reporting burden 
on EPs.
1. Proposed Qualified Clinical Data Registry Reporting Option
    Section 1848(m)(7) of the Act (``Integration of Physician Quality 
Reporting'') requires the Secretary to develop a plan to integrate 
reporting on quality measures under the PQRS with reporting 
requirements related to meaningful use under the EHR Incentive Program. 
In response to section 1848(m)(7) of the Act, the PQRS and EHR 
Incentive Program have, in particular, taken steps to align their 
respective quality measures reporting criteria. For example, in the CY 
2013 PFS final rule with comment period (77 FR 69190), the PQRS adopted 
criteria for satisfactory reporting for the 2014 PQRS incentive that 
aligns with the criteria for meeting the CQM component of achieving 
meaningful use under the Medicare EHR Incentive Program in 2014. 
Specifically, under the PQRS, an individual EP will meet the criteria 
for satisfactory reporting for the 2014 PQRS incentive using a direct 
EHR or EHR data submission vendor product that is CEHRT certified to 
the 2014 Edition certification criteria if, during the 12-month 2014 
PQRS incentive reporting period, the EP reports 9 measures covering at 
least 3 National Quality Strategy domains. If an eligible 
professional's CEHRT does not contain patient data for at least 9 
measures covering at least 3 domains, then the eligible professional 
must report the measures for which there is patient data (see Table 91, 
77 FR 69194 through 69195).
    As further described in section G of this proposed rule, section 
1848(m)(3)(D) of the Act, as amended and added by section 601(b) of the 
American Taxpayer Relief Act of 2012, includes a provision that 
authorizes an additional standard for individual eligible professionals 
to meet the PQRS by satisfactorily participating in a qualified 
clinical data registry. In section G of this proposed rule, we proposed 
criteria for eligible professionals to satisfactorily participate in a 
qualified clinical data registry for the 2014 PQRS incentive.
    For purposes of meeting the CQM reporting component of meaningful 
use for the Medicare EHR Incentive Program in 2014 and subsequent 
years, we propose to allow EPs to submit CQM information using 
qualified clinical data registries, according to the proposed 
definition and requirements for qualified clinical data registries 
discussed in section IV.I. of this proposed rule. We are proposing this 
new option under the Medicare EHR Incentive Program beginning with the 
reporting periods in 2014 for the following reasons: (1) To minimize 
duplicative reporting as directed under section 1848(o)(2)(B)(iii) of 
the Act for EPs who seek to participate in both the Medicare EHR 
Incentive Program and a qualified clinical data registry under the PQRS 
in 2014; (2) to further integrate reporting quality reporting options 
under the PQRS and the EHR Incentive Program as directed under section 
1848(m)(7) of the Act; and (3) because the proposed criteria for the 
satisfactory participation in a qualified clinical data registry for 
the 2014 PQRS incentive are similar to criteria we finalized for 
meeting the CQM component of achieving meaningful use under the

[[Page 43480]]

Medicare EHR Incentive Program for 2014. In the event that the criteria 
established for satisfactory participation in a qualified clinical data 
registry under PQRS in the final rule are different from the proposed 
criteria, we intend to adopt the criteria that are finalized for PQRS 
to the extent feasible for the Medicare EHR Incentive Program. In 
addition to the criteria that are ultimately established for PQRS, we 
propose the following additional criteria that an EP who seeks to 
report CQMs for the Medicare EHR Incentive Program using a qualified 
clinical data registry must satisfy: (1) The EP must use CEHRT as 
required under the Medicare EHR Incentive Program; (2) the CQMs 
reported must be included in the Stage 2 final rule (see Table 8, 77 FR 
54069) and use the same electronic specifications established for the 
EHR Incentive Program, (3) report 9 CQMs covering at least 3 domains, 
(4) if an EP's CEHRT does not contain patient data for at least 9 CQMs 
covering at least 3 domains, then the EP must report the CQMs for which 
there is patient data and report the remaining CQMs as ``zero 
denominators'' as displayed by the EP's CEHRT, and (5) an EP must have 
CEHRT that is certified to all of the certification criteria required 
for CQMs, including certification of the qualified clinical data 
registry itself for the functions it will fulfill (for example, 
calculation, electronic submission). We note that these proposed 
additional criteria are already final policies for the CQM reporting 
options that we established for EPs in the EHR Incentive Program Stage 
2 final rule. We refer readers to that final rule for further 
explanation of the policies related to clinical quality measure 
reporting under the EHR Incentive Program (77 FR 54049-54089). The 
electronic specifications for the clinical quality measures can be 
found at http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. We are proposing this 
qualified clinical data registry reporting option only for those EPs 
who are beyond their first year of demonstrating meaningful use (MU). 
For purposes of avoiding a payment adjustment under Medicare, EPs who 
are in their first year of demonstrating MU in the year immediately 
preceding a payment adjustment year must satisfy their CQM reporting 
requirements by October 1 of such preceding year (for example, by 
October 1, 2014 to avoid a payment adjustment in 2015). The proposed 
qualified clinical data registry reporting option would not enable an 
EP to meet the deadline to avoid a payment adjustment because these 
qualified clinical data registries would be submitting data on CQMs by 
the last day of February following the 2014 PQRS incentive reporting 
periods, which would occur after October 1, 2013. Therefore, EPs who 
are first-time meaningful EHR users must report CQMs via attestation as 
established in the EHR Incentive Program Stage 2 final rule (77 FR 
54050). The reporting periods established in the EHR Incentive Program 
Stage 2 final rule would continue to apply to EPs who would choose to 
report CQMs under this proposed qualified clinical data registry 
reporting option for purposes of the Medicare EHR Incentive Program (77 
FR 54049-54051). Please note that this may not satisfy requirements for 
other quality reporting programs that have established 12-month 
reporting periods, such as the PQRS.
    Under section 1848(o)(2)(A)(iii) of the Act, EPs are required to 
use CEHRT to submit information on clinical quality measures for the 
EHR Incentive Program. The 2014 Edition certification criteria 
established by the Office of the National Coordinator for Health IT 
(ONC) set the requirements for certification that cover the 
functionality needed to ``capture and export'' (45 CFR 170.314(c)(1)), 
``import and calculate'' (45 CFR 170.314(c)(2)), and for ``electronic 
submission'' (45 CFR 170.314(c)(3)) of each CQM that will be reported.
    As EPs are required to use CEHRT under section 1848(o)(2)(A)(iii) 
of the Act, we propose that for the Medicare EHR Incentive Program, an 
EP who seeks to report using a qualified clinical data registry that 
meets the criteria established for PQRS must also ensure that the 
registry selected is certified for the functionality that it is 
intended to fulfill and is a certified EHR Module that is part of the 
EP's CEHRT. For example, if the registry would collect patient level 
data from EPs, calculate the CQMs, then submit to CMS the calculated 
results on behalf of the EP in either an aggregate level Quality 
Reporting Document Architecture (QRDA) Category III file or patient 
level QRDA-I files, then the registry would need to be certified for 
the CQM criteria listed at 45 CFR 170.314(c)(2) (``import and 
calculate'') for each CQM that will be submitted and 45 CFR 
170.314(c)(3) (``electronic submission''). We note that EPs would still 
need to include a certified EHR Module as part of their CEHRT that is 
certified to the CQM criteria listed at 45 CFR 170.314(c)(1) (``capture 
and export'') for each of the CQMs that would be submitted to CMS for 
the purposes of meeting the CQM requirements of the Medicare EHR 
Incentive Program. If the qualified clinical data registry is 
performing the function of data capture for the CQMs that would be 
submitted to CMS, then the registry would need to be certified to the 
``capture and export'' criteria listed at 45 CFR 170.314(c)(1). The 
certified EHR Module must be part of the EP's CEHRT.
    We intend to revisit the certification criteria with ONC in the 
Stage 3 rulemaking for the purpose of developing a more flexible 
clinical data registry reporting option and certification criteria for 
the EHR Incentive Program when Stage 3 begins. We welcome public 
comment and recommendations on a more flexible clinical data registry 
reporting option for meeting the CQM reporting requirement for MU and 
on the certification criteria that ONC could incorporate for clinical 
data registries.
2. Proposed Group Reporting Option--Comprehensive Primary Care 
Initiative
    The Comprehensive Primary Care (CPC) Initiative, under the 
authority of section 3021 of the Affordable Care Act, is a multi-payer 
initiative fostering collaboration between public and private health 
care payers to strengthen primary care. Under this initiative, CMS will 
pay participating primary care practices a care management fee to 
support enhanced, coordinated services. Simultaneously, participating 
commercial, State, and other federal insurance plans are also offering 
an enhanced payment to primary care practices that provide high-quality 
primary care. There are approximately 500 CPC participants across 7 
health care markets in the U.S. More details on the CPC Initiative can 
be found at http://innovation.cms.gov/initiatives/Comprehensive-Primary-Care-Initiative/index.html.
    CPC practice sites will submit a subset of the CQMs that were 
selected in the EHR Incentive Program Stage 2 final rule for EPs to 
report under the EHR Incentive Program beginning in CY 2014 (77 FR 
54069-54075). In a continuing effort to align quality reporting 
programs and innovation initiatives, we propose to add a group 
reporting option for CQMs for the Medicare EHR Incentive Program 
beginning in CY 2014 for EPs who are part of a CPC practice site that 
successfully submits at least 9 electronically specified CQMs covering 
3 domains. We propose that each of the EPs in the CPC practice site 
would satisfy the CQM reporting component of meaningful use for the 
relevant

[[Page 43481]]

reporting period if the CPC practice site successfully submits and 
meets the reporting requirements of the CPC Initiative. We propose that 
only those EPs who are beyond their first year of demonstrating 
meaningful use may use this proposed CPC group reporting option, for 
the reasons explained in the preceding section in regard to avoiding a 
payment adjustment under Medicare. We propose that EPs who successfully 
submit as part of a CPC practice site in accordance with the 
requirements established for the CPC Initiative and using CEHRT would 
satisfy their CQM reporting requirement for the Medicare EHR Incentive 
Program. The CPC practice sites must submit the CQM data in the form 
and manner required by the CPC Initiative.
    If a CPC practice site fails the requirements established for the 
CPC Initiative, we note that the EPs who are part of the site would 
have the opportunity to report CQMs per the requirements established in 
the EHR Incentive Program Stage 2 final rule for EPs to report under 
the EHR Incentive Program beginning in CY 2014 (77 FR 54049). We invite 
public comment on these proposals.
3. Reporting of Electronically Specified Clinical Quality Measures for 
the Medicare EHR Incentive Program
    In the EHR Incentive Program Stage 2 final rule, we finalized the 
CQMs from which EPs would report beginning in CY 2014 under the EHR 
Incentive Program (77 FR 54069, Table 8). These CQMs are electronically 
specified and updated routinely to account for issues such as changes 
in billing and diagnosis codes and changes in medical practices. The 
requirements specified in the EHR Incentive Program Stage 2 final rule 
for EPs to report under the EHR Incentive Program beginning in CY 2014 
allow for the reporting of different versions of the CQMs. However, it 
is not technically feasible for CMS to accept data that is reported 
according to the specifications of the older versions of the CQMs, 
including versions that may be allowed for reporting under the EHR 
Incentive Program. We stated in the EHR Incentive Program Stage 2 final 
rule that, consistent with section 1848(o)(2)(B)(ii) of the Act, in the 
event that the Secretary does not have the capacity to receive CQM data 
electronically, EPs may continue to report CQM data through attestation 
(77 FR 54076). Therefore, we propose that EPs who seek to report CQMs 
electronically under the Medicare EHR Incentive Program must use the 
most recent version of the electronic specifications for the CQMs and 
have CEHRT that is tested and certified to the most recent version of 
the electronic specifications for the CQMs. For example, for the 
reporting periods in 2014, EPs who want to report CQM data 
electronically for purposes of satisfying the quality measure reporting 
component of meaningful use would be required to use the June 2013 
version of the CQMs electronic specifications (available at http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html) and ensure that their CEHRT has been tested and 
certified to the June 2013 version of the CQMs for purposes of 
achieving the CQM component of meaningful use in 2014. EPs who do not 
wish to report CQMs electronically using the most recent version of the 
electronic specifications (for example, if their CEHRT has not been 
certified for that particular version) would be allowed to report CQM 
data to CMS by attestation for the Medicare EHR Incentive Program. For 
further explanation of reporting CQMs by attestation, we refer readers 
to the EHR Incentive Program Stage 1 final rule (77 FR 44430 through 
44434) and the EHR Incentive Program's Registration and Attestation 
page (available at https://ehrincentives.cms.gov/hitech/login.action).
    We invite public comment on these proposals. Specifically, we 
invite comment on whether there would be sufficient time for EHR 
technology developers to update their systems and timely distribute the 
updated CQM versions in a way that would enable EPs to report on the 
updated versions. Additionally, we invite comment on whether there are 
any data or logic dependencies in the eCQMs that EHR technology 
developers have experienced which, if not built in upfront and deployed 
before a reporting period, would result in inaccurate measures, if for 
example, an EHR technology was upgraded in the middle of an EP's 
reporting period to the newest version of the CQMs (if we finalized our 
proposal to only accept the lasted published specification of an CQM).

J. Medicare Shared Savings Program

    Under section 1899 of the Act, CMS has established a Medicare 
Shared Savings Program (Shared Savings Program) to facilitate 
coordination and cooperation among providers to improve the quality of 
care for Medicare Fee-For-Service (FFS) beneficiaries and reduce the 
rate of growth in healthcare costs. Eligible groups of providers and 
suppliers, including physicians, hospitals, and other healthcare 
providers, may participate in the Shared Savings Program by forming or 
participating in an Accountable Care Organization (ACO). The final rule 
implementing the Shared Savings Program appeared in the Federal 
Register on November 2, 2011 (Medicare Shared Savings Program: 
Accountable Care Organizations Final Rule (76 FR 67802)).
    ACOs are required to completely and accurately report on all 
quality performance measures for all quality measurement reporting 
periods in each performance year of their agreement period. There are 
currently 33 quality performance measures under the Shared Savings 
Program. For Shared Savings Program ACOs beginning their agreement 
period in April or July, 2012, there will be two reporting periods in 
the first performance year, corresponding to calendar years 2012 and 
2013. For ACOs beginning their agreement periods in 2013 or later, both 
the performance year and reporting period will correspond to the 
calendar year. Reporting on measures associated with a reporting period 
will generally be done in the spring of the following calendar year. 
For example, an ACO will submit quality measures for the 2015 reporting 
period in the spring of 2016.
1. Medicare Shared Savings Program and Physician Quality Reporting 
System Payment Adjustment
    Section 1899(b)(3)(D) of the Act affords the Secretary discretion 
to ``* * * incorporate reporting requirements and incentive payments 
related to the physician quality reporting initiative (PQRI), under 
section 1848, including such requirements and such payments related to 
electronic prescribing, electronic health records, and other similar 
initiatives under section 1848 * * *'' and permits the Secretary to 
``use alternative criteria than would otherwise apply [under section 
1848 of the Act] for determining whether to make such payments.'' Under 
this authority, we incorporated certain Physician Quality Reporting 
System (PQRS) reporting requirements and incentive payments into the 
Shared Savings Program, including (1) The 22 GPRO quality measures 
identified in Table 1 of the final rule (76 FR 67889 through 67890); 
(2) reporting via the GPRO web interface; (3) criteria for satisfactory 
reporting; and (4) set January 1 through December 31 as the reporting 
period. The regulation governing the incorporation of PQRS incentives 
and reporting requirements

[[Page 43482]]

under the Shared Savings Program is set forth at Sec.  425.504.
    Under section 1848(a)(8) of the Act, a payment adjustment will 
apply under the PQRS beginning in 2015 based on quality reporting 
during the applicable reporting period. Eligible professionals who are 
not satisfactory reporters will be subject to a payment adjustment 
applied to the PFS amount for covered professional services furnished 
by the eligible professional during 2015. For eligible professionals 
subject to the 2015 PQRS payment adjustment, the fee schedule amount is 
equal to 98.5 percent (and 98 percent for 2016 and each subsequent 
year) of the fee schedule amount that would otherwise apply to such 
services. To continue to align Shared Savings Program requirements with 
PQRS, for the 2013 reporting period (which will be used to determine 
the 2015 PQRS payment adjustment to PFS amounts), in the CY 2013 PFS 
final rule with comment (77 FR 69372), we amended Sec.  425.504 to 
include the PQRS reporting requirements necessary for eligible 
professionals in an ACO to avoid the 2015 PQRS payment adjustment. 
Specifically, we required ACOs on behalf of eligible professionals that 
are ACO providers/suppliers to successfully report one ACO GPRO measure 
in 2013 to avoid the payment adjustment in 2015. We also provided that 
ACO providers/suppliers that are eligible professionals may only 
participate under their ACO participant TIN as a group practice under 
the PQRS GPRO for purposes of avoiding the payment adjustment in 2015. 
Thus, ACO providers/suppliers who are eligible professionals may not 
seek to avoid the payment adjustment by reporting either as an 
individual under the traditional PQRS or under the traditional PQRS 
GPRO under their ACO participant TIN. We note, however, that eligible 
professionals may bill Medicare under more than one TIN (for example, 
eligible professionals may bill Medicare under a non-ACO participant 
TIN in one practice location and also bill Medicare under the TIN of an 
ACO participant at another practice location). As a result, ACO 
provider/suppliers who are eligible professionals that bill under a 
non-ACO participant TIN during the year could participate under the 
traditional PQRS as either individual EPs or a group practice for 
purposes of avoiding the PQRS payment adjustment for the claims billed 
under the non-ACO participant TIN. In fact, such EPs would have to do 
so to avoid the PQRS payment adjustment with respect to those claims 
because the regulation at Sec.  425.504 only applies to claims 
submitted by ACO providers/suppliers that are eligible professionals 
billing under an ACO participant TIN. If eligible professionals within 
an ACO meet the requirements for the PQRS payment adjustment 
established under the Shared Savings Program, only the claims billed 
through the TIN of the ACO participant will avoid the payment 
adjustment in 2015.
    For the 2014 reporting period and subsequent reporting periods 
(which would apply to the PQRS payment adjustment for 2016 and 
subsequent payment years), we propose to align with the requirements 
for reporting under the traditional PQRS GPRO through the CMS web 
interface by amending Sec.  425.504 to require that ACOs on behalf of 
their ACO providers/suppliers who are eligible professionals 
satisfactorily report the 22 ACO GPRO measures during the 2014 and 
subsequent reporting periods to avoid the downward PQRS payment 
adjustment for 2016 and subsequent payment years. Additionally, we 
propose to continue the current requirement that ACO providers/
suppliers who are eligible professionals may only participate under 
their ACO participant TIN for purposes of the payment adjustment in 
2016 and subsequent years.
    We believe that the proposal to modify the requirements for ACOs to 
satisfactorily report the 22 ACO GPRO measures to avoid the 2016 
payment adjustments would not increase burden on ACOs or on ACO 
providers/suppliers that are eligible professionals because ACOs must 
already report these measures in order to satisfy the Shared Savings 
Program quality performance standard. Thus, this proposal would not 
increase the total number of measures that must be reported by the ACO 
and its ACO providers/suppliers that are eligible professionals. We 
also note that these proposals would not affect the Shared Savings 
Program quality performance standard reporting requirement under which 
ACOs are currently required to report on 33 quality performance 
measures, which include all 22 of the ACO GPRO quality measures.
    Additionally, ACOs are required to report certain measures using 
the GPRO web interface tool. Specifically, Sec.  425.504(a)(1) and 
(b)(1) require that ACOs submit quality measures using the GPRO web 
interface to qualify on behalf of their eligible professionals for the 
PQRS incentive or to avoid the PQRS payment adjustment. This reporting 
mechanism is also referenced in Sec.  425.308(e), which provides that 
quality measures that ACOs report using the GPRO web interface will be 
reported by CMS on Physician Compare.
    Under Sec.  414.90(h)(3)(i), group practices may report data under 
the traditional PQRS GPRO through a CMS web interface. The Shared 
Savings Program regulations 425.504(a)(1) and (b)(1) and Sec.  
425.308(e) specifically reference the use of the GPRO web interface for 
quality reporting purposes. We propose to amend these regulations to 
replace references to GPRO web interface with CMS web interface. We 
believe this change will ensure consistency with the reporting 
mechanism used under 414.90(h)(3)(i) and will also allow for the 
flexibility to use a similar web interface in the event that 
operational issues are encountered with the use of the GPRO web 
interface. We invite public comment on this proposal.

2. Medicare Shared Savings Program-Establishing the Quality Performance 
Benchmark

    Section 1899(b)(3)(C) of the Act directs the Secretary to ``* * * 
establish quality performance standards to assess the quality of care 
furnished by ACOs * * *'' and to ``improve the quality of care 
furnished by ACOs over time by specifying higher standards, new 
measures, or both for purposes of assessing such quality of care.'' In 
the Shared Savings Program final rule, we finalized the following 
requirements with regard to establishing a performance benchmark for 
measures: (1) During the first performance year for an ACO, the quality 
performance standard is set at the level of complete and accurate 
reporting; (2) during subsequent performance years, the quality 
performance standard will be phased in such that ACOs will be assessed 
on their performance on each measure; (3) CMS designates a performance 
benchmark and minimum attainment level for each measure, and 
establishes a point scale for the measures; and (4) contingent upon 
data availability, performance benchmarks are defined by CMS based on 
national Medicare fee-for-service rates, national Medicare Advantage 
(MA) quality measure rates, or a national flat percentage. In the final 
rule, we indicated that we would not compare an ACO's quality 
performance to the performance of other ACOs for purposes of 
determining an ACO's overall quality score. We acknowledged, however, 
that in future program years, we should seek to incorporate actual ACO 
performance on quality measures into the quality benchmarks after 
seeking industry input through rulemaking.

[[Page 43483]]

a. Data Sources Used To Establish Performance Benchmarks
    The regulation governing the data that CMS will use to establish 
the performance benchmarks for quality performance measures under the 
Shared Savings Program is set forth at Sec.  425.502(b)(2). This 
provision states that CMS will define the performance benchmarks based 
on national Medicare fee-for-service rates, national MA quality measure 
rates, or a national flat percentage. In the Shared Savings Program 
final rule, we responded to comments suggesting that quality 
performance benchmarks be set based on actual historical data submitted 
by ACOs. We stated that although we agreed that we should seek to 
incorporate actual ACO performance on quality scores into the quality 
benchmark, we would do so only in future rulemaking so that we could 
seek industry input. In addition, we noted that we expected to update 
the quality benchmarks over time, consistent with section 1899(b)(3)(C) 
of the Act, which requires CMS to seek to improve the quality of care 
furnished by ACOs participating in the Shared Savings Program over 
time.
    Consistent with our stated intention to incorporate actual ACO 
experience into quality measure benchmarks, for the 2014 reporting 
period, we propose to amend Sec.  425.502(b)(2) to permit CMS to use 
all available and applicable national Medicare Advantage and Medicare 
FFS performance data to set the quality performance benchmarks. 
Specifically, in addition to using available national Medicare FFS 
rates, which include data reported through PQRS, and national MA 
quality measure rates, we propose to use data submitted by Shared 
Savings Program and Pioneer ACOs in 2013 for the 2012 reporting period 
to set the performance benchmarks for the 2014 reporting period. We 
propose to publish the quality benchmarks based upon these data prior 
to the beginning of the 2014 reporting period through subregulatory 
guidance. As stated in the Shared Savings Program final rule, we will 
establish benchmarks using the most currently available data source and 
the most recent available year of benchmark data prior to the start of 
the reporting period. In other words, data collected in 2014 from the 
2013 reporting period would be used in conjunction with other available 
data to set benchmarks for the 2015 reporting period, and so on. We 
propose to retain the option of using flat percentages when data are 
unavailable, inadequate or unreliable to set quality performance 
benchmarks. Further, we clarify our intent to combine data derived from 
national Medicare Advantage and national Medicare FFS to set 
performance benchmarks when the measure specifications used under 
Medicare Advantage and FFS Medicare are the same. We propose to revise 
Sec.  425.502(b)(2)(i) to reflect this clarification. We seek comment 
on these proposals, and whether there are other data sources that 
should be considered in setting performance benchmarks.
b. Ensuring Meaningful Differences in Performance Rates
    Data collected by CMS from the GPRO and Physician Group Practice 
Demonstration participants in 2012 coupled with previous CMS experience 
indicates that using actual data to calculate quality performance may 
result in some measures' performance rates being tightly clustered. In 
this case, quality scores for the measure may not reflect clinically 
meaningful differences between the performance rates achieved by 
reporters of quality. For example, for some measures, the distribution 
of performance rates may have a spread of less than 2.0 percentage 
points between the 30th and 90th percentiles. In such an instance, even 
though there is little distinction in actual performance rates, a 
slight difference in performance on the measure may result in a 
significant difference in the number of quality points obtained for the 
Shared Savings Program. For example, two separate ACOs at the 50th 
percentile and the 90th percentile may have only a few tenths of a 
percentage point difference in their actual performance, but under the 
Shared Savings Program scoring methodology, the difference between 
their quality scores for that measure would be more noteworthy (1.4 
points versus 2.0 points).
    We continue to believe it is desirable to use performance rates for 
measures based on actual data because doing this creates benchmarks 
that are simple to understand and apply, even if the rates are 
clustered, as the data reflect achievable performance on quality 
measures. However, allowing clustered performance rates for a measure 
may result in payment differences that are not be associated with 
clinically meaningful differences in patient care, as noted in the 
example above.
    Keeping these issues in mind, we propose to develop a methodology 
to spread clustered performance on measures. The first step in 
developing that methodology is to identify when performance on a 
measure is clustered. Clustering could be defined as less than a 
certain spread between performance rates in an identified range, for 
example, less than 6.0 percentage points between the performance rates 
associated with the 30th and 90th percentiles, or less than 10.0 
percentage points between the minimum and maximum values achieved by 
previous reporters of the quality measure. Alternatively, clustering 
could be defined as a spread of performance rates of less than x 
percentage points between any two deciles, for example, less than a 1.0 
percentage point difference between the 60th and 70th decile.
    Once a clustered measure has been identified, the next step is to 
apply a methodology to spread or separate the performance rates within 
the measure. It is important to establish a meaningful performance 
rate, or starting point, around which to differentiate or spread the 
performance. For example, selecting a certain percentile or median 
value may represent one option for establishing a reasonable starting 
point. Once the starting point is set, then we could implement a series 
of fixed percentage point intervals around the starting point in both a 
positive and negative direction to increase the spread, for example, 
applying a fixed 1.0 percentage point interval between scored deciles. 
For example, if the starting point is the 60th percentile, and the 
performance rates at the 60th and 70th percentiles were observed to be 
77.15 and 77.65 respectively, there would be only a 0.5 spread between 
the deciles. In contrast, applying a fixed 1.0 percentage point 
interval to increase spread would result in a 1.0 difference between 
these rates, and the new performance rates would be 77.15 and 78.15 at 
the 60th and 70th percentiles, respectively. In the alternative, we 
could take the spread calculated from a subset (for example, ACO 
performance only) of the underlying performance data if we believe that 
data reported by ACOs show a different variability than other data 
sources. For example, the spread between the measure's percentiles 
could be based on historical ACO distribution only, not the historical 
distribution of Medicare Advantage and/or national fee-for-service, 
PQRS, and ACO data. The historical ACO distribution could then be 
applied to the Medicare Advantage and/or national fee-for-service, 
PQRS, and ACO percentile distribution to establish the measure's 
percentiles.
    We believe that a clinically meaningful assessment of ACO quality 
is important. We also are interested in providing a pathway for ACOs 
new to quality reporting to achieve the quality reporting standard, and 
an incentive for

[[Page 43484]]

experienced ACOs to continue improving and performing at high levels. 
We are therefore proposing to use a standardized method for calculating 
benchmark rates when a measure's performance rates are tightly 
clustered. We propose that the application of a methodology to reduce 
measure clustering would only apply to quality measures whose 
performance rates are calculated as percentiles, that is, the 
methodology would not apply to measures whose performance rates are 
calculated as ratios, for example, measures such as the two ACO 
Ambulatory Sensitive Conditions Admissions and the All Condition 
Readmission measure. We believe that measures whose performance rates 
are calculated as ratios already demonstrate a high degree of 
clinically meaningful differences because they are risk adjusted to 
reflect the health status of the patient population being measured.
    We propose to define a tightly clustered measure, including 
clinical process and outcome measures reported through the GPRO web 
interface and CAHPS measures, as one that demonstrates less than a 6.0 
percentage point spread in performance rates between the 30th and 90th 
percentiles. We believe using the 30th and 90th percentiles as the 
lower and upper bounds is reasonable because these bounds have been 
given some significance in earlier rulemaking; specifically, the Shared 
Savings Program rule sets the ACO's minimum attainment level at the 
30th percentile, below which the ACO achieves no points, and the ACO 
achieves full points for quality reporting at or above the 90th 
percentile. Further, we propose to establish the starting point at the 
60th percentile, the midpoint between the 30th and 90th percentiles, 
and then apply a positive 1.0 fixed percentage point interval for each 
decile above the 60th percentile and a negative 1.0 fixed percentage 
point interval for each decile below the 60th percentile.
    We recognize that spreading tightly clustered performance measures 
would decrease the lower bound necessary to meet the minimum attainment 
level for the measure, giving ACOs new to quality reporting a greater 
opportunity to meet the quality performance standard. At the same time, 
spreading tightly clustered performance rates would increase the upper 
bound necessary for achieving the maximum available quality points for 
the measure, giving already experienced ACOs an incentive to continue 
improving quality. Applying a 1.0 fixed percentage point interval 
achieves the goal of creating meaningful differences in performance. 
Further, we believe that applying a 1.0 fixed percentage point interval 
represents a tempered and reasonable interval that does not spread 
performance rates to levels that are too easy to achieve on the lower 
bound or too difficult to achieve on the upper bound.
    For example, Table 57 demonstrates the original spread of a quality 
measure, based on all available data, which is compressed from a range 
of 75.83 at the 30th percentile to 79.23 at the 90th percentile, that 
is, a spread of less than 6.0 percentage points. When the proposed 
methodology is applied, the 60th percentile (or 77.15 percent), serving 
as the starting point, remains unchanged. The spread increases 6.0 
percentage points from 74.15 at the 30th percentile to 80.15 at the 
90th percentile. As demonstrated and explained above, this methodology 
improves the distinction in performance between the minimum attainment 
level (30th percentile) and the maximum attainment level (90th 
percentile).

                      Table 57--Proposed Methodology To Reduce Clustered Performance Rates
----------------------------------------------------------------------------------------------------------------
                    Percentile                       30th     40th     50th     60th     70th     80th     90th
----------------------------------------------------------------------------------------------------------------
Original performance rates using all available       75.83    76.21    76.76    77.15    77.65    78.21    79.23
 data............................................
Performance rates using methodology to reduce        74.15    75.15    76.15    77.15    78.15    79.15    80.15
 clustering......................................
----------------------------------------------------------------------------------------------------------------
*Example is for illustration purposes only and is not based on actual data.

    We propose to amend Sec.  425.502(b) to reflect this methodology to 
reduce clustering. We are seeking comment on these proposals. 
Specifically, we are seeking comment on whether or not a methodology 
should be applied to spread out clustered performance on measures. We 
are also seeking comment on the proposal to define clustered 
performance on a measure as one in which the spread of performance 
rates between the 30th and 90th percentiles is less than 6.0 percentage 
points, or whether other values should be used to define clustered 
measure performance, for example, when the minimum and maximum reported 
values are spread by less than 10.0 percentage points. We are seeking 
comment on whether there are alternative methodologies that should be 
considered to spread out clustered performance on measures. In 
addition, we are seeking comment on whether measures that are 
calculated as ratios should be excluded from this methodology. We are 
also seeking comment on whether all available relevant data should be 
considered when developing the spread between measures, or whether only 
the relevant performance data from a subset of reporters, such as ACO-
reported data, as discussed above, should be used to determine the 
appropriate spread between deciles.
c. Scoring CAHPS Measures Within the Patient Experience of Care Domain
    The preamble to the Shared Savings Program final rule (76 FR 67895-
67900) outlines the total potential points available per domain as 
demonstrated in Table 58. As indicated in Table 58, under the final 
rule the Patient/Caregiver Experience Domain is weighted equally with 
other three quality domains at 25 percent and consists of 2 measures: a 
composite of six Clinician and Group (CG) CAHPS summary survey measures 
(1) Getting Timely Care, Appointments and Information, (2) How Well 
Your Doctors Communicate, (3) Patient's Rating of Doctor, (4) Access to 
Specialists, (5) Health Promotion and Education, (6) Shared Decision 
Making) and a Health Status/Functional Status measure. The six measures 
included in the composite will transition to pay-for-performance 
starting in the second year of an ACO's agreement period. In contrast, 
the Health Status/Functional Status measure will remain pay-for-
reporting throughout the ACO's entire agreement period.

[[Page 43485]]



                 Table 58--Total Points for Each Domain Within the Quality Performance Standard
----------------------------------------------------------------------------------------------------------------
                                             Total                                         Total
                                           individual     Total measures for scoring     potential      Domain
                 Domain                     measures               purposes              points per     weight
                                           (table F1)                                      domain     (percent)
----------------------------------------------------------------------------------------------------------------
Patient/Caregiver Experience............            7  1 measure, with 6 survey module            4           25
                                                        measures combined, plus 1
                                                        individual measure.
Care Coordination/......................            6  6 measures, plus the EHR                  14           25
Patient Safety..........................                measure double-weighted (4
                                                        points).
Preventative Health.....................            8  8 measures.....................           16           25
At Risk Population......................           12  7 measures, including 5                   14           25
                                                        component diabetes composite
                                                        measure and 2 component CAD
                                                        composite measure.
                                         -----------------------------------------------------------------------
Total...................................           33  23.............................           48          100
----------------------------------------------------------------------------------------------------------------
*From Table 4 in the Shared Savings Program Final Rule (76 FR 67899).

    The result of this point system is that performance on the six 
patient experience measures is worth only 12.5 percent of an ACO's 
total performance score because the other 12.5 percent of the Patient/
Caregiver Experience domain is the Health Status/Functional Status 
measure, which is a pay-for-reporting measure for all program years. 
However, we believe that each of these seven measures is equally 
important within the Patient/Caregiver Experience domain, and that 
scoring within the domain should better reflect performance on these 
measures, thereby placing a greater emphasis on the voice of the 
patient through patient-reported outcomes and experiences. We believe 
that increasing the weight of the 6 measures that will become pay-for-
performance in the second year of the agreement period will incentivize 
ACOs to improve their performance on these measures. A policy to place 
a greater emphasis on patient-reported outcomes and experiences is 
consistent with our goal to improve the quality of care furnished by 
ACOs over time.
    Therefore, we are proposing to modify the point scoring for the 
Patient/Caregiver Experience domain as demonstrated in Table 59. As 
modified, each of the 7 survey module measures within the domain would 
be assigned a maximum value of 2 points. The Patient/Caregiver 
Experience domain would then be worth a total of 14 points, rather than 
4 points. The end result would be that each of the 7 measure modules in 
the domain would have equal weight. We note that this change would not 
affect the weighting of the domain itself in relationship to the other 
three domains; it would remain 25 percent of the ACO's total quality 
performance score.

             Table 59--Modified Total Points for Each Domain Within the Quality Performance Standard
----------------------------------------------------------------------------------------------------------------
                                             Total                                         Total
                                           individual     Total measures for scoring     potential      Domain
                 Domain                     measures               purposes              points per     weight
                                           (table F1)                                      domain     (percent)
----------------------------------------------------------------------------------------------------------------
Patient/Caregiver Experience............            7  7 individual survey module                14           25
                                                        measures.
Care Coordination/Patient Safety........            6  6 measures, plus the EHR                  14           25
                                                        measure double-weighted (4
                                                        points).
Preventative Health.....................            8  8 measures.....................           16           25
At Risk Population......................           12  7 measures, including 5                   14           25
                                                        component diabetes composite
                                                        measure and 2 component CAD
                                                        composite measure.
                                         -----------------------------------------------------------------------
    Total...............................           33  28.............................           58          100
----------------------------------------------------------------------------------------------------------------

    We believe that giving equal weight to each of the Patient/
Caregiver Experience measures modules is appropriate because it places 
greater emphasis on patient-reported experiences, promotes clinically 
meaningful differences in ACO performance within the domain, and is 
consistent with the statutory mandate to improve quality of care 
furnished by ACOs over time. The proposed change would also bring the 
total points for the domain in line with the points available in other 
domains.
    We seek comment on our proposal to modify the point scoring within 
the Patient/Caregiver Experience domain.

K. Value-Based Payment Modifier and Physician Feedback Program

1. Overview
    Section 1848(p) of the Act requires that we establish a value-based 
payment modifier and apply it to specific physicians and groups of 
physicians the Secretary determines appropriate starting January 1, 
2015 and to all physicians and groups of physicians by January 1, 2017. 
On or after January 1, 2017, section 1848(p)(7) of the Act provides the 
Secretary discretion to apply the value-based payment modifier to 
eligible professionals as defined in section 1848(k)(3)(B) of the Act. 
Section 1848(p)(4)(C) of the Act requires the value-based payment 
modifier to be budget neutral.
    In this proposed rule, we continue to phase in implementation of 
the value-based payment modifier by applying it to small groups of 
physicians and by increasing the amount of payment at risk. We also 
propose to refine the methodologies used in our approach to calculating 
the value-based payment modifier in order to better identify both high 
and low performers for upward and downward payment adjustments.
2. Governing Principles for Physician Value-Based Payment Modifier 
Implementation
    In the CY 2013 PFS final rule with comment period (77 FR 69306), we

[[Page 43486]]

stated that the value-based payment modifier has the potential to help 
transform Medicare from a passive payer to an active purchaser of 
higher quality, more efficient and more effective healthcare by 
providing upward payment adjustments under the PFS to high performing 
physicians (and groups of physicians) and downward adjustments for low 
performing physicians (and groups of physicians). We also noted that 
Medicare is implementing value-based payment adjustments for other 
types of services, including inpatient hospital services. Further, in 
implementing value-based purchasing initiatives generally, we seek to 
recognize and reward high quality care and quality improvements, and to 
promote more efficient and effective care through the use of evidence-
based measures, the reduction in administrative burden and duplication, 
and less fragmented care.
    In the CY 2013 PFS final rule with comment period, we established 
that the following specific principles should govern the implementation 
of the value-based payment modifier (77 FR 69307).
     A focus on measurement and alignment. Measures for the 
value-based payment modifier should consistently reflect differences in 
performance among physicians and physician groups, reflect the 
diversity of services furnished, and be consistent with the National 
Quality Strategy and other CMS quality initiatives, including the PQRS, 
the Medicare Shared Savings Program, and the Medicare EHR Incentive 
Program.
     A focus on physician choice. Physicians should be able to 
choose the level (individual or group) at which their quality 
performance will be assessed, reflecting physicians' choice over their 
practice configurations. The choice of level should align with the 
requirements of other physician quality reporting programs.
     A focus on shared accountability. The value-based payment 
modifier can facilitate shared accountability by assessing performance 
at the group practice level and by focusing on the total costs of care, 
not just the costs of care furnished by an individual physician.
     A focus on actionable information. The Physician Feedback 
reports should provide meaningful and actionable information to help 
groups of physicians and physicians identify clinical areas where they 
are doing well, as well as areas in which performance could be improved 
by providing groups of physicians with feedback reports on the quality 
and cost of care they furnish to their patients.
     A focus on a gradual implementation. The value-based 
payment modifier should focus initially on identifying high and low 
performing groups of physicians. Moreover, groups of physicians should 
be able to elect how the value-based payment modifier would apply to 
their payment under the PFS starting in CY 2015. As we gain more 
experience with physician measurement tools and methodologies, we can 
broaden the scope of measures assessed, refine physician peer groups, 
create finer payment distinctions, and provide greater payment 
incentives for high performance.
3. Overview of Existing Policies for the Physician Value-Based Payment 
Modifier
    In the CY 2013 PFS final rule with comment period, we finalized 
policies to phase-in the value-based payment modifier by applying it 
starting January 1, 2015 to payments under the Medicare PFS for 
physicians in groups of 100 or more eligible professionals. We identify 
a group of physicians as a single taxpayer identification number (TIN). 
For purposes of establishing group size only, we use the definition of 
an eligible professional as specified in section 1848(k) of the Act. We 
apply the value-based payment modifier to the Medicare paid amounts for 
the items and services billed under the PFS at the TIN level so that 
beneficiary cost-sharing is not affected. We apply the value-based 
payment modifier to the items and services billed by physicians under 
the TIN, not to other eligible professionals that also may bill under 
the TIN. We identify groups of physicians subject to the value-based 
payment modifier for CY 2015 based on a query of Medicare's Provider 
Enrollment, Chain, and Ownership System (PECOS) on October 15, 2013, 
and we remove any groups from this list if, based on a claims analysis, 
the group of physicians did not have 100 or more eligible professionals 
that submitted claims during the performance period (77 FR 69310).
    We established CY 2013 as the performance period for the value-
based payment modifier that will be applied to payments during CY 2015 
and CY 2014 as the performance period for the value-based payment 
modifier that will be applied to payments in CY 2016 (77 FR 69314). We 
also finalized that we will not apply the value-based payment modifier 
in CYs 2015 and 2016 to any group of physicians that is participating 
in the Medicare Shared Savings Program, the Pioneer ACO model, or the 
Comprehensive Primary Care Initiative or other similar Innovation 
Center initiatives (77 FR 69313). From an operational perspective, we 
will apply this policy to any group of physicians in which one or more 
physician(s) participate(s) in one of these programs or initiatives 
during performance periods CY 2013 or CY 2014.
    We finalized policies to determine the amount of the value-based 
payment modifier for CY 2015 by categorizing groups of physicians with 
100 or more eligible professionals into two categories. Category 1 
includes groups of physicians that either (a) self-nominate for the 
PQRS as a group and report at least one measure or (b) elect the PQRS 
Administrative Claims option as a group. Category 2 includes groups 
that do not fall within either of the two subcategories (a) or (b) of 
Category 1. Groups within Category 1 may elect to have their value-
based payment modifier for CY 2015 calculated using the quality-tiering 
methodology, which could result in an upward, neutral, or downward 
adjustment amount. For groups that make this election, we use the 
performance rates on the quality measures reported through the PQRS 
reporting mechanism that the group selects for 2013 (that is, group 
practice reporting option (GPRO) web-interface, CMS-qualified registry, 
or PQRS Administrative Claims option) and the performance rates on 
three outcome measures to calculate the group's quality composite under 
the quality-tiering approach. If a group in Category 1 that elects 
quality-tiering self-nominates for the GPRO web-interface or CMS-
qualified registry and does not meet the satisfactory reporting 
criteria for the PQRS incentive payment, we use the group's performance 
on the Administrative Claims option to calculate the group's quality 
composite under the quality-tiering approach. The value-based payment 
modifier for groups of physicians in Category 1 that do not elect-
quality tiering is 0.0 percent, meaning that these groups will not 
receive a payment adjustment under the value-based payment modifier for 
CY 2015. Category 2 includes groups that do not fall within either of 
the two subcategories (a) or (b) of Category 1. For the groups that are 
in Category 2, the value-based payment modifier for the CY 2015 payment 
adjustment period is -1.0 percent.
    We also finalized the following policies to calculate the value-
based payment modifier using the quality-tiering approach. The quality-
tiering approach requires creation of quality and cost composites for 
each group of physicians subject to the value-based payment modifier. 
The following brief summary describes the policies adopted in last 
year's final rule with comment

[[Page 43487]]

period (77 FR 69320 through 69326). To create the quality composite, we 
create a standardized score for each quality measure reported through 
the group's selected PQRS reporting mechanism, as well as the group's 
performance on three outcome measures (two composite measures of 
potentially preventable hospital admissions for acute and chronic 
conditions and a measure of all-cause hospital readmissions). The 
standardized score for each quality measure is calculated by dividing 
the difference between the group's performance rate and the measure's 
benchmark (the national mean of the measure's performance rate from the 
previous year) by the measure's standard deviation. The standardized 
scores for each measure are classified into one of six domains based on 
the national priorities related to clinical care, patient experience, 
population/community health, patient safety, care coordination, and 
efficiency established in the National Quality Strategy. Within each 
domain, we weight each measure's standardized score equally to arrive 
at a domain score. The domains are then equally weighted to form a 
quality of care composite. When a domain does not contain quality 
measures (for example, when a group chooses a reporting mechanism that 
does not contain measures in the domain), the remaining domains would 
be equally weighted to form the quality of care composite.
    Additionally, we finalized a policy to construct the cost composite 
using five measures of total per capita costs for beneficiaries 
attributed to the group practice. The five measures are total per 
capita costs (both Parts A and B) and total per capita costs for 
beneficiaries with four specific chronic conditions: chronic 
obstructive pulmonary disease (COPD), heart failure, coronary artery 
disease (CAD), and diabetes. We attribute beneficiaries to each group 
using a two-step process that examines whether the group furnished the 
plurality (that is, more than any other group) of primary care services 
to the beneficiary. This attribution methodology is similar to the 
attribution rule we use for the Medicare Shared Savings Program and the 
PQRS GPRO web interface. We create a standardized score for each 
measure by dividing the difference between the group's performance rate 
and the measure's benchmark (the national mean of the measure's 
performance rate for the performance period) by the measure's standard 
deviation. We then classify each measure's standardized score into one 
of two domains: total per capita costs for all attributed beneficiaries 
(one measure) and total per capita costs for all attributed 
beneficiaries with specific conditions (four measures). Within each 
cost domain, each measure is equally weighted. In those instances in 
which we cannot calculate a particular cost measure because, for 
example, the number of cases is fewer than 20, we will weight the 
remaining cost measures in the domain equally. Similar to the quality 
of care composite, each cost domain is weighted equally to form the 
cost composite, unless one of the domains contains no measures, in 
which case the remaining domain will be weighted at 100 percent.
    Under the quality-tiering approach, each group's quality and cost 
composites are classified into high, average, and low categories 
depending upon whether the composites are one or more standard 
deviations above or below the mean. We compare the group's quality of 
care composite classification with the cost composite classification to 
determine the value-based payment modifier adjustment for the CY 2015 
payment adjustment period according to the amounts in Table 60.

 Table 60--2015 Value Modifier Amounts for the Quality-Tiering Approach
------------------------------------------------------------------------
                                                  Average
           Quality/cost              Low cost       cost      High cost
------------------------------------------------------------------------
High quality.....................       +2.0x*       +1.0x*        +0.0%
Average quality..................       +1.0x*        +0.0%        -0.5%
Low quality......................        +0.0%        -0.5%        -1.0%
------------------------------------------------------------------------
* Groups of physicians eligible for an additional +1.0x if (1) reporting
  Physician Quality Reporting System quality measures through the GPRO
  web-interface or CMS-qualified registry, and (2) average beneficiary
  risk score is in the top 25 percent of all beneficiary risk scores.

    To ensure budget neutrality, we first aggregate the downward 
payment adjustments in Table 60 for those groups in Category 1 that 
have elected quality tiering with the -1.0 percent downward payment 
adjustments for groups of physicians subject to the value-based payment 
modifier that fall within Category 2. Using the aggregate downward 
payment adjustment amount, we then calculate the upward payment 
adjustment factor (x). These calculations will be done after the 
performance period has ended. Accordingly, because the performance 
period for the CY 2015 value-based payment modifier is CY 2013, these 
calculations will be performed after December 31, 2013.
    This scoring methodology also provides an additional upward payment 
adjustment of +1.0x to groups of physicians that care for high-risk 
patients (as evidenced by the average HCC risk score of the attributed 
beneficiary population) and submit data on PQRS quality measures 
through PQRS via the GPRO using the web-interface or CMS-qualified 
registry. We will increase the upward payment adjustment from +2.0x to 
+3.0x for groups of physicians classified as high quality/low cost and 
from +1.0x to +2.0x for groups of physicians that are either high 
quality/average cost or average quality/low cost if the group of 
physicians' attributed beneficiary population has an average risk score 
that is in the top 25 percent of the distribution of beneficiary risk 
scores nationwide. This additional upward payment adjustment (+1.0x for 
the CY 2015 payment adjustment period) will not apply to groups of 
physicians that select the PQRS Administrative Claims reporting 
mechanism. Finally, we provide an informal review process to enable a 
group of physicians to inquire about the calculation of its value-based 
payment modifier.
    Since adopting these policies, the Institute of Medicine released a 
new report, ``Interim Report of the Committee on Geographic Variation 
in Health Care Spending and Promotion of High-Value Care: Preliminary 
Committee Observations,'' observing that to improve value, ``payment 
reforms need to create incentives to encourage behavioral change at the 
locus of care (providers and patient).'' \2\ Our approach to 
implementing the value-based payment modifier is consistent with this 
vision because it ties a group practice's payment to its

[[Page 43488]]

actions by rewarding high performing groups of physicians and 
penalizing low-performing groups of physicians.
---------------------------------------------------------------------------

    \2\ Institute of Medicine, ``Interim Report of the Committee on 
Geographic Variation in Health Care Spending and Promotion of High-
Value Health Care: Preliminary Committee Observations,'' (2013), 
p.29.
---------------------------------------------------------------------------

    On January 31, 2013, we submitted two cost measures--the total per 
capita costs for all attributed beneficiaries measure and the Medicare 
Spending per Beneficiary measure--to the National Quality Forum for 
endorsement. We have gained valuable feedback on a variety of issues 
(for example, attribution and risk adjustment) as we work with the 
National Quality Forum on the endorsement process for our cost 
measures. CMS is committed to refining our cost measures through future 
rulemaking based on feedback we receive from NQF and other 
stakeholders.
    As discussed below in section K.5, we provided 2011 Quality and 
Resource Use Reports (QRURs) to 54 large group practices and to over 
31,000 individual physicians in nine states that practice in group of 
physicians with 25 or more eligible professionals. These reports 
contained performance information on the quality of care furnished, and 
the cost of that care, to Medicare beneficiaries by these physicians 
and groups of physicians. Overall findings and results from these 
reports confirm that we can develop reliable and valid quality and cost 
measures at the group and individual physician level on which to base 
the value-based payment modifier. Moreover, group report recipients 
have found the reports informative and they have suggested ways to 
improve them to facilitate care coordination and quality improvement. 
We have adopted many of these suggestions in the QRUR reports that we 
plan to make available later this year.
4. Provisions of This Proposed Rule
    In this proposed rule, we propose additions and refinements to the 
existing value-based payment modifier policies. These proposals 
continue our phased-in implementation of the value-based payment 
modifier by reinforcing our emphasis on quality measurement, alignment 
with the PQRS, physician choice, and shared accountability. 
Specifically, this proposed rule includes the following proposals:
     To apply the value-based payment modifier to groups of 
physicians with 10 or more eligible professionals in CY 2016.
     To make quality-tiering mandatory for groups within 
Category 1 for the CY 2016 value-based payment modifier, except that 
groups of physicians with between 10 and 99 eligible professionals 
would be subject only to any upward or neutral adjustment determined 
under the quality-tiering methodology, and groups of physicians with 
100 or more eligible professionals would be subject to upward, neutral, 
or downward adjustments determined under the quality-tiering 
methodology.
     To increase the amount of payment at risk under the value-
based payment modifier from 1.0 percent to 2.0 percent in CY 2016.
     To align the quality measures and quality reporting 
mechanisms for the value-based payment modifier with those available to 
groups of physicians under the PQRS during the CY 2014 performance 
period.
     To include the Medicare Spending Per Beneficiary (MSPB) 
measure in the total per capita costs for all attributed beneficiaries 
domain of the cost composite.
     To refine the cost measure benchmarking methodology to 
account for the specialties of the physicians in the group.
a. Group Size
    In the CY 2013 PFS final rule with comment period, we stated that 
we would gradually phase in the value-based payment modifier in CY 2015 
by first applying it to large groups (77 FR 69308), which we defined as 
groups of physicians with 100 or more eligible professionals. We noted 
our view that it would be reasonable to focus on groups with 100 or 
more eligible professionals before expanding the application of the 
value-based payment modifier to more groups and solo practitioners in 
CY 2016 and beyond.
    To continue our phase-in of the value-based payment modifier, we 
believe it is appropriate to lower the group size threshold for CY 2016 
payment adjustments, which will be based on performance during CY 2014. 
Table 61 shows the number of groups, eligible professionals (EPs) and 
physicians in groups of various sizes based on an analysis of calendar 
year 2011 claims with a 90-day run-out period. We note that the number 
of EPs includes other practitioners, such as physician assistants and 
nurse practitioners, in addition to physicians.

                        Table 61--Eligible Professional/Physician Group Size Distribution
                                                  [2011 claims]
----------------------------------------------------------------------------------------------------------------
                                     Number of       Eligible        Number of      Percent of      Cumulative
           Group size              groups (TINs)   professionals    physicians      physicians      percentage
----------------------------------------------------------------------------------------------------------------
100+ EPs........................           1,132         311,094         215,936            25.7            25.7
50-99EPs........................           1,622         110,862          76,318             9.1            34.8
25-49 EPs.......................           3,729         126,596          88,065            10.5            45.3
20-24 EPs.......................           1,890          41,334          28,756             3.4            48.7
10-19 EPs.......................           8,653         116,379          81,829             9.7            58.4
2-9 EPs.........................          68,702         241,732         174.758            20.8            79.2
1 EP............................         222,097         222,097         175,115            20.8           100.0
                                 -------------------------------------------------------------------------------
    Total.......................         307,825       1,170,094         840,777             100  ..............
----------------------------------------------------------------------------------------------------------------

    We propose to apply the value-based payment modifier in CY 2016 to 
groups of physicians with 10 or more eligible professionals. We 
estimate that this proposal would cause approximately 17,000 groups 
(TINs) and nearly 60 percent of physicians to be affected by the value-
based payment modifier in CY 2016. We believe this proposal continues 
our policy to phase in the value-based payment modifier by ensuring 
that the majority of physicians are covered in CY 2016 before it 
applies to all physicians in CY 2017. As discussed below in Section 
K.5, CMS conducted statistical reliability analyses on the PQRS quality 
measures and the cost measures contained in the 2010 and 2011 groups 
and individual Quality and Resource Use Reports (QRURs). These reports 
contained the same PQRS quality measures and cost measures that we will 
use for the value-based payment modifier. Both the quality and cost 
measures in the group reports were statistically reliable at a high 
level. Moreover, the average reliability score

[[Page 43489]]

was high for 98 percent of the individually reported PQRS measures and 
all of the cost measures (with a case size of at least 20) included in 
the individual feedback reports. Given these results, we believe that 
we can reliably apply a value-based payment modifier to groups of 
physicians with 10 or more eligible professionals in CY 2016 and to 
smaller groups and to solo practitioners in future years. Accordingly, 
we propose to revise the regulations at Sec.  414.1210 to reflect that 
the CY 2016 value-based payment modifier would be applicable to 
physicians that are in groups with ten or more eligible professionals. 
We seek comments on this proposal.
    We propose to identify groups of physicians that would be subject 
to the value-based payment modifier (for example, for CY 2016, groups 
of physicians with 10 or more eligible professionals) using the same 
procedures that we finalized in the CY 2013 PFS final rule with comment 
period (for a description of those procedures, we refer readers to 77 
FR 69309 through 69310). Rather than querying Medicare's PECOS data 
base as of October 15 or another date certain, however, we propose to 
perform the query within 10 days of the close of the PQRS group self-
nomination/registration process during the relevant performance period 
year. For example, for the CY 2016 value-based payment modifier, within 
10 days of the close of the PQRS group self-nomination/registration 
process that will occur during the fall of CY 2014. We propose to 
revise the regulations at Sec.  414.1210(c) to reflect that 
identification of the groups of physicians subject to the value-based 
payment modifier is based on a query of PECOS at the close of the PQRS 
registration period and that groups of physicians are removed from this 
list if, based on a claims analysis, the group of physicians did not 
have the required number of eligible professionals, as defined in Sec.  
414.1210(a), that submitted claims during the performance period for 
the applicable calendar year payment adjustment period. We seek comment 
on this proposal.
b. Approach to Setting the Value-Based Payment Modifier Adjustment 
Based on PQRS Participation
    In the CY 2013 PFS final rule with comment period (77 FR 69311), we 
adopted a policy to categorize groups of physicians subject to the 
value-based payment modifier in CY 2015 based on a group's 
participation in the PQRS. Specifically, we categorize groups of 
physicians eligible for the CY 2015 value-based payment modifier into 
two categories. Category 1 includes groups that either (a) self-
nominate for the PQRS as a group and report at least one measure or (b) 
elect the PQRS Administrative Claims option as a group for CY 2013. 
Groups of physicians in Category 1 may elect to have their value-based 
payment modifier for CY 2015 calculated using the quality-tiering 
methodology, which could result in an upward, neutral, or downward 
adjustment amount. The value-based payment modifier for groups of 
physicians in Category 1 that do not elect quality tiering is 0.0 
percent, meaning that physicians in these groups will not receive a 
payment adjustment under the value-based payment modifier for CY 2015. 
Category 2 includes groups of physicians that do not fall within 
Category 1. For those groups of physicians in Category 2, the value-
based payment modifier for CY 2015 is -1.0 percent.
    We propose to use a similar two-category approach for the CY 2016 
value-based payment modifier based on a group of physicians' 
participation in the PQRS but with different criteria for inclusion in 
Category 1. Category 2 would include those groups of physicians that 
are subject to the CY 2016 value-based payment modifier and do not fall 
within Category 1. Our proposal is intended to accommodate the various 
ways in which physicians can participate in the PQRS in CY 2014--either 
as a group practice participating in the PQRS GPRO or individually. We 
established in the CY 2013 PFS final rule with comment period that 
groups of physicians that wish to participate as a group in the PQRS 
during CY 2014 must self-nominate and select one of three PQRS GPRO 
reporting mechanisms: GPRO web interface, qualified registry, or EHR 
(77 FR 69199 through 69200 (Table 93)). We also established the 
criteria for satisfactory reporting of data on PQRS quality measures 
via the GPRO for the PQRS payment adjustment for CY 2016 (77 FR 69200 
through 69202) and we have proposed to modify these criteria as 
described in Table 27 of this proposed rule. In order to maintain 
alignment with the PQRS, for purposes of the CY 2016 value-based 
payment modifier, we propose that Category 1 would include those groups 
of physicians that meet the criteria for satisfactory reporting of data 
on PQRS quality measures via the GPRO (through use of the web-
interface, EHRs, or qualified registry reporting mechanisms) for the CY 
2016 PQRS payment adjustment.
    We understand that not all groups of physicians may want to 
participate in PQRS as a group under the GPRO in CY 2014. These groups 
of physicians may prefer to have all of their eligible professionals 
continue to report PQRS measures as individuals so that physicians and 
other eligible professionals in the group are able to report data on 
quality measures that reflect their own clinical practice. For example, 
a thoracic surgeon in a multi-specialty group practice may wish to 
report data on different quality measures than those on which a 
dermatologist or urologist in the same group practice may wish to 
report data. In addition, eligible professionals in these groups of 
physicians may wish to use different reporting mechanisms to report 
data for PQRS, such as the claims-based reporting mechanism, EHRs, 
qualified registries, or the proposed qualified clinical data registry 
reporting mechanism. Therefore, for the CY 2016 value-based payment 
modifier, we propose to include in Category 1 groups of physicians that 
do not self-nominate to participate in the PQRS as a group practice in 
CY 2014 and that have at least 70 percent of the group's eligible 
professionals meet the criteria for satisfactory reporting of data on 
PQRS quality measures as individuals for the CY 2016 PQRS payment 
adjustment, or in lieu of satisfactory reporting, satisfactorily 
participate in a PQRS-qualified clinical data registry for the CY 2016 
PQRS payment adjustment. The criteria for satisfactory reporting by 
individual eligible professionals for the claims, qualified registry, 
and EHR reporting mechanisms for the CY 2016 PQRS payment adjustment 
were established in the CY 2013 PFS final rule with comment period (77 
FR 69194 through 69195 (Table 91), 69200-69202). We are proposing in 
Table 25 of this proposed rule the criteria for satisfactory 
participation in a qualified clinical data registry and other proposed 
changes to the criteria for satisfactory reporting for the CY 2016 PQRS 
payment adjustment. Another way to state this proposal is that a group 
of physicians subject to the CY 2016 value-based payment modifier would 
be in Category 1 if at least 70 percent of the individual eligible 
professionals in the group avoid the CY 2016 PQRS payment adjustment by 
any of the reporting options available under the PQRS.
    We are proposing a 70 percent threshold for three reasons. First, 
although we expect 100 percent of a group's eligible professionals to 
participate in PQRS, we believe that we will obtain a reliable 
indicator of the

[[Page 43490]]

group's quality if at least 70 percent of the eligible professionals in 
the group meet the criteria to avoid the PQRS payment adjustment. We 
recognize that many individual eligible professionals may be reporting 
data on PQRS measures for the first time in CY 2014 and we do not seek 
to impose too high a burden on these groups that does not increase the 
reliability of the group's quality performance data for purposes of the 
value-based payment modifier. Second, the vast majority of eligible 
professionals participate in the PQRS as individuals, not as members of 
a group practice. Third, based on an examination of 2011 PQRS data, at 
least 63 percent of groups of physicians (TINs) participating in the 
PQRS with fewer than 50 eligible professionals would meet the 70 
percent threshold already. At a 70 percent threshold, however, only 29 
percent of groups of physicians participating in the PQRS of more than 
100 eligible professionals have at least 70 percent of their eligible 
professionals meeting the criteria for satisfactory reporting in 2011. 
We believe that this result is consistent with our policy to encourage 
group reporting by the very largest groups of physicians. Indeed, these 
large groups have several reporting mechanisms available under the PQRS 
GPRO including the web interface, registries, and EHRs. Accordingly, we 
also propose to revise the regulation text at Sec.  414.1225, which was 
previously specific to the CY 2013 performance period and only referred 
to quality measures reported by groups of physicians rather than 
individual eligible professionals within a group. We seek comment on 
these proposals.
    For a group of physicians that would be subject to the CY 2016 
value-based payment modifier to be included in Category 1, the criteria 
for satisfactory reporting (or the criteria for satisfactory 
participation, in the case of the 70 percent option described above) 
would need to be met during the CY 2014 performance period for the PQRS 
CY 2016 payment adjustment. We note that any reporting periods that are 
established under the PQRS would continue to apply for purposes of the 
PQRS. In the event that the criteria that are finalized for the CY 2016 
PQRS payment adjustment differ from what is proposed for the PQRS in 
this proposed rule, our intention is to align the criteria for 
inclusion in Category 1 to the extent possible with the criteria that 
are ultimately established for the CY 2016 PQRS payment adjustment.
    We propose to more fully phase-in the quality-tiering methodology 
for calculating the value-based payment modifier for CY 2016 based on 
the number of eligible professionals in the group. We propose that 
groups in Category 1 would no longer have the option to elect quality 
tiering for the CY 2016 value-based payment modifier (as was the case 
for the CY 2015 value-based payment modifier) and instead would be 
subject to mandatory quality tiering. We propose to apply the quality-
tiering methodology to all groups in Category 1 for the value-based 
payment modifier for CY 2016, except that groups of physicians with 
between 10 and 99 eligible professionals would be subject only to 
upward or neutral adjustments derived under the quality-tiering 
methodology, while groups of physicians with 100 or more eligible 
professionals would be subject to upward, neutral, or downward 
adjustments derived under the quality-tiering methodology. In other 
words, we propose that groups of physicians in Category 1 with between 
10 and 99 eligible professionals would be held harmless from any 
downward adjustments derived from the quality-tiering methodology for 
the CY 2016 value-based payment modifier. We believe this proposed 
approach would reward groups of physicians that provide high-quality/
low-cost care, reduce program complexity, and more fully engage groups 
of physicians in our plans to implement the value-based payment 
modifier. Accordingly, we propose to revise the regulations at Sec.  
414.1270 to reflect the proposal to make the quality-tiering 
methodology mandatory, with the exception noted above, for all groups 
of physicians subject to the value-based payment modifier in CY 2016 
that fall within Category 1. We seek comment on this proposal. We are 
also revising the regulations at Sec.  414.1270 to clarify that for the 
CY 2015 payment adjustment period a group may be determined under the 
quality-tiering methodology to have poor performance based on low 
quality and high costs, low quality and average costs, or average 
quality and high costs.
    For groups of physicians with 100 or more eligible professionals, 
we believe it is appropriate to begin to phase in both the upward and 
the downward payment adjustments under the quality-tiering methodology 
for the CY 2016 value-based payment modifier. Based on 2011 claims, we 
estimate that there are approximately 1,100 groups of 100 or more 
eligible professionals. We believe that such large groups should 
already be focused on quality improvement and that they have ample 
ability to do so. These groups should have developed the internal means 
to track and improve the quality of care they furnish to Medicare FFS 
beneficiaries. For example, several large group practices that have 
participated in the PQRS GPRO have redesigned their electronic medical 
records systems to capture data to continually monitor their 
performance on those quality measures and provide alerts at the point 
of care to physicians and practitioners to further facilitate provision 
of high quality care to Medicare beneficiaries. Moreover under the 
quality-tiering methodology for calculating the value-based payment 
modifier as we established in the CY 2013 PFS final rule with comment 
period and have updated in this proposed rule, groups of physicians 
that furnish high quality care will not have a downward adjustment, 
even if they furnish such care at high costs. Thus, we believe it is 
appropriate to apply both upward and downward adjustments under the 
quality-tiering methodology to groups of physicians with 100 or more 
eligible professionals in 2016. We seek comments on our proposals and, 
in the alternative, whether we should treat groups of physicians with 
100 or more eligible professionals in the same manner as we propose to 
treat groups of physicians with between 10 and 99 eligible 
professionals under the quality-tiering methodology as described 
previously.
    Accordingly, we propose to revise Sec.  414.1270 to reflect these 
proposals, including our proposals regarding mandatory quality-tiering. 
We seek comment on these proposals.
c. Payment Adjustment Amount
    Section 1848(p) of the Act does not specify the amount of payment 
that should be subject to the adjustment for the value-based payment 
modifier; however, section 1848(p)(4)(C) of the Act requires the value-
based payment modifier be implemented in a budget neutral manner. 
Budget neutrality means that payments will increase for some groups of 
physicians based on high performance and decrease for others based on 
low performance, but the aggregate amount of Medicare spending in any 
given year for physicians' services will not change as a result of 
application of the value-based payment modifier.
    In the CY 2013 PFS final rule with comment period, we adopted a 
modest payment reduction of 1.0 percent for groups of physicians in 
Category 1 that elected quality tiering and were classified as low 
quality/high cost and for groups of physicians in Category 2 (77 FR 
69323-24). Although we received comments suggesting that larger payment 
adjustments (both

[[Page 43491]]

upward and downward) would be necessary to more strongly encourage 
quality improvements, we finalized our proposed adjustments as we 
believed they better aligned with our goal to gradually phase in the 
value-based payment modifier. However, we noted that as we gained 
experience with our value-based payment modifier methodologies, we 
would likely consider ways to increase the amount of payment at risk 
(77 FR 69324).
    Since last year, we have further considered comments on ways to 
better encourage improvements in physician efficiency and quality while 
still gradually phasing in the value-based payment modifier. We agree 
with commenters on the value of gradually strengthening the incentives 
to improve performance by offering greater rewards for strong 
performance along with increased financial risk for poorer performance. 
As discussed below in section K.5, CMS conducted statistical 
reliability analysis on the PQRS quality measures and the cost measures 
contained in the 2010 and 2011 groups and individual physician feedback 
reports. These reports contained the same PQRS quality measures and 
cost measures that we will use for the value-based payment modifier. 
The quality and cost measures in the group reports were statistically 
reliable at a high level. Moreover, the average reliability score was 
high for 98 percent of the individually reported PQRS measures and for 
all of the cost measures (with a case size of at least 20) included in 
the individual feedback reports. Thus, we believe that we can increase 
the amount of payment at risk because we can reliably apply a value-
based payment modifier in CY 2016 to groups of physicians with 10 or 
more eligible professionals and to smaller groups and to solo 
practitioners in future years. Therefore, we propose to increase the 
downward adjustment under the value-based payment modifier from 1.0 
percent in CY 2015 to 2.0 percent for CY 2016. That is, for CY 2016, a 
-2.0 percent value-based payment modifier would apply to groups of 
physicians subject to the value-based payment modifier that fall in 
Category 2. In addition, we propose to increase the maximum downward 
adjustment under the quality-tiering methodology to -2.0 percent for 
groups of physicians classified as low quality/high cost and to set the 
adjustment to -1.0 percent for groups classified as either low quality/
average cost or average quality/high cost. We propose to revise Sec.  
414.1270 and Sec.  414.1275(c) and (d) to reflect the proposed increase 
to a 2.0 percent adjustment under the value-based payment modifier for 
the CY 2016 payment adjustment period. We are also making a technical 
correction to Sec.  414.1275(c) to clarify the PQRS GPRO reporting 
mechanisms available in CY 2013. Table 62 shows the proposed quality-
tiering payment adjustment amounts for CY 2016 (based on CY 2014 
performance).

           Table 62--2016 Value-Based Payment Modifier Amounts
------------------------------------------------------------------------
                                 CY 2016
-------------------------------------------------------------------------
                                                  Average
           Quality/cost              Low cost       cost      High cost
------------------------------------------------------------------------
High quality.....................      * +2.0x      * +1.0x        +0.0%
Average quality..................      * +1.0x        +0.0%        -1.0%
Low quality......................        +0.0%        -1.0%        -2.0%
------------------------------------------------------------------------
* Groups of physicians eligible for an additional +1.0x if reporting
  Physician Quality Reporting System quality measures and average
  beneficiary risk score is in the top 25 percent of all beneficiary
  risk scores.

    Consistent with the policy adopted in the CY 2013 PFS final rule 
with comment period, the upward payment adjustment factor (``x'') would 
be determined after the performance period has ended based on the 
aggregate amount of downward payment adjustments. We note that any 
funds derived from the application of the downward adjustments to 
groups of physicians with 100 or more eligible professionals and the 
downward 2.0 percent adjustment applied to those groups of physicians 
subject to the value-based payment modifier that fall in Category 2, 
would be available to all groups of physicians eligible for value-based 
payment modifier upward payment adjustments. The quality-tiering 
methodology would continue to provide an additional upward payment 
adjustment of +1.0x to groups of physicians that care for high-risk 
beneficiaries (as evidenced by the average HCC risk score of the 
attributed beneficiary population). We seek comments on our proposal to 
increase the downward value-based payment modifier to 2.0 percent for 
those groups of physicians with 10 or more eligible professionals that 
are in Category 2 and for groups of physicians with 100 or more 
eligible professionals that are classified as low quality/high cost 
groups for the CY 2016 payment adjustment period.
d. Performance Period
    In the CY 2013 PFS final rule with comment period (77 FR 69314), we 
adopted a policy that performance on quality and cost measures in CY 
2014 will be used to calculate the value-based payment modifier that is 
applied to items and services for which payment is made under the PFS 
during CY 2016. We received comments requesting us to close the gap 
between the end of the performance period (for example, December 31, 
2014) and the beginning of the payment adjustment period (for example, 
January 1, 2016), in order to strengthen the connection between the 
performance of physicians and groups of physicians and the financial 
incentives for quality improvement.\3\ We understand that many private 
sector plans start to provide payment adjustment within seven months of 
close of the performance period.\4\
---------------------------------------------------------------------------

    \3\ See, e.g., Comment of the American College of Surgeons 
comment on the CY 2013 PFS proposed rule (Aug. 31, 2012).
    \4\ US GAO, Medicare Physician Payment: Private-Sector 
Initiatives Can Help Inform CMS Quality and Efficiency Incentive 
Efforts, GAO-13-160 (Dec. 2012), available at http://www.gao.gov/assets/660/651102.pdf.
---------------------------------------------------------------------------

    Because the payment adjustment periods for the value-based payment 
modifier are tied to the PFS, which is updated on an annual calendar 
year basis, options to close the one year gap between the close of the 
performance period and the start of the payment adjustment period 
center around altering the start and end dates of the performance 
period, and not the payment adjustment period. As discussed previously 
in this proposed rule, one option could be to adjust the performance 
period for quality data reported through the PQRS. In addition, we 
could calculate the total per capita

[[Page 43492]]

cost measures on an April 1 through March 31 basis, thus closing the 
gap by three months.
    However, a byproduct of altering the performance periods is that 
the deadline for submitting quality information would have to occur at 
the end of the performance period. In addition, the review period 
during which groups of physicians will be able to review the 
calculation of the value-based payment modifier would be shortened to 
allow the necessary system changes to implement the adjustment by the 
January 1 deadline for implementation of the annual PFS. We seek 
comment on the potential merits of altering our current performance 
periods.
    Though we appreciate the comments requesting that we shorten the 
gap between the performance period and the payment adjustment period, 
we propose to use CY 2015 as the performance period for the value-based 
payment modifier adjustments that will apply during CY 2017. We believe 
it is important to propose the performance period for the payment 
adjustments that will apply in CY 2017, because section 
1848(p)(4)(B)(iii) of the Act requires all physicians and groups of 
physicians to be subject to the value-based payment modifier beginning 
not later than January 1, 2017. Accordingly, we propose to add a new 
paragraph (c) to Sec.  414.1215 to indicate that the performance period 
is CY 2015 for value-based payment modifier adjustments made in the CY 
2017 payment adjustment period. We seek comment on this proposal.
    We also are striving to provide more timely feedback to 
stakeholders regarding their cost and quality of care they furnish to 
Medicare beneficiaries. We note that in CY 2013, we plan to provide 
physician feedback reports (Quality and Resource Use Reports (QRURs)) 
starting in mid-September, which is eight and one-half months from the 
close of the CY 2012 reporting period (that is, December 31, 2012) and 
five months from the close of the quality data submission period (April 
15, 2013) for the GPRO web interface. These QRURs will be made 
available to all groups of 25 or more eligible professionals and will 
preview how the groups of physicians would fare under the value-based 
payment modifier policies, albeit on CY 2012 data, that we established 
in the CY 2013 final rule with comment period. Moreover, we anticipate 
that these reports will contain actionable information regarding 
beneficiaries attributed to the group, thereby enabling physicians in 
the group to better coordinate care and improve the quality of care 
furnished. We also are in the process of enhancing our quality 
reporting and report dissemination infrastructure such that we expect 
to provide QRURs in 2014 even closer to the end of the performance 
period.
    Despite these efforts, we expect there will always be a gap between 
the close of the performance period and the beginning of the payment 
adjustment period to account for various operational processes, albeit 
one that we are striving to reduce. During this gap, we allow for a 
three-month claim run out so that physicians are evaluated on complete 
and accurate information. We standardize the amounts on these claims in 
order to calculate the cost measures. This process takes one month. 
Concurrent with these two processes, we obtain the data reported for 
quality measurement and calculate the PQRS measures--a process which 
takes at least six months. In addition, we then calculate each group's 
cost and quality composites and implement the quality-tiering 
methodology. We then produce and verify the reports. These processes 
combined take approximately eight to nine months. We are striving to 
find ways to make these processes more efficient as we gain more 
experience producing these reports.
e. Quality Measures
    In the CY 2013 PFS final rule with comment period (77 FR 69315), we 
aligned our policies for the value-based payment modifier for CY 2015 
with the PQRS reporting mechanisms available to groups of physicians in 
CY 2013, such that data that a group of physicians submitted for 
quality reporting purposes through any of the PQRS group reporting 
mechanisms in CY 2013 would be used for calculating the quality 
composite under the quality-tiering approach for the value-based 
payment modifier for CY 2015. Moreover, all of the quality measures for 
which groups of physicians are eligible to report under the PQRS are 
used to calculate the group of physicians' value-based payment modifier 
for CY 2015, to the extent the group of physicians submits data on such 
measures. We also established a policy to include three additional 
quality measures (outcome measures) for all groups of physicians 
subject to the value-based payment modifier: (1) A composite of rates 
of potentially preventable hospital admissions for heart failure, 
chronic obstructive pulmonary disease, and diabetes; (2) a composite 
rate of potentially preventable hospital admissions for dehydration, 
urinary tract infections, and bacterial pneumonia, and (3) rates of an 
all-cause hospital readmissions measure (77 FR 69315).
    We believe it is important to continue to align the value-based 
payment modifier for CY 2016 with the requirements of the PQRS, because 
quality reporting is a necessary, but not sufficient, component of 
quality improvement. We also seek not to place an undue burden on 
physicians to report such data so that they can furnish care to 
beneficiaries in an efficient manner. We propose to include, therefore, 
for purposes of the value-based payment modifier for CY 2016, all of 
the PQRS GPRO reporting mechanisms available to group practices for the 
PQRS reporting periods in CY 2014 and all of the PQRS reporting 
mechanisms available to individual eligible professionals for the PQRS 
reporting periods in CY 2014. Accordingly, we also propose to update 
our regulations at Sec.  414.1220 to reflect this proposal. We note 
that the criteria for satisfactory reporting of data on PQRS quality 
measures for individual eligible professionals via qualified registries 
for the CY 2014 PQRS incentive and CY 2016 PQRS payment adjustment 
permits the use of a 6-month reporting period (Tables 24 and 25). We 
believe that data submitted via qualified registries for this 6-month 
reporting period would be sufficiently reliable on which to base a 
group of physicians' quality composite score under the value-based 
payment modifier because in order for us to use the data to calculate 
the score, we would require data for each quality measure on at least 
20 beneficiaries, which is the reliability standard for the value-based 
payment modifier (77 FR 69322-69323). Given this level of reliability, 
we believe a six-month reporting period would be comparable to a 12-
month reporting period for the purpose of evaluating the quality of 
care furnished by a group of physicians subject to the value-based 
payment modifier. We seek comment on this proposal.
    We also propose to utilize all of the quality measures that are 
available to be reported under these various PQRS reporting mechanisms, 
including quality measures reported through qualified clinical data 
registries, to calculate a group of physicians' value-based payment 
modifier in CY 2016 to the extent that a group of physicians submits 
data on these measures. In addition, we propose that groups of 
physicians with 25 or more eligible professionals will be able to elect 
to have included in their value-based payment modifier for CY 2016 the 
patient experience of care measures collected through the PQRS CAHPS

[[Page 43493]]

survey for CY 2014. These reporting mechanisms and the patient 
experience measures are described in Tables 24 through 27. We note that 
the three outcome measures that we finalized in the CY 2013 PFS final 
rule with comment period and in Sec.  414.1230--the two composites of 
rates of potentially preventable hospital admissions and the all-cause 
hospital readmission measure--would continue to be included in the 
quality measures used for the value-based payment modifier in CY 2016.
    Although we have received comments to require a core set of quality 
measures for the value-based payment modifier, we believe it is 
premature to require reporting on limited set of measures by all 
physicians until physicians have had a chance to choose measures that 
are meaningful to their practice. As we indicated previously, our 
primary focus is on measurement and alignment during the phase-in of 
the value-based payment modifier, because we believe it is difficult to 
maintain high-quality care and improve quality and performance without 
measurement. Thus, it is important to provide physicians and groups of 
physicians flexibility on the data they report for quality measures.
    For those groups of physicians subject to the value-based payment 
modifier in CY 2016 whose eligible professionals participate in the 
PQRS as individuals rather than as a group practice under the GRPO 
(that is, groups of physicians that are assessed under the 70 percent 
threshold), we propose to calculate the group's performance rate for 
each measure reported by at least one eligible professional in the 
group of physicians by combining the weighted average of the 
performance rates of those eligible professionals reporting the 
measure. If all of the eligible professionals in a group of physicians 
subject to the CY 2016 value-based payment modifier satisfactorily 
participate in a PQRS qualified clinical data registry in CY 2014 and 
we are unable to receive quality performance data for those eligible 
professionals for the reasons discussed above, for purposes of the 
value-based payment modifier, we propose to classify the group's 
quality composite score as ``average'' under the quality-tiering 
methodology, because we would not have data to reliably indicate 
whether the group should be classified as high or low quality under the 
quality-tiering methodology. Accordingly, we also propose to add a new 
subsection to our regulations at Sec.  414.1270 to reflect our 
proposals about how to assess quality performance for groups assessed 
under the 70 percent threshold. We seek comment on these proposals.
    We note that when the value-based payment modifier applies to all 
physicians and groups of physicians in CY 2017 based on performance 
during CY 2015, we anticipate continuing our policy to align with the 
PQRS group reporting for all groups of physicians of two or more 
eligible professionals, and we anticipate permitting physicians who are 
solo practitioners to use any of the PQRS reporting mechanisms 
available to them under the PQRS for reporting periods in CY 2015 for 
purposes of the value-based payment modifier in CY 2017. Although we 
are not proposing to adopt this policy in this proposed rule, we seek 
comment on this approach to align the quality measures and reporting 
mechanisms used in the PQRS for purposes of the value-based payment 
modifier.
f. Inclusion of the Medicare Spending per Beneficiary Measure in the 
Value-Based Payment Modifier Cost Composite
    In the CY 2013 PFS final rule with comment period (77 FR 69316), we 
established a policy to include five cost measures in the value-based 
payment modifier cost composite. The five measures are total per capita 
costs (both Parts A and B) and total per capita costs for beneficiaries 
with four specific chronic conditions: Chronic obstructive pulmonary 
disease (COPD), heart failure, coronary artery disease (CAD), and 
diabetes. We stated that the value-based payment modifier should 
incorporate additional measures that are consistent with the National 
Quality Strategy and other CMS quality initiatives. As a step toward 
that goal, beginning with the CY 2016 value-based payment modifier, we 
propose to expand the cost composite to include an additional measure, 
the Medicare Spending per Beneficiary (MSPB) measure (with one 
modification as discussed below). This section discusses the background 
of the MSPB measure and our proposals to incorporate it into the value-
based payment modifier beginning with the CY 2016 payment adjustment 
period and beyond.
    Background on the implementation of the MSPB measure for other CMS 
quality programs. We finalized the MSPB measure for use in the Hospital 
IQR Program in the FY 2012 IPPS final rule to further Medicare's 
transformation from a system that rewards volume of service to one that 
rewards efficient, effective care and reduces delivery system 
fragmentation and to help address the critical issue of health care 
costs (76 FR 51618-27). We finalized the MSPB measure for inclusion in 
the Hospital VBP Program in the FY 2013 IPPS final rule as an important 
first step toward identifying value in healthcare. In that rule, we 
expressed our belief that this measure provides an incentive for 
hospitals to build stronger relationships with and better understand 
the providers and suppliers that furnish care for their patients before 
and after an acute care hospitalization (77 FR 53585). When viewed in 
light of other quality measures, as a part of the value-based payment 
modifier measure set, we believe that the measure would enable us to 
align incentives and similarly recognize physician groups involved in 
the provision of high-quality care at a lower cost to Medicare. This 
measure also addresses physician care associated with acute inpatient 
hospitalizations and post-acute care. In its recently-released 
``Interim Report of the Committee on Geographic Variation in Health 
Care Spending and Promotion of High-Value Care: Preliminary Committee 
Observations,'' the Institute of Medicine (IOM) observed that, 
``Geographic variation in total Medicare spending is strongly 
influenced by the utilization of post-acute care.'' \1\ Medicare 
spending post-hospital discharge is a significant source of variation 
in the MSPB measure rates, with spending unrelated to readmissions 
being the largest source of variation in those post-discharge Medicare 
payments. As part of the value-based-payment modifier measure set, the 
MSPB measure would recognize and enable CMS to assess groups of 
physicians' performance relating to post-acute care spending, which is 
a ``major source of unexplained variation in Medicare spending.'' \1\
    We propose that this measure would be added to the total per capita 
costs for all attributed beneficiaries domain of the value-based 
payment modifier. Thus, there would be two measures in the total per 
capita costs for all attributed beneficiaries domain--the total per 
capita costs measure and the MSPB measure--each weighted equally in the 
domain. We considered placing this measure in the total per capita 
costs for all attributed beneficiaries with specific conditions domain; 
however, we are not proposing to do so because the MSPB measure is 
similar to the total per capita costs measure (because it includes all 
costs incurred by a beneficiary), albeit one that is related to the 
totality of services furnished surrounding an inpatient 
hospitalization, and thus belongs in the total per capita costs for all 
attributed beneficiaries domain. Moreover, we intend to propose in 
future rulemaking

[[Page 43494]]

to replace the four measures in the total per capita costs for all 
attributed beneficiaries with specific conditions domain with cost 
measures derived from the CMS Episode Grouper and other episode-based 
costs derived from our recent and ongoing work with many specialty 
societies.\5\ We solicit comments on these potential changes to the 
condition-specific cost measures as well as on the other elements of 
the cost composite in preparation for the CY 2015 performance period 
affecting payment adjustment year CY 2017.
---------------------------------------------------------------------------

    \5\ Our recent activities relating to developing Medicare-
specific episodes using the CMS Episode grouper and development of 
other episode costs are discussed in the Physician Feedback Program 
section below.
---------------------------------------------------------------------------

    We currently use the MSPB measure in two other CMS quality 
initiatives, the Hospital Inpatient Quality Reporting (IQR) and 
Hospital Value-Based Purchasing (VBP) Programs. We believe that its 
inclusion in the value-based payment modifier will help to align 
performance incentives across the delivery system. By focusing on the 
cost of care and encouraging avoidance of unnecessary services, the 
measure also addresses one of the National Quality Strategy aims of 
better care: Care that is affordable. This measure has been submitted 
to the National Quality Forum for endorsement, and it was supported by 
the Measures Application Partnership for inclusion in both the Hospital 
IQR and VBP Programs.
    Construction of the MSPB measure. The MSPB measure used for the 
Hospital IQR and VBP Programs is constructed of services furnished 
surrounding hospitalizations (``index admissions''). The measure 
includes all Medicare Part A and Part B payments during an MSPB 
episode. An MSPB episode spans from 3 days prior to an index admission 
at a subsection (d) hospital \6\ through 30 days post discharge with 
certain exclusions. Certain hospitalizations at subsection (d) 
hospitals do not represent index admissions for the MSPB measure. 
Admissions that result in a transfer from one acute hospital to 
another, episodes that occur fewer than 30 days before the end of the 
performance period, or episodes during which the beneficiary is not 
enrolled in both Part A and Part B Medicare do not count as index 
admissions. Costs for each episode are risk adjusted for age and 
severity of illness, and the included payments are standardized to 
remove differences attributable to geographic payment adjustments and 
other payment factors. The payment standardization is the same 
methodology used for the existing total per capita cost measures 
included in the value-based payment modifier.
---------------------------------------------------------------------------

    \6\ Section 1886(d)(1)(B) of the Social Security Act defines 
such hospitals as those in the 50 States and the District of 
Columbia other than psychiatric hospitals, rehabilitation hospitals, 
hospitals whose inpatients are predominantly under 18 years old, 
hospitals whose average inpatient length of stay exceeds 25 days, 
and hospitals involved extensively in treatment for, or research on, 
cancer.
---------------------------------------------------------------------------

    To calculate a hospital's MSPB amount, the payment-standardized 
costs for all index admissions are summed and divided by the sum of the 
expected costs from the risk adjustment model. This ratio is then 
multiplied by the national average MSPB episode cost to give the 
hospital's MSPB amount. Because the Hospital IQR and VBP Programs apply 
to subsection (d) hospitals, we attribute a MSPB index admission to the 
hospital at which an index admission occurs, and we calculate the MSPB 
amount at the hospital level.
    After determining an individual hospital's MSPB amount, we divide 
it by the national median MSPB amount to calculate a ratio. This ratio 
is then converted to a percentage which is the MSPB measure rate that 
we report publicly on Hospital Compare under the Hospital IQR Program 
and use to generate a measure score for the Efficiency domain under the 
Hospital VBP Program. In the context of the value-based payment 
modifier, we propose a slightly revised calculation. We propose not to 
convert the MSPB amount to a ratio as is done to compute a hospital's 
MSPB measure, but rather use the MSPB amount as the measure's 
performance rate. We refer readers to the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51618 through 51627) for a detailed description of the MSPB 
measure that is used in the Inpatient Quality Reporting program and the 
HVBP program. Additional information on the measure, including a 
detailed specification document (entitled ``MSPB Measure Information 
Form'') and the payment standardization methodology (entitled ``CMS 
Price Standardization'') can be found in the ``Measure Methodology'' 
section at http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996. We seek comment on our proposals to include the MSPB measure (as 
modified per the discussion above) in the value-based payment modifier 
cost composite and to add the measure to the total per capita costs for 
all attributed beneficiaries domain. We also propose to revise the 
regulations at Sec.  414.1235 to include the Medicare Spending per 
Beneficiary measure in the set of cost measures for the value-based 
payment modifier and Sec.  414.1260(b)(1)(i) to include the Medicare 
Spending per Beneficiary measure in the total per capita costs for all 
attributed beneficiaries domain. As stated previously, all of our 
proposals related to the MSPB measure would apply beginning with the CY 
2016 value-based payment modifier.
    Attribution of the MSPB measure to physician groups. Unlike the 
Hospital IQR and VBP Programs, in which we attribute the MSPB index 
admission to the hospital at which the index admission occurred, we 
need to develop a method to attribute the MSPB episode to groups of 
physicians to include the measure in the value-based-payment modifier. 
We propose to attribute an MSPB episode to a group of physicians 
subject to the value-based payment modifier (as identified by a single 
TIN), when any eligible professional in the group submits a Part B 
Medicare claim under the group's TIN for a service rendered during an 
inpatient hospitalization that is an index admission for the MSPB 
measure during the performance period for the applicable calendar year 
payment adjustment period. Thus, the same index admission and MSPB 
episode could be attributed to more than one group of physicians.
    We believe that attribution of the MSPB episode to all groups of 
physicians from which an eligible professional submits a Part B claim 
for a service rendered during the hospitalization is the best way to 
assign responsibility for, and encourage greater coordination of, care 
furnished to Medicare beneficiaries who are hospitalized. Based on CY 
2011 claims data, the proposed approach would enable approximately 
11,419 groups of physicians with at least 10 eligible professionals to 
have an MSPB measure score included in their cost composite.\7\ Our 
proposed approach incentivizes hospitals and physicians to furnish 
efficient, effective care during a hospitalization and to coordinate 
post-discharge care to avoid unnecessary services and preventable 
readmissions. Further, we believe that this attribution approach 
fosters shared accountability between hospitals and physicians for the 
care they furnish to Medicare beneficiaries who are hospitalized. We 
propose to add a new paragraph (b) to Sec.  414.1240 to indicate that a 
MSPB episode would be attributed to a group

[[Page 43495]]

of physicians subject to the value-based payment modifier if any 
eligible professional in the group submits a Part B Medicare claim 
under the group's TIN for a service rendered during an inpatient 
hospitalization that is an index admission for the MSPB measure during 
the performance period for the applicable calendar year payment 
adjustment period. Groups of physicians would have a Medicare Spending 
per Beneficiary measure score included in their cost composite based on 
the proposed attribution methodology for the MSPB. We welcome public 
comment on our proposal.
---------------------------------------------------------------------------

    \7\ We note that, based on 2011 claims, many of these 11,419 
groups would only have the MSPB measure included in the cost 
composite because the physicians in the groups do not provide 
primary care services and thus do not have attributed beneficiaries 
for the five annual total per capita cost measures.
---------------------------------------------------------------------------

    We also considered attributing the MSPB episode to physician groups 
from which an eligible professional in the group billed a part B claim 
for a service rendered at any time during the Medicare Spending per 
Beneficiary episode (that is, from 3 days prior to an index admission 
through 30 days post-discharge). This attribution approach would place 
an even stronger emphasis on shared accountability for care provided to 
Medicare beneficiaries who are hospitalized, both during and after 
their hospitalization. Based on 2011 claims data, we estimate that 
attribution to any physician group from which a eligible professional 
billed a part B claim at any time during the episode would enable an 
additional 3,017 groups of physicians with 10 or more eligible 
professionals to receive an MSPB measure performance rate for inclusion 
in the cost composite, as compared to our proposed attribution approach 
which considers only those eligible professionals who bill a Part B 
claim during the hospitalization. We welcome public comment on the 
alternative attribution approach under which we would attribute an MSPB 
episode to a physician group if any eligible professional in the group 
billed a Part B service during the 3 days prior to an index admission 
through 30 days post hospital discharge.
    In addition to the proposed attribution method above, we considered 
several other methods to attribute the MSPB measure to physician 
groups. For example, the MSPB episode could be attributed solely to the 
group of physicians that provided the plurality of Part B services 
billed either: (1) During the entire MSPB episode (that is three days 
prior to hospital admission through 30 days post discharge); or (2) 
during the index hospitalization only. By ``plurality'' of services, we 
mean the highest total dollar amount paid by Medicare to any group of 
physicians who provided Part B services during a given portion of an 
episode (either the full episode or the hospitalization only). The 
group of physicians need not have provided the majority of the services 
paid by Medicare during a given portion of an episode, but rather to 
have provided services for which Medicare paid more than it did to any 
other group of physicians during that portion of an episode. This 
method is a single attribution approach unlike our proposal which is a 
multi-attribution approach.
    Using 2011 claims, we analyzed the number of TINs, comprised of 10 
or more eligible professionals, that would be attributed an MSPB 
measure rate under these alternative attribution methods given a 
minimum of 20 MSPB episodes required. Our analyses revealed that 7,799 
TINs (out of approximately 17,000 TINs (see Table 61)) would be 
eligible to receive an MSPB measure rate, if MSPB episodes were 
attributed to the group of physicians that received the plurality of 
Medicare Part B payments during the entire MSPB episode. This 
represents a 46% decrease from the 11,419 TINs that would receive an 
MSPB measure rate, were it attributed to a group from which an eligible 
professional rendered any Part B service during the entire episode, as 
we proposed above. Our analysis also showed that 7,582 TINs would be 
eligible to receive an MSPB measure rate, if MSPB episodes were 
attributed to the physician group that billed the plurality of Medicare 
Part B payments during the index admission. This represents a 34% 
decrease from the 14,436 TINs that would receive an MSPB measure rate, 
were it attributed to a group from which an eligible professional 
rendered any Part B service during the index admission.
    We considered these attribution methods because they represent 
methods to identify groups of physicians that were ``most responsible'' 
for the Part B Medicare payments made during the episode. We are not 
proposing these methods, because we believe our proposed multiple 
attribution approach better incentivizes a team approach to 
accountability for Medicare beneficiaries' care during a 
hospitalization. We believe our proposed attribution approach is 
further supported by the higher number of TINs that will be able to 
receive an MSPB measure rate under that methodology. We seek comment, 
however, on these two single alternative attribution approaches we 
considered: Attributing an MSPB episode to the group of physicians that 
provided the plurality of Part B services billed either during the 
entire MSPB episode or during the index hospitalization only.
    In addition, we considered a hybrid attribution method: Attribute 
MSPB episodes to all TINs from which an eligible professional provided 
services representing at least 35 percent of the total Medicare Part B 
payments made either: (1) During the entire MSPB episode (that is three 
days prior to hospital admission through 30 days post discharge); or 
(2) during the index hospitalization only. This alternative could 
result in multiple attribution, if two eligible professionals from 
different TINs each provided services representing at least 35 percent 
of the Part B Medicare payments during one of the episode portions 
described above (either the full episode or during the index admission 
only). The rationale for this attribution approach is that it ensures 
that a group of physicians had responsibility for a significant portion 
of the Medicare beneficiary's care during a given portion of the MSPB 
episode. We are not proposing this alternative, because we believe that 
our proposed attribution approach better incentivizes a team approach 
to accountability for Medicare beneficiaries' care during and after a 
hospitalization. We welcome public comment on this alternative 
attribution approach based on provision of services representing at 
least 35 percent of Medicare Part B payments made either during the 
entire MSPB episode or during the index hospitalization only.
    Reliability standard for the Medicare Spending per Beneficiary 
measure for the value-based payment modifier. We propose that a group 
of physicians would have to be attributed a minimum of 20 MSPB episodes 
during the performance period to have their performance on this measure 
included in the value-based payment modifier cost composite. Table 63 
shows the MSPB measure's reliability at various minimum numbers of 
episodes for all Medicare-enrolled TINs with at least one EP (not just 
TINs of 10 or more eligible professionals) from May 2011 through 
December 2011. In this context, reliability is defined as the extent to 
which variation in the measure's performance rate is due to various in 
the cost of services furnished by groups of physicians rather than 
random variation due to the sample of cases observed. Potential 
reliability values range from zero to one, where one (highest possible 
reliability) signifies that all variation in the measure's rates is the 
result of variation in the difference is performance across groups of 
physicians. Generally, reliabilities in the 0.40-0.70 range are often 
considered

[[Page 43496]]

moderate and values greater than 0.70 high.

   Table 63--Reliability of Medicare Spending per Beneficiary Measure for All TINs With at Least One Eligible
                                                  Professional
                                            [May 2011-December 2011]
----------------------------------------------------------------------------------------------------------------
                                                                                      Mean risk-
                                                         Number of    Percent of       adjusted        Average
               MSPB episodes attributed                     TINs         TINs     standardized cost  reliability
                                                                                   per MSPB episode
----------------------------------------------------------------------------------------------------------------
1-9...................................................       59,419           47            $20,493         0.65
10-19.................................................       12,332           10             21,260         0.79
20-29.................................................        7,774            6             21,225         0.83
30-39.................................................        5,839            5             21,340         0.85
40-49.................................................        4,511            4             21,324         0.87
50-99.................................................       12,648           10             21,353         0.89
100-124...............................................        3,702            3             21,403         0.91
125-149...............................................        2,761            2             21,342         0.92
150-174...............................................        2,134            2             21,316         0.93
175-199...............................................        1,673            1             21,119         0.93
200+..................................................       14,933           12             20,562         0.96
----------------------------------------------------------------------------------------------------------------

    We also considered a minimum number of 10 episodes. The advantage 
of this lower minimum number is that it would enable us to calculate 
the MSPB measure for an additional 12,332 physician groups once we 
apply the value-based payment modifier to all physicians and groups of 
physicians. With a minimum of 10 cases, the measure is still very 
reliable, as illustrated in the Table 63. We are proposing the minimum 
of 20 cases for initial implementation of this measure in the cost 
composite beginning with the CY 2016 value-based payment modifier 
because it strikes a balance between maintaining high reliability and 
including a large number of physician groups. We note that this 
reliability standard we are proposing is the same one we adopted in the 
CY 2013 PFS final rule with comment period that applies to quality and 
cost measures used in the value-based payment modifier (77 FR 69323). 
We welcome public comment on our proposed minimum of 20 episodes for 
inclusion of the Medicare Spending per Beneficiary measure in the cost 
composite for the value-based payment modifier and on the alternative 
10 episode minimum that we considered.
g. Refinements to the Cost Measure Composite Methodology
    In the CY 2013 PFS final rule with comment period (77 FR 69322), we 
established a policy to create a cost composite for each group of 
physicians subject to the value-based payment modifier that includes 
five payment-standardized and risk-adjusted cost measures. To calculate 
the each group's cost measures, we first attribute beneficiaries to the 
group of physicians. We attribute beneficiaries using a two-step 
attribution methodology that is used for the Medicare Shared Savings 
Program and the PQRS GPRO and that focuses on the delivery of primary 
care services (77 FR 69320). We have observed that groups of physicians 
that do not provide primary care services are not attributed 
beneficiaries or are attributed fewer than 20 beneficiaries and, thus, 
we are unable to calculate reliable cost measures for those groups of 
physicians (77 FR 69323). Given this development, we propose that, to 
the extent that we are unable to attribute a sufficient number of 
beneficiaries to a group of physicians subject to the value-based 
payment modifier and thus are unable to calculate any of the cost 
measures with at least 20 cases, the group of physicians' cost 
composite score would be classified as ``average'' under the quality-
tiering methodology. We believe this policy is reasonable because we 
would have insufficient information on which to classify the group of 
physicians' costs as ``high'' or ``low'' under the quality-tiering 
methodology. Moreover, we believe that to the extent a group of 
physicians' quality composite is classified as ``high'' or ``low,'' the 
groups of physicians' value-based payment modifier should reflect that 
classification. Accordingly, we propose to add a new paragraph at Sec.  
414.1270 to reflect this proposal that groups of physicians in Category 
1 for which we attribute fewer than 20 cases to calculate any cost 
measure would have their cost composite classified as ``average'' cost. 
We seek comment on this proposal.
    Once we calculate the cost measures for each group of physicians 
subject to the value-based payment modifier, we create the cost 
composite by calculating a standardized score for each cost measure and 
then placing the measures into one of two equally weighted domains: (1) 
The total per capita costs for all attributed beneficiaries domain; and 
(2) the total per capita costs for attributed beneficiaries with 
specific conditions domain. This standardized score is referred to in 
statistical terms as a Z-score. To arrive at the standardized score for 
each cost measure, we compare the performance for each group's cost 
measures to the benchmark (national mean) of other groups subject to 
the value-based payment modifier (peer group) for the same performance 
year. Specifically, we calculate the benchmark for each cost measure as 
the national mean of the performance rates among all groups of 
physicians to which beneficiaries are attributed and that are subject 
to the value-based payment modifier. For example, for CY 2015, the cost 
measures of groups of 100 or more eligible professionals (EPs) will be 
compared to the cost measures of other groups of 100 or more EPs. We 
also noted that we would consider the effects of this policy over the 
next several years as we implement this program and may consider 
changes to these policies through future rulemaking.
    Using 2011 claims data, we have since examined the distribution of 
the overall total per capita cost measure among all groups of 
physicians with one or more eligible professionals to determine whether 
comparisons at the group level would be appropriate once we apply the 
value-based payment modifier to smaller groups of physicians and solo 
practitioners. We found that our current peer grouping methodology 
could have varied impacts on groups of physicians

[[Page 43497]]

that are comprised of different physician specialties. This result 
occurs because the peer group for the per capita cost benchmarks is 
based on a national mean calculated among all groups of physicians 
subject to the value modifier rather than determined more narrowly (for 
example, within a physician specialty).
    For certain physician specialties, the types of services furnished 
typically have higher than average or lower than average costs, and 
thus can affect the group's cost measures. For example, medical and 
other types of oncologists tend to treat relatively costly 
beneficiaries and bill for expensive Part B drugs, which can increase 
mean total per capita costs for oncologists as a whole. By contrast, 
dermatologists and ophthalmologists, for example, perform relatively 
low cost procedures in an outpatient setting and, thus, their total per 
capita cost measures are low. Moreover, to the extent that physicians 
in groups of physicians work together to provide services to the same 
beneficiaries, groups of physicians with a large proportion of high or 
low-cost specialists can affect the level of the group's cost measures. 
Although the cost data are adjusted to account for the relative risk of 
patients, the effects of these adjustments do not fully offset this 
result at the physician and physician group level.
    To address this issue beginning with the CY 2016 value-based 
payment modifier, we considered two methods that account for the group 
practice's specialty composition so that our quality-tiering 
methodology produces fair peer group comparisons and, ultimately, 
correctly ranks group of physicians based on actual performance. Taking 
account of physician specialties in making cost comparisons is similar 
to the approach we have used in the CY 2010 and CY 2011 Quality and 
Resource Use Reports (QRURs) for individual physicians in which we made 
cost comparisons at the individual physician specialty level.
    The first method, ``specialty adjustment,'' accounts for the 
specialty composition of the group prior to computing the standardized 
score for each cost measure. This method enables us to develop 
comparable benchmarks for the risk-adjusted cost measures against which 
to evaluate groups of physicians of smaller size who often have fewer 
or single specialty composition. More specifically, we would adjust the 
standardized score methodology to account for a group's specialty 
composition using three steps:
    Step 1: Create a specialty-specific expected cost based on the 
national average for each cost measure (referred to as the ``national 
specialty-specific expected costs''). To do so, we would attribute 
beneficiaries to a group using the plurality of primary care services 
methodology that we finalized in the CY 2013 PFS final rule with 
comment period (77 FR 69316). For each specialty, we would calculate 
the average cost of beneficiaries attributed to groups of physicians 
with that specialty, weighted by the number of EPs in each group.
    Step 2: Calculate the ``specialty-adjusted expected cost'' for each 
group of physicians by weighting the national specialty-specific 
expected costs by the group's specialty composition of Part B payments. 
That is, the specialty-adjusted expected cost for each group is the 
weighted average of the national specialty-specific expected cost of 
all the specialties in the group, where the weights are each 
specialty's proportion of the group's Part B payments. The Part B 
payments for each specialty are determined based on the payments to 
each EP in the group, and each EP is identified with one specialty 
based on its claims.
    Step 3: Divide the total per capita cost by the specialty-adjusted 
expected cost, and multiply this ratio by the national average per 
capita cost so that we can convert this ratio to a dollar amount 
(referred to as the ``specialty-adjusted total per capita cost'') that 
can then be used in the standardized (Z-) score to determine whether a 
group can be classified as high cost, low cost, or average.
    Below, we illustrate the three steps of the specialty adjustment to 
the standardized score with an example. Assume for simplicity that only 
two TINs and two specialties exist: TIN 1 and TIN 2, and Specialty A 
and Specialty B. For this example, assume that the total per capita 
costs and specialty shares are as shown in Table 64.

                                 Table 64--Example of Calculating Specialty-Adjusted Total per Capita Cost: Assumptions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Number of
             TIN                 Risk-Adjusted      attributed       Number of EPs in  TIN by    Specialty share of EPs in    Specialty share  of part B
                                per capita cost    beneficiaries      specialty  type A or B                TIN                    payments  in TIN
--------------------------------------------------------------------------------------------------------------------------------------------------------
TIN 1........................           $12,000             1,500  A: 10; B: 30...............  A: 25%; B: 75%.............  A: 35%; B: 65%
TIN 2........................             8,000             2,000  A: 21; B: 39...............  A: 35%; B: 65%.............  A: 60%; B: 40%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Step 1: To compute the national specialty-specific expected cost 
for a specialty across all TINs, we first calculate the numerator, 
which is the product of each TIN's total per capita cost times its 
weight (the number of attributed beneficiaries times that specialty's 
share of the TIN's EPs times the number of EPs of that specialty in 
that TIN), summed across all TINs. This sum is divided by the 
denominator, which is the sum across all TINs of the same weights that 
were used in the numerator. For this example, the national specialty-
specific expected cost for Specialty A is ($12,000 * 1,500 * 25% * 10 + 
$8,000 * 2,000 * 35% * 21)/(1,500 * 25% * 10 + 2,000 * 35% * 21) = 
$8,813. Similarly, the national specialty-specific expected cost for 
Specialty B is ($12,000 * 1,500 * 75%*30 + $8,000 * 2,000 * 65% * 39)/
(1,500 * 75% * 30 + 2,000 * 65% * 39) = $9,599.

National Specialty-Specific Expected Cost, by Specialty (step 1)
Specialty A: $8,813
Specialty B: $9,599

    Step 2: To calculate the specialty-adjusted expected cost for each 
group (TIN), we would multiply the above national specialty-specific 
expected costs by each group's proportion of specialty-specific Part B 
payments. For each TIN, we compute the product of the TIN's proportion 
of specialty-specific Part B payments, summed across all specialty 
types of the TIN. In our example, the specialty-adjusted expected cost 
for TIN 1 would be computed as 35% * $8,813 + 65% * $9,599 = $9,324. 
Similarly, the specialty-adjusted expected cost for TIN 2 would be 60% 
* $8,813 + 40% * $9,599 = $9,127.

Specialty-Adjusted Expected Cost, by TIN (step 2)
TIN 1: $9,324
TIN 2: $9,127

    Step 3: We divide the total per capita cost by the specialty-
adjusted expected cost and multiply this ratio by the national average 
per capita cost, to convert this ratio to a dollar amount.

[[Page 43498]]

Assuming the national average per capita cost is $9,714, we can compute 
the specialty-adjusted total per capita cost for each TIN, as shown in 
Table 65.

             Table 65--Example of Calculating Specialty-Adjusted Total per Capita Cost: Calculations
----------------------------------------------------------------------------------------------------------------
                    COLUMN                            A               B               C                D
----------------------------------------------------------------------------------------------------------------
                                                                                                   Specialty-
                                                                                                 adjusted total
                                                  Total per      Specialty-       National      per capita cost:
                     TIN                         capita cost      adjusted       average per      ((column A/
                                                                expected cost    capita cost      column B) *
                                                                                                   column C)
----------------------------------------------------------------------------------------------------------------
TIN 1........................................         $12,000          $9,324          $9,714            $12,502
TIN 2........................................           8,000           9,127           9,714              8,514
----------------------------------------------------------------------------------------------------------------

    The figure in the rightmost column (column D) is the specialty-
adjusted total per capita cost that is used to compute a group's 
standardized (Z-) score. As can be seen, the specialty-adjusted total 
per capita cost for use in the standardized score is $12,502 for TIN 1 
and $8,514 for TIN 2.
    To illustrate the impact of the specialty adjustment methodology, 
we examined the distribution, by specialty, of the overall specialty-
adjusted total annual per capita cost measure based on 2011 claims for 
group of physicians with 1 or more eligible professionals. Table 66 
includes the percentage of physicians in each specialty that practice 
in groups of 1 or more eligible professionals with 20 or more 
attributed beneficiaries and that, based only on this one measure, 
would be classified into low, average, and high cost groups. Table 66 
does not represent all of the physicians within that specialty, rather 
only those that practice in groups of physicians with at least 20 
attributed beneficiaries.

 Table 66--Percentage of Physicians Practicing in Groups With 1 or More
  Eligible Professionals, With at Least 20 Beneficiaries, Classified by
                                  Cost
------------------------------------------------------------------------
                                    Percentage of eligible professionals
                                       in groups (TINs) classified as
                                  --------------------------------------
            Specialty                             Average
                                     Low cost       cost      High cost
                                    (percent)    (percent)    (percent)
------------------------------------------------------------------------
Addiction medicine...............          4.7         94.1          1.2
Allergy/immunology...............          5.3         92.4          2.3
Anesthesiology...................          1.6         93.5          4.9
Cardiac Electrophysiology........          1.9         95.7          2.4
Cardiac surgery..................          0.5         92.9          6.6
Cardiology.......................          4.4         92.2          3.3
Chiropractic.....................          3.1         88.7          8.2
Colorectal surgery...............          3.1         89.2          7.6
Critical care (intensivists).....          1.7         91.9          6.4
Dermatology......................         30.6         68.0          1.4
Diagnostic radiology.............          0.7         92.7          6.6
Emergency medicine...............          3.7         89.1          7.2
Endocrinology....................          9.2         89.1          1.7
Family practice..................          1.3         91.7          7.0
Gastroenterology.................          4.4         93.3          2.2
General practice.................          5.7         84.8          9.5
General surgery..................          1.6         90.1          8.3
Geriatric medicine...............          1.5         83.8         14.7
Geriatric Psychiatry.............          0.0         82.5         17.5
Gynecologist/oncologist..........          1.7         88.5          9.8
Hand surgery.....................          3.1         95.6          1.3
Hematology.......................          0.7         89.1         10.2
Hematology/oncology..............          1.0         87.3         11.8
Hospice and Palliative Care......          0.3         87.9         11.8
Infectious disease...............          2.5         90.6          6.9
Internal medicine................          1.3         87.4         11.3
Interventional Pain Management...          2.9         89.7          7.4
Interventional radiology.........          0.7         93.0          6.2
Maxillofacial surgery............          0.9         94.7          4.4
Medical oncology.................          0.5         83.4         16.1
Nephrology.......................          7.6         89.3          3.0
Neurology........................          5.0         92.4          2.6
Neuropsychiatry..................          4.0         90.7          5.3
Neurosurgery.....................          1.4         83.7         14.9
Nuclear medicine.................          2.2         90.5          7.3
Obstetrics/gynecology............          7.7         89.0          3.3

[[Page 43499]]

 
Ophthalmology....................         17.7         80.9          1.5
Oral surgery (dentists only).....          1.5         92.4          6.1
Orthopedic surgery...............          3.1         91.5          5.5
Osteopathic manipulative medicine          5.7         85.8          8.5
Otolaryngology...................         13.4         84.3          2.3
Pain Management..................          1.5         86.0         12.6
Pathology........................          2.4         91.2          6.4
Pediatric medicine...............          1.2         92.6          6.2
Peripheral vascular disease......          0.0         94.4          5.6
Physical medicine and                      2.1         87.9          9.9
 rehabilitation..................
Plastic and Reconstructive                 4.2         90.4          5.4
 surgery.........................
Podiatry.........................          2.2         91.3          6.5
Preventive medicine..............          3.0         91.3          5.6
Psychiatry.......................          5.0         88.8          6.2
Pulmonary disease................          3.3         92.0          4.7
Radiation oncology...............          4.4         83.5         12.1
Rheumatology.....................          3.9         93.5          2.6
Single or Multispecialty clinic            5.9         85.1          9.1
 or group practice...............
Sports Medicine..................          2.6         94.8          2.6
Surgical oncology................          1.6         82.5         16.0
Thoracic surgery.................          0.1         92.3          7.6
Urology..........................          3.9         93.2          2.9
Vascular surgery.................          0.3         93.7          6.0
------------------------------------------------------------------------

    Under this methodology, we would perform this specialty adjustment 
prior to computing the standardized score for all six cost measures 
included in the value-based payment modifier: The total per capita cost 
measure, the four total per capita cost measures for beneficiaries with 
specific conditions, and the MSPB measure. The specialty adjustment for 
the four condition-specific total per capita cost measures is identical 
to the total per capita cost measure that was described above. The 
specialty adjustment for the MSPB cost measure is analogous to that 
described above for the total per capita cost measure, except that 
``number of beneficiaries'' is replaced with ``number of episodes'' and 
``per capita cost'' is replaced with ``per episode cost.'' Thus, each 
cost measure will have its own set of specialty-specific expected 
costs.
    The second method, ``comparability peer grouping,'' constructs peer 
groups for each physician group practice by identifying group practices 
with the nearest comparable specialty mix.\8\ After doing so, we would 
then calculate a benchmark for the peer group and then use the 
benchmark to calculate the group's standardized score for that measure. 
Under this approach, two group practices would be considered to have 
the same specialty mix if the share of physicians of each specialty is 
within a defined range for both group practices. For the purposes of 
computing peer groups, group practices also could be stratified by 
size, as measured by number of eligible professionals billing under the 
group practice's TIN. A group practice's peer group, however, would 
include a minimum number of peers (that is, group practices with 
similar specialty mixes) to ensure a reliable comparison. If there were 
fewer than the designated number of other group practices with the 
group practice's same specialty mix in the group practice's size 
category, group practices would be added to the peer group based on the 
next level of comparability in order to obtain the minimum number of 
group practices. Group practices that had a specialty mix more 
comparable to the practice's own mix would receive greater weight in 
the peer group. Among the identified peers sharing the same specialty 
mix, those with the most cases would receive the greatest weight.
---------------------------------------------------------------------------

    \8\ For a description of this type of method, see, for example, 
Margaret M. Byrne, et al., Method to Develop Health Care Peer Groups 
for Quality and Financial Comparisons Across Hospitals. April 2009. 
HSR: Health Services Research 44:2, Part I: 577-592.
---------------------------------------------------------------------------

    We tested this method, based on 2011 claims, using a sample of 870 
group practices of 25 or more EPs. The results showed that the 
comparability peer grouping approach reduced the average difference 
between the group's performance and benchmark rate compared to the 
difference between the group's performance and benchmark as computed 
based on the methodology we established in the CY 2013 PFS final rule 
with comment period and which does not consider the specialty 
composition of the group of physicians. Moreover, further analysis 
showed that this methodology consistently ranked groups of physicians. 
In other words, groups of physicians in the top and bottom 5th 
percentiles were consistent using this approach.
    On balance, we believe that the first method, the specialty 
benchmarking method, is preferable to account for the specialty 
composition of the group of physicians when making peer group 
comparisons and creating the standardized score for the cost measures 
for the value-based payment modifier. We also believe this methodology 
allows us to apply the value-based payment modifier to smaller size 
groups and solo practitioners. This methodology creates one national 
benchmark for each cost measure. Moreover, all groups of physicians 
(regardless of size) are assessed against that benchmark in creating 
the group of physicians' standardized score. As discussed in the CY 
2013 PFS final rule with comment period, we believe national benchmarks 
are appropriate for the value-based payment modifier (77

[[Page 43500]]

FR 69322). Although the calculations discussed above may be very 
detailed, they are transparent and we can provide each group of 
physicians with information on how its costs were benchmarked in its 
Quality and Resource Use Report.
    By contrast, the second method, comparability peer grouping, 
requires us to develop a transparent way to define which groups of 
physicians are similar enough to be included in each group of 
physicians' peer group. This approach also creates a different 
benchmark for each group of physicians, which may make it more 
difficult for groups of physicians to understand how their costs are 
benchmarked. Notwith-standing these downsides, the comparability peer 
grouping method treats each group of physicians as a whole, rather than 
as a sum of its parts as in the specialty benchmarking method, and thus 
may have more acceptability among physicians. Moreover, treating the 
group of physicians as a whole also reinforces the shared 
accountability aspect of the value-based payment modifier.
    Given these considerations, we propose to use the first method, the 
specialty benchmarking method, to create the standardized score for 
each group's cost measures beginning with the CY 2016 value-based 
payment modifier. Accordingly, we propose to amend our regulations at 
Sec.  414.1255 to include this policy in our cost composite 
methodology. We seek comment on our proposals, including comments on 
ways to streamline or enhance the calculation mechanics and to make the 
specialty adjustments more transparent and easily understood. We also 
seek comment on the alternative method, the comparability peer grouping 
method. We propose to identify the specialty for each EP based on the 
specialty that is listed on the largest share of the EP's Part B 
claims. We understand that many physicians believe our current 
specialty designations may mask sub-specialist care furnished. We note 
that the procedures for obtaining a CMS specialty code are available at 
http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/MedicareProviderSupEnroll/Taxonomy.html.
    Regardless of the method chosen, we will continue to monitor the 
effects of this policy over the next several years as we implement this 
program and may consider changes to these policies through future 
rulemaking.
5. Physician Feedback Program
    Section 1848(n) of the Act requires us to provide confidential 
reports to physicians that measure the resources involved in furnishing 
care to Medicare FFS beneficiaries. Section 1848(n)(1)(A)(iii) of the 
Act also authorizes us to include information on the quality of care 
furnished to Medicare FFS beneficiaries. In CY 2012, we disseminated 
both group and individual QRURs, based on CY 2011 performance, to a 
wider audience than the CY 2010 reports. These reports contained 
improvements and enhancements suggested by the recipients of the CY 
2010 reports to provide meaningful and actionable information for 
quality improvement. In addition, in May 2013, we provided supplemental 
QRURs to the group report recipients that featured episode-based costs 
for care of pneumonia and several acute and chronic cardiac conditions. 
We derived these episode-based costs using the newly developed CMS 
Episode Grouper software required by section 1848(n)(9)(ii) of the Act.
a. CY 2011 Physician Group Feedback Reports Based on CY 2011 Data and 
Disseminated in CY 2012
    In December 2012, we produced and distributed QRURs to each of the 
54 medical group practices that chose to participate in the CY 2011 
GPRO under the PQRS. Each report provided information on 30 quality 
measures and five resource use (cost) measures for Medicare FFS 
beneficiaries treated by the medical groups in CY 2011. For each of the 
five cost measures, we standardized the input costs to adjust for 
differences in Medicare payments geographically and various Medicare 
payment policies such as Indirect Graduate Medical Education and 
Disproportionate Share Hospital add-on payments. We also risk adjusted 
the cost measures based on the unique mix of patients attributed to the 
physician or group of physicians. Costs for beneficiaries with high 
risk factors (such as a history of chronic diseases, disability, or 
increased age) are adjusted downward, and costs for beneficiaries with 
low risk factors are adjusted upward. More information on the payment 
standardization and risk adjustment techniques is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeedbackProgram/downloads/2011_group_detail_methodology.pdf.
    To participate in the PQRS GPRO in CY 2011, a group practice had to 
be a single provider entity, as identified by its TIN, with at least 
200 eligible professionals. Fifty-four groups, encompassing 37,745 
eligible professionals, participated in the 2011 PQRS GPRO. On average 
the group contained the following type of medical professionals: 
Primary care physicians (22 percent); medical specialists (22 percent); 
surgeons (16 percent); emergency medicine physicians (4 percent); other 
physicians (13 percent); and other medical professionals (23 percent).
    For each of the 54 GPRO practices, we attributed a Medicare FFS 
beneficiary to the group if eligible professionals in the group billed 
for at least two of the beneficiary's eligible office visits or other 
outpatient evaluation and management (E&M) services provided in CY 2011 
and the group practice had the plurality of CY 2011 E&M allowed charges 
for that beneficiary. The average beneficiary population attributed to 
a group practice was 12,764 beneficiaries, with the smallest group 
practice attributed 808 beneficiaries and the largest attributed 33,907 
beneficiaries. Highlights of major findings from these 2011 QRURs are 
as follows:
     The mean group practice performance rate on each PQRS 
quality measures was equal to, or better than the individual physician 
reported performance rate for 13 of 22 comparable quality measures (60 
percent), but lower for the other 9 measures.
     Although there is a positive correlation (0.59), risk-
adjusted total per capita costs for each group are fairly dispersed at 
any given level of risk (Table 67).

[[Page 43501]]

[GRAPHIC] [TIFF OMITTED] TP19JY13.102

     We also constructed a quality composite score for each of 
the 54 groups by combining the 26 clinical quality measures, the 
chronic conditions ACSC composite \9\ and acute conditions ACSC 
composite, and the two hospital discharge measures. Table 68 displays 
the relationship between the composite quality score for each group 
practice and the total payment-standardized risk-adjusted per capita 
cost measure. Although there is a negative correlation (-0.53), total 
per capita costs are fairly dispersed at any given level of quality.
---------------------------------------------------------------------------

    \9\ The chronic conditions composite was constructed as the sum 
of the numerators for diabetes, COPD, and heart failure ACSC 
measures divided by the sum of their corresponding denominators.
[GRAPHIC] [TIFF OMITTED] TP19JY13.103

    The performance rates for the 54 groups on the quality of care and 
cost measures were statistically reliable at a high level across the 
vast majority of the measures. More information about findings from 
these reports is available at http://www.cms.hhs.gov/physicianfeedbackprogram.html.
b. Individual Physician Feedback Reports Based on CY 2011 Data and 
Disseminated in CY 2012.
    In December 2012, we provided individual 2011 Quality and Resource 
Use Reports to over 94,000 physicians

[[Page 43502]]

affiliated with medical group practices of 25 or more eligible 
professionals (that is, these group practices include physicians and 
other medical staff such as nurse practitioners and physician 
assistants). The physician groups were based in 9 states: California; 
Illinois; Iowa; Kansas; Michigan; Minnesota; Missouri; Nebraska; and 
Wisconsin. Over the 4-month period during which reports were available, 
31,518 individual reports were downloaded.
    The QRURs contained performance on PQRS measures for physicians who 
participated in the CY 2011 program. They also contained performance 
information on 28 quality indicators for preventive care, medication 
management, and eight separate condition categories, such as chronic 
obstructive pulmonary disease (COPD) and cancer. We calculated rates 
for these measures using CY 2010 and CY 2011 Medicare administrative 
claims. Of these 28 measures, 14 measures will be included in the PQRS 
Administrative Claims reporting mechanism available for groups of 
physicians and individual EPs in CY 2013.
    The QRURs also provided measures of physician resource use. These 
measures were payment-standardized and risk-adjusted total Parts A and 
B per capita costs for beneficiaries treated by the physician. Payment 
standardization adjusts for differences in Medicare payment rates to 
compare service use within or across geographic regions. Risk 
adjustment accounts for differences in costs among physician that 
result from variation in patient mix. We included five measures of cost 
in the QRURs: total per capita costs for all beneficiaries attributed 
to the physician and total per capita costs for attributed 
beneficiaries with one of four chronic conditions (diabetes, heart 
failure, COPD, or coronary artery disease (CAD)). For the cost 
measures, we attribute beneficiaries to physicians based on each 
physician's degree of involvement with the beneficiary. The three 
categories of attribution are directed, influenced, and contributed, 
which are based on the percentage of each beneficiary's evaluation and 
management services or total professional costs. More information about 
the methodologies used in the CY 2011 Individual QRURs is available at 
http://www.cms.hhs.gov/physicianfeedbackprogram.
    The following is a summary of the highlights from these reports:
     Among high-risk Medicare beneficiaries, visiting a primary 
care physician during the year was associated with lower costs, but 
having a physician who is more involved in one's care (that is, the 
physician directed or influenced care) is associated with the lowest 
costs, on average. For this analysis a physician directed or influenced 
care if the physician billed for 35 percent or more of the patient's 
office or other outpatient E&M visits or for 20 percent or more of the 
patient's total professional costs.
     The average reliability score was high (greater than 0.70) 
for 98 percent (125) of the 128 PQRS measures reported by physicians in 
the nine states with a case size of at least 20. A total of 109 of the 
128 measures (85 percent) had average reliabilities greater than 0.90. 
These reliability scores were substantially higher than for the 14 
measures that are included in the CY 2013 PQRS Administrative Claims 
reporting mechanism. Reliability scores range from zero to one and 
measure the extent to which the performance of one physician can be 
confidently distinguished from another.
     The performance rate for at least 25 percent of physicians 
was significantly different from the mean for 5 of the 10 most reported 
PQRS measures in the 9 states. However, none of the 14 Administrative 
Claims-based measures had performance rates that were significantly 
different from the mean for at least 25 percent of physicians. These 
results suggest statistically significant variation across physicians 
is more likely to be detected using the most common self-reported PQRS 
quality measures rather than the Administrative Claims measures.
     Across the 9 states, the average of the total per capita 
cost (payment-standardized and risk-adjusted) among physicians was 
$18,735. Among total per capita costs for beneficiaries with the four 
chronic condition, total per capita costs for heart failure were 
highest ($34,545), followed by COPD ($32,946), CAD ($25,906), and 
diabetes ($25,016).
     Across the 9 states, the average reliability for 
physicians' total per capita costs was very high at 0.97, when a 
physician had at least 20 cases. The average reliability of the total 
per capita cost measure (among physicians with 20+ cases) for directed 
patients was 0.85, for influenced patients was 0.71, and for 
contributed patients was 0.97. These results demonstrate that for the 
typical physician profiled with a minimum case size of 20 the overall 
per capita cost measure is reliable.
    More information about the aggregate findings from these reports is 
also available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeedbackProgram/ReportTemplate.html.
c. Episode Costs and the Supplemental QRURs
    Section 1848(n)(9)(A)(ii) of the Act, as added by section 3003 of 
the Affordable Care Act, requires CMS to develop a Medicare episode 
grouper by January 1, 2012, and to include episode-based costs in the 
QRURs. An episode of care consists of medical and/or procedural 
services that address a specific medical condition or procedure that 
are delivered to a patient within a defined time period and are 
captured by claims data. An episode grouper is software that organizes 
claims data into episodes. We have developed a CMS prototype episode 
grouper that, for a limited number of conditions, classifies episodes 
into three categories: chronic; acute; and procedural.
    To illustrate how the CMS Episode Grouper works, in June 2013 we 
developed supplemental QRURs and made them available to the 54 large 
group practices that we had provided group QRURs in December 2012. The 
CY 2011 Supplemental Episode Grouper QRURs included the following five 
major episodes along with seven episode sub-types that further 
stratified the episode:
     Pneumonia (acute condition).
    ++ With (inpatient) hospital stay.
    ++ Without hospital stay.
     Acute Myocardial Infarction (AMI) (acute condition).
    ++ Without Percutaneous Coronary Interventions (PCI) or Coronary 
Artery Bypass Graft (CABG).
    ++ With PCI.
    ++ With CABG.
     Coronary Artery Disease (CAD) (chronic condition).
    ++ Without AMI.
    ++ With AMI.
     CABG (without AMI) (procedural).
     PCI (without AMI) (procedural).
    The Supplemental QRURs assign, or attribute, responsibility for the 
patient's care for each episode to a medical practice group. Episode 
assignment to medical practice groups for the Supplemental QRURs was 
based on one or more of the following three methods, depending upon the 
episode type:
     The performance of specific procedures.
     The plurality (35 percent) of episode EP fee schedule 
(PFS) costs billed.
     The plurality or shared majority (35 percent) of E&M 
visits.
    Each of these methods relies on different criteria to attribute 
episodes to groups. We used the first method when a single procedure, 
such as a surgery, triggers, or begins, an episode of care. In this 
case, the group performing the

[[Page 43503]]

surgery is assumed to be responsible for the care. We used this method 
to attribute PCI and CABG episode types to group practices.
    The latter two methods attribute the episode based on EPs' relative 
billing made during the episode. Attribution using PFS costs assumes 
that certain types of EPs who are paid higher amounts during the 
episode are likely to have interacted most with the patient and 
directed the patient's care. The PFS cost attribution method excludes 
costs from laboratories and ambulances, as well as other settings to 
reduce the likelihood that non-clinicians, are attributed the episode. 
Use of E&M visit attribution assumes that EPs who most frequently visit 
the beneficiary during the episode are likely to have substantial 
responsibility for the services rendered during the episode. The 
chronic CAD episode type used only E&M visits for attribution, while 
the acute AMI and pneumonia episodes used both PFS costs and E&M 
visits. More information about the group attribution methodologies is 
available at: www.cms.gov/physicianfeedbackprogram.
    To control for patient case-mix, the CMS Episode Grouper applied a 
risk-adjustment methodology. The risk-adjustment methodology calculated 
each episode's expected cost based on three factors: patient health 
status; demographics; and beneficiary type. Using these factors, the 
risk-adjustment model calculated the predicted cost of an episode using 
information available at the start of the episode.\10\ The use of such 
a prospective risk model avoids allowing providers to influence their 
risk-adjusted costs by changing their treatment patterns during the 
episode. The risk-adjusted cost amount was defined to be equal to the 
average episode cost nationally plus the difference between the episode 
cost level and the predicted cost level derived from the risk-
adjustment model. All cost figures used in the risk-adjustment model 
are payment-standardized.
---------------------------------------------------------------------------

    \10\ CAD episodes are risk-adjusted each quarter, and the data 
used for risk adjustment is updated with each new quarter.
---------------------------------------------------------------------------

    To make the Supplemental QRURs more actionable for medical groups 
for quality improvement and care coordination, the Supplemental QRURs 
identify a suggested individual provider within the group who is likely 
to be directing the care during the episode. This individual is 
designated as the ``Suggested Lead Eligible Professional (EP)'' of the 
episode. In addition the Supplemental QRURs contained summary 
information about each episode type, comparisons to national 
benchmarks, as well as specific information describing each episode 
attributed to the group of physicians. More information about the 
Supplemental QRURs is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeedbackProgram/Episode-Costs-and-Medicare-Episode-Grouper.html.
    We view these Supplemental QRURs as the beginning of an extended 
process of incorporating episode costs into the QRURs. We intend to 
develop the CMS Episode Grouper (based in the CMS' Center for Medicare 
and Medicaid Innovation) and to broaden the number of conditions that 
could be addressed by episode grouping. The feedback that CMS expects 
from the 54 medical practice groups report recipients will inform next 
steps.
d. Future Plans for the Physician Feedback Reports
    In September, 2013, we plan to provide the QRURs at the TIN level 
to all groups of physicians with 25 or more eligible professionals. The 
QRURs will be based on CY 2012 performance data. We anticipate that 
there will be approximately 6,750 reports (including 1,235 groups of 
100 or more EPs) covering approximately 440,000 physicians. These 
reports will include a ``first look'' at the value-based payment 
modifier methodologies using the group's PQRS measures, outcome 
measures, and cost measures.
    The reports also incorporate many valuable suggestions we have 
received from specialty societies and professional societies on ways to 
make these reports more meaningful and actionable. In particular, the 
reports will contain details regarding: (1) Beneficiaries attributed to 
the group practice (for example, beneficiary identifying information, 
information regarding services furnished by the group to the 
beneficiary, risk score percentile, last hospital admission, and 
chronic conditions); (2) Physicians and non-physician eligible 
professionals billing under the group's TIN; and (3) Hospitalizations 
for attributed beneficiaries to help each group manage its patients and 
potentially reduce hospital admissions (including, for example, (a) 
beneficiary identifying information, (b) hospital admission data such 
as data of admission, admitting hospital, principal diagnosis, and (c) 
discharge disposition information). We plan to provide this additional 
information to support the group's quality improvement and care 
coordination efforts. As part of its review of these detailed reports, 
each group will also be able to compare the data in the reports with 
its own records (for example, professionals billing under the group's 
TIN) to verify the information in the CMS reports. We note that these 
reports are developed following a 90-day claim run-out, meaning that 
claims for services furnished during CY 2012 are included in the 
reports if the claim was paid by March 31, 2013.
    We will continue to develop and refine the annual QRURs in an 
iterative manner. As we have done in previous years, we will seek to 
further improve the reports by welcoming suggestions from recipients, 
specialty societies, professional associations, and others. We have 
worked with several specialty societies representing physicians in 
anesthesiology, cardiology, cardiothoracic surgery, emergency medicine, 
neurosurgery, pathology, and radiology to develop episode costs or 
other cost or utilization metrics to include in the annual QRURs. We 
believe these efforts could be productive as we use the QRURs to not 
only describe how the value-based payment modifier would apply to the 
group of physicians, but to provide these groups with utilization and 
other statistics that can be used for quality improvement and care 
coordination.
    In the late summer of 2014, we plan to disseminate the QRURs based 
on CY 2013 data to all physicians (that is, TINs of any size) even 
though groups of physicians with fewer than 100 eligible professionals 
will not be subject to the value-based payment modifier in CY 2015. 
These reports will contain performance on the quality and cost measures 
used to score the composites and additional information to help 
physicians coordinate care and improve the quality of care furnished.
    We continue to look at ways to streamline the QRURs supporting the 
PQRS and the physician value-based payment modifier programs in order 
to create one unified format for quality assessment to increase their 
utility in future years.

L. Updating Existing Standards for E-Prescribing Under Medicare Part D

1. Background
a. Legislative History
    Section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended title XVIII 
of the Act to establish a voluntary prescription drug benefit program 
at section 1860D-4(e) of the Act. Among other things,

[[Page 43504]]

these provisions required the adoption of Part D e-prescribing 
standards. Prescription Drug Plan (PDP) sponsors and Medicare Advantage 
(MA) organizations offering Medicare Advantage-Prescription Drug Plans 
(MA-PD) are required to establish electronic prescription drug programs 
that comply with the e-prescribing standards that are adopted under 
this authority. There is no requirement that prescribers or dispensers 
implement e-prescribing. However, prescribers and dispensers who 
electronically transmit prescription and certain other information for 
covered drugs prescribed for Medicare Part D eligible beneficiaries, 
directly or through an intermediary, are required to comply with any 
applicable standards that are in effect.
    For a further discussion of the statutory basis for this proposed 
rule and the statutory requirements at section 1860D-4(e) of the Act, 
please refer to section I. (Background) of the E-Prescribing and the 
Prescription Drug Program proposed rule, published February 4, 2005 (70 
FR 6256).
b. Regulatory History
(1) Foundation and Final Standards
    CMS utilized several rounds of rulemaking to adopt standards for 
the e-prescribing program. Its first rule, which was published on 
November 7, 2005 (70 FR 67568), adopted three standards that were 
collectively referred to as the ``foundation'' standards. We issued a 
subsequent rule on April 7, 2008 (73 FR 18918) that adopted additional 
standards which are referred to as ``final'' standards. One of these 
standards, the NCPDP Formulary and Benefit Standard, Implementation 
Guide, Version 1, Release 0 (Version 1.0, hereafter referred to as the 
NCPDP Formulary and Benefit 1.0) was a subject of the calendar year 
(CY) 2013 Physician Fee Schedule (PFS) final rule with comment period 
(77 FR 68892 at 69329) and is the subject of this proposed rule. Please 
see the ``Initial Standards Versus Final Standards'' discussion at 70 
FR 67568 in the November 7, 2005 rule for a more detailed discussion 
about ``foundation'' and ``final'' standards.
(2) Updating e-Prescribing Standards
    As noted previously, transaction standards are periodically updated 
to take new knowledge, technology and other considerations into 
account. As CMS adopted specific versions of the standards when it 
adopted the foundation and final e-prescribing standards, there was a 
need to establish a process by which the standards could be updated or 
replaced over time to ensure that the standards did not hold back 
progress in the industry. CMS discussed these processes in its November 
7, 2005 final rule (70 FR 67579).
    The discussion noted that the rulemaking process will generally be 
used to retire, replace or adopt a new e-prescribing standard, but it 
also provided for a simplified ``updating process'' when a standard 
could be updated with a newer ``backward-compatible'' version of the 
adopted standard. In instances in which the user of the later version 
can accommodate users of the earlier version of the adopted standard 
without modification, it noted that notice and comment rulemaking could 
be waived, in which case the use of either the new or old version of 
the adopted standard would be considered compliant upon the effective 
date of the newer version's incorporation by reference in the Federal 
Register.
(3) The NCPDP Formulary and Benefit Standard in the Part D e-
Prescribing Regulations
    The backward compatibility concept has been used extensively to 
update the NCPDP SCRIPT standard in the Part D e-prescribing program, 
but it has not yet been used to update the adopted NCPDP Formulary and 
Benefit Standard. We proposed to update the NCPDP Formulary and Benefit 
1.0 standard for the first time in the CY 2013 PFS proposed rule (77 FR 
44722), but we did not ultimately finalize those proposals. 
Specifically, we proposed to recognize NCPDP Formulary and Benefit 
Standard 3.0 as a backward compatible version of NCPDP Formulary and 
Benefits 1.0 effective 60 days from the publication of the final rule, 
and sought comment on when we should retire NCPDP Formulary and 
Benefits 1.0 as well as when we should adopt NCPDP Formulary and 
Benefits 3.0 as the official Part D e-prescribing standard. As was 
noted in that rule, while recognition of backward compatible versions 
can be done in an interim final rule in which we waive notice and 
comment rulemaking, other Part D e-prescribing proposals that were 
being made at that time required full notice and comment rulemaking, 
so, as we didn't wish to publish two e-prescribing rules 
contemporaneously, we elected to forgo our usual use of our simplified 
updating process for backward compatible standards (in which we waive 
notice and comment rulemaking and go straight to final) in favor of 
putting all of the proposals through full notice and comment 
rulemaking.
2. Proposals
a. Proposed Backward Compatible Standards
    As was discussed in the CY 2013 PFS final rule with comment period 
(77 FR 68892), we were persuaded by commenters to refrain from retiring 
Formulary and Benefit Standard 1.0 until NCPDP ceased supporting it on 
July 1, 2014. As further noted in that rule, we believed it best to 
delay implementing any of our Formulary and Benefits proposals, 
including recognitions of NCPDP Formulary and Benefit 3.0 as a backward 
compatible standard, until closer to that July 1, 2014 date. Our 
actions at that time were based on a belief that an extended period of 
use of either 3.0 or 1.0 would be ill-advised.
    Having come within roughly a year of the anticipated date upon 
which NCPDP will cease supporting NCPDP Formulary and Benefit 1.0, we 
believe that it is now appropriate to re-propose the recognition of 
NCPDP Formulary and Benefits 3.0 as a backward compatible version of 
Formulary and Benefits 1.0 effective 60 days after publication of a 
final rule until June 30, 2014, and, as discussed below, to propose the 
retirement of NCPDP Formulary and Benefits 1.0, effective July 1, 2014, 
and to propose the adoption of NCPDP Formulary and Benefits 3.0 as the 
official Part D e-prescribing standard effective July 1, 2014. As was 
discussed previously, while the recognition of backward compatible 
standards can be done in an interim final rule in which we waive notice 
and comment rulemaking, in light of other Part D e-prescribing 
proposals being made in this rule that require full notice and comment 
rulemaking, we will forgo use of the simplified updating method for 
backward compatible standards (in which we waive notice and comment 
rulemaking and go straight to final) in favor of putting all of the 
proposals through a single notice and comment rulemaking.
    Also, as was seen in our prior proposal to recognize backward 
compatibility using full notice and comment in place of the backward 
compatible methodology, we must also propose to require users of 3.0 to 
support users who are still using NCPDP Formulary and Benefit 1.0 until 
such time as that version is officially retired as a Part D e-
prescribing standard and NCPDP Formulary and Benefit 3.0 is adopted as 
the official Part D e-prescribing standard.

[[Page 43505]]

2. Proposed Retirement of NCPDP Formulary and Benefit Standard 1.0 and 
adoption of NCPDP Formulary and Benefit Standard 3.0
    As noted in the CY 2013 PFS proposed rule, the NCPDP Formulary and 
Benefits standard provides a uniform means for pharmacy benefit payers 
(including health plans and PBMs) to communicate a range of formulary 
and benefit information to prescribers via point-of-care (POC) systems. 
These include:
     General formulary data (for example, therapeutic classes 
and subclasses);
     Formulary status of individual drugs (that is, which drugs 
are covered);
     Preferred alternatives (including any coverage 
restrictions, such as quantity limits and need for prior 
authorization); and
     Copayment (the copayments for one drug option versus 
another).
    Also as noted in that proposed rule, standards are updated over 
time to take industry feedback and new and modified business needs into 
account. See the CY 2013 PFS proposed rule (77 FR 45023-45024) for a 
full discussion of the changes to that were made to the NCPDP Formulary 
and Benefit 1.0 as it was updated to the NCPDP Formulary and Benefit 
3.0.
    As noted above, having come within roughly a year of the 
anticipated date upon which NCPDP will cease supporting NCPDP Formulary 
and Benefit 1.0, we believe that it is now appropriate to re-propose 
the retirement of NCPDP Formulary and Benefits 1.0, effective July 1, 
2014, and to propose the adoption of NCPDP Formulary and Benefits 3.0 
as the official Part D e-prescribing standard, effective July 1, 2014.
    To effectuate these proposals, we propose to revise Sec.  
423.160(b)(5). We propose to place the existing material in a new 
paragraph (b)(5)(i), which would provide the formulary and benefit 
standard for Part D e-prescribing until [60 days after publication of 
the final rule]. We then propose to create a second new paragraph 
((b)(5)(ii)) to recognize NCPDP Formulary and Benefit 3.0. as a 
backward compatible version of the official Part D e-prescribing 
standard (NCPDP Formulary and Benefit 1.0), effective [60 days after 
publication of the final rule] through June 30, 2014. Furthermore, we 
propose to create a third new paragraph ((b)(5)(iii)) to reflect the 
retirement of NCPDP Formulary and Benefit 1.0 and the adoption of NCPDP 
Formulary and Benefit 3.0 as the official Part D e-prescribing 
standard, effective July 1, 2014. Finally, we propose to make 
conforming changes to Sec.  423.160(b)(1). We seek comment on these 
proposals.

M. Discussion of Budget Neutrality for the Chiropractic Services 
Demonstration

    Section 651 of MMA requires the Secretary to conduct a 
demonstration for up to 2 years to evaluate the feasibility and 
advisability of expanding coverage for chiropractic services under 
Medicare. Current Medicare coverage for chiropractic services is 
limited to treatment by means of manual manipulation of the spine to 
correct a subluxation described in section 1861(r)(5) of the Act 
provided such treatment is legal in the state or jurisdiction where 
performed. The demonstration expanded Medicare coverage to include: 
``(A) care for neuromusculoskeletal conditions typical among eligible 
beneficiaries; and (B) diagnostic and other services that a 
chiropractor is legally authorized to perform by the state or 
jurisdiction in which such treatment is provided.'' The demonstration 
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 that BN would be 
assessed by determining the change in costs based on a pre-post 
comparison of total 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 for other services.
    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 BN. In the 
``All Neuromusculoskeletal Analysis,'' which compared the total 
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 on Medicare spending was $114 million higher costs 
for beneficiaries in areas that participated in the demonstration. 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 was 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 on Medicare spending was a $50 million increase in costs.
    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, as the latter included those who 
did not use chiropractic services and who may 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, from CYs 2010 through 2014 (74 
FR 61927). Specifically, we are recouping $10 million for each such 
year through adjustments to the

[[Page 43506]]

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.
    For the CY 2013 PFS, our Office of the Actuary (OACT) estimated 
chiropractic expenditures to be approximately $470 million, which 
reflected the statutory 26.5 percent reduction to PFS payments 
scheduled to take effect that year. The statute was subsequently 
amended to impose a zero percent PFS update for CY 2013 instead of the 
26.5 percent reduction. In large part because of the change in the PFS 
update, OACT now estimates CY 2013 chiropractic expenditures to be 
approximately $580 million. Because of the change in projected 
chiropractic expenditures, we now expect to recoup approximately $11.6 
million from the 2 percent payment reduction for chiropractic CPT codes 
in CY 2013.
    We expect to complete the required BN adjustment by recouping the 
remainder of the chiropractic expenditures in CY 2014. For each year of 
this recoupment, we have provided OACT's projected chiropractic 
expenditures based on previous year's data. While OACT's projections 
have included the statutory reductions to physician payments, the 
statute was amended in each year to avoid these reductions. As a 
result, Medicare expenditures for chiropractic services during the 
recoupment were higher than the OACT projections. Chiropractic services 
expenditures during the recoupment period have been as follows: $540 
million in 2010; $520 million in 2011; and $580 million in 2012. In 
total, CMS recouped $32.8 million over the years of 2010, 2011 and 
2012. OACT now projects chiropractic expenditures to be approximately 
$580 million in 2013. A 2 percent recoupment percentage for 
chiropractic services would result in approximately $11.6 million in 
2013. For the years 2010 through 2013, CMS would have recouped 
approximately $44.4 million of the $50 million required for budget 
neutrality.
    In 2014, CMS is reducing the recoupment percentage for the 
chiropractic codes to ensure the recoupment does not exceed the $50 
million required for budget neutrality. OACT estimates chiropractic 
expenditures in CY 2014 will be approximately $480 million based on 
Medicare spending for chiropractic services for the most recent 
available year and reflecting an approximate 25 percent reduction to 
physician payments scheduled to take effect under current law. CMS 
plans to recoup the remaining funds, approximately $5.6 million, and 
will reduce chiropractic CPT codes (CPT codes 98940, 98941, and 98942) 
by the appropriate percentage, which by our preliminary estimates is 
one percent which takes into account the approximately 25 percent 
reduction in physician payments scheduled to occur in 2014 as provided 
under current law. If the statute is amended to avoid the physician 
payment reduction, we will reduce the recoupment percentage as 
appropriate to ensure the recoupment does not exceed $50 million. For 
instance, if the statute is amended to provide for a zero percent PFS 
update, we would reduce the recoupment percentage to approximately 0.7 
percent. We will reflect 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 
preserves the integrity of the PFS, particularly since many private 
payers also base payment on the RVUs.
    Therefore, as finalized in the CY 2010 PFS regulation and 
reiterated in the CYs 2011 through 2013 PFS regulations, we are 
implementing this methodology and recouping excess expenditures under 
the chiropractic services demonstration from PFS payment for the 
chiropractor codes as set forth above. This recoupment addresses the 
statutory requirement for BN and appropriately impacts the chiropractic 
profession that is directly affected by the demonstration. We intend 
for CY 2014 to be the last year of this required recoupment.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

1. ICRs Regarding Medical Services Coverage Decisions That Relate to 
Health Care Technology (Sec.  405.211)

    The burden associated with the requirements under Sec.  405.211 is 
the time and effort it would take a study sponsor that is requesting 
Medicare coverage of an FDA-approved IDE to prepare the following as 
electronic documents: (1) A copy of the FDA IDE approval letter; (2) a 
copy of the IDE study protocol; (3) a copy of IRB approval letter(s); 
and (4) the ClinicalTrails.gov identifier. CMS reviews these documents 
to determine whether it should cover certain costs in an IDE trial or 
study.
    Each IDE trial sponsor will have to prepare these documents once. 
If the sponsor requests a second review, the documents will have to be 
sent again. We estimate that this may happen 5-8 percent of the time. 
Since the IDE rule was passed in September 1995 through 2012, there 
have been 4,000 IDE applications, averaging 222 per year. Adding 
another 8 percent brings the total estimate of about 240 requests per 
year.
    The study sponsors do not have to create new documents. Rather they 
will be required to send us copies of information they have sent to the 
FDA and that the FDA has sent to them. Accordingly, we estimate that it 
will take 1 hour for an executive administrative assistant in a medical 
device company to prepare: (1) A copy of the FDA IDE approval letter; 
(2) a copy of the IDE study protocol; (3) a copy of IRB approval 
letter(s); and (4) the ClinicalTrails.gov identifier, for electronic 
submission.
    We estimate that for 240 requests per year, that the total 
estimated cost to the public is $7,821 annually. In deriving these 
figures, we used the Bureau of Labor Statistics May 2012 estimate of 
$24.14 + 35 percent in fringe benefits for estimated hourly wage of 
$32.59 for an executive administrative assistant (occupation code 43-
6011).

2. ICRs Regarding the Physician Quality Reporting System (PQRS) (Sec.  
414.90)

    We are making certain revisions to Sec.  414.90, primarily to 
include our proposals for the qualified clinical data registry option. 
All of the requirements

[[Page 43507]]

and burden estimates are currently approved by OMB under OCN 0938-1059, 
and are not subject to additional OMB review under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
    We are revising Sec.  414.90(b), (c), and (e) to indicate our 
proposals for the qualified clinical data registry option. While the 
sections contain information collection requirements regarding the 
input process and the endorsement of consensus-based quality measures, 
this rule would not revise any of the information collection 
requirements or burden estimates that are associated with those 
provisions.
    The preamble of this proposed rule discusses the background of the 
PQRS, provides information about the measures and reporting mechanisms 
that would be available to eligible professionals and group practices 
who choose to participate in 2014, and provides the proposed criteria 
for satisfactory reporting in 2014 (for the 2014 PQRS incentive and the 
2016 PQRS payment adjustment). Below are our burden estimates for 
participating in the PQRS in 2014 which are subject to OMB review/
approval under OCN 0938-1059.
a. Participation in the 2013 and 2014 PQRS
    In the CY 2013 PFS final rule with comment period, we provided 
estimates related to the impact of the requirements we finalized for 
the PQRS for 2014. Since we are proposing additional proposals, this 
section modifies the impact statement provided in the CY 2013 PFS final 
rule with comment period for reporting in 2014. Please note that we 
will base our estimates on information found in the 2011 Physician 
Quality Reporting System and eRx Reporting Experience and Trends 
(hereinafter ``the PQRS Reporting Experience''). This report contains 
the latest data we have gathered on PQRS participation. The PQRS 
Reporting Experience is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html?redirect=/PQRS/. According to the 2011 Reporting Experience 
Report, over 1 million professionals were eligible to participate in 
the PQRS. A total of $261,733,236 in PQRS incentives was paid by CMS 
for the 2011 program year, which encompassed 26,515 practices that 
included 266,521 eligible professionals (or approximately 27% of the 
professionals eligible to participate). The average incentive earned 
for PQRS in 2011 per each individually-participating eligible 
professional was $1,059.
    As we noted in our impact statement last year, we expect that, due 
to the implementation of payment adjustments beginning in 2015, 
participation in the PQRS would rise incrementally to approximately 
300,000 eligible professionals and 400,000 eligible professionals in 
2013 and 2014, respectively. We believe our estimate of 400,000 
eligible professionals participating in PQRS in 2014 is accurate.
    With respect to the estimated amount of incentives earned, for 
2014, eligible professionals can earn a 0.5 percent incentive (i.e., a 
bonus payment equal to 0.5 percent of the total allowed part B charges 
for covered professional services under the PFS furnished by the 
eligible professional during the reporting period) for satisfactory 
reporting, a reduction of 1.0 percent from 2011. Based on information 
drawn from the 2011 Reporting Experience and our participation 
estimate, we believe that, out of the 400,000 eligible professionals we 
expect to participate in the PQRS in 2014, the PQRS will distribute 
2014 incentives to approximately (27% of 1 million eligible 
professionals) 270,000 eligible professionals. At $1,059 per eligible 
professional, the PQRS would distribute approximately $286 million in 
incentive payments in 2014. We believe these incentive payments will 
help offset the cost eligible professionals may undertake for 
participating in the PQRS for the applicable year.
    We note that the total burden associated with participating in the 
PQRS is the time and effort associated with indicating intent to 
participate in the PQRS, if applicable, and submitting PQRS quality 
measures data. When establishing these burden estimates, we assume the 
following:
     The proposals for reporting for the PQRS for the 2014 
incentive and 2016 payment adjustment would be established as proposed 
in this CY 2014 Medicare PFS proposed rule.
     For an eligible professional or group practice using the 
claims, qualified registry, qualified clinical data registry, or EHR-
based reporting mechanisms, we assume that the eligible professional or 
group practice would attempt to report PQRS quality measures data with 
the intention of earning the 2014 PQRS incentive. Therefore, an 
eligible professional or group practice would report on 9 measures.
     With respect to labor costs, we believe that a billing 
clerk will handle the administrative duties associated with 
participating, while a computer analyst will handle duties related to 
reporting PQRS quality measures. According to the Bureau of Labor 
Statistics, the mean hourly wage for a billing clerk is approximately 
$16/hour whereas the mean hourly wage for a computer analyst is 
approximately $40/hour.
    Please note that these estimates do not reflect total costs 
estimates for participating in PQRS, but rather cost estimates that 
would change if our proposals are finalized.
b. Burden Estimate on Participation in the CYs 2013 and 2014 PQRS--New 
Individual Eligible Professionals: Preparation
    For an eligible professional who wishes to participate in PQRS as 
an individual, the eligible professional need not indicate his/her 
intent to participate. Instead, the eligible professional may simply 
begin reporting quality measures data. Therefore, these burden 
estimates for individual eligible professionals participating in PQRS 
are based on the reporting mechanism the individual eligible 
professional chooses. However, we believe a new eligible professional 
or group practice would spend 5 hours--which includes 2 hours to review 
PQRS measures list, review the various reporting options, and select a 
reporting option and measures on which to report and 3 hours to review 
the measure specifications and develop a mechanism for incorporating 
reporting of the selected measures into their office work flows. 
Therefore, we believe that the initial administrative costs associated 
with participating in PQRS would be approximately $80 ($16/hour x 5 
hours).
c. Burden Estimate on Participation in the 2013 and 2014 PQRS via the 
Claims-Based Reporting Mechanism--Individual Eligible Professionals
    Historically, the claims-based reporting mechanism is the most 
widely used reporting mechanism in PQRS. In 2011, 229,282 of the 
320,422 eligible professionals (or 72 percent of eligible 
professionals) used the claims-based reporting mechanism. In the CY 
2013 PFS final rule with comment period, we estimated that 
approximately 320,000 eligible professionals, whether participating 
individually or in a group practice, would participate in PQRS by CY 
2014 (77 FR 69338). We believe this estimate should be further modified 
to reflect a lower participation estimate in 2014 due to the following 
proposals:
     We are proposing to eliminate the option to report 
measures groups via claims for the 2014 PQRS incentive.

[[Page 43508]]

     We are proposing to increase the number of measures that 
an eligible professional must report to meet the criteria for 
satisfactory reporting for the 2014 PQRS incentive from 3 measures to 
9, but lower the reporting threshold to 50%.
     We are proposing to remove the claims-based reporting 
mechanism as an option for reporting certain individual quality 
measures.
    Based on these proposals, we estimate that approximately 230,000 
eligible professionals (that is, the same number of eligible 
professionals who participated in the PQRS using the claims-based 
reporting mechanism in 2011) will participate in the PQRS using the 
claims-based reporting mechanism. Therefore, we estimate that 
approximately 58 percent of the eligible professionals participating in 
PQRS will use the claims-based reporting mechanism.
    With respect to an eligible professional who participated in PQRS 
via claims, the eligible professional must gather the required 
information, select the appropriate quality data codes (QDCs), and 
include the appropriate QDCs on the claims they submitted for payment. 
PQRS will collect QDCs as additional (optional) line items on the 
existing HIPAA transaction 837-P and/or CMS Form 1500 (OCN 0938-0999). 
Based on our experience with Physician Voluntary Reporting Program 
(PVRP), we continue to estimate that the time needed to perform all the 
steps necessary to report each measure via claims would range from 0.25 
minutes to 12 minutes, depending on the complexity of the measure. 
Therefore, the time spent reporting 9 measures would range from 2.25 
minutes to 108 minutes. Using an average labor cost of $40/hour, we 
estimated that the time cost of reporting for an eligible professional 
via claims would range from $1.50 (2.25 minutes or 0.0375 hours x $40/
hour) to $72.00 (108 minutes or 1.8 hours x $40/hour) per reported 
case. With respect to how many cases an eligible professional would 
report when using the claims-based reporting mechanism, we established 
that an eligible professional would need to report on 50 percent of the 
eligible professional's applicable cases. The actual number of cases on 
which eligible professional reports would vary depending on the number 
of the eligible professional's applicable cases. However, in prior 
years, when the reporting threshold was 80 percent for claims-based 
reporting, we found that the median number of reporting cases for each 
measure was 9. Since we reduced the reporting threshold to 50 percent, 
we estimated that the average number of reporting cases for each 
measure would be reduced to 6. Based on these estimates, we estimated 
that the total cost of reporting for an eligible professional choosing 
the claims-based reporting mechanism would range from ($1.50/per 
reported case x 6 reported cases) $9.00 to ($72.00/reported case x 6 
reported cases) $432.
d. Burden Estimate on PQRS Participation in CY 2014 via the Qualified 
Registry, Qualified Clinical Data Registry, or EHR Reporting Mechanisms
    We noted previously that we estimate a significant reduction in the 
number of eligible professionals using the claims-based reporting 
mechanism to report PQRS quality measures data in 2014. Specifically, 
we estimate that approximately 230,000 eligible professionals will 
participate in the PQRS using the claims-based reporting mechanism in 
2014. Therefore, we estimate that the remainder of the eligible 
professionals (170,000) will participate in PQRS using either the 
qualified registry, qualified clinical data registry, EHR (using either 
a direct EHR or EHR data submission vendor), or the GPRO web interface 
reporting mechanisms.
    With respect to participation in a qualified registry or qualified 
clinical data registry, we are combining our estimates for the number 
of eligible professionals we believe will use the qualified registry 
and qualified clinical data registry reporting mechanisms for the 2014 
PQRS incentive and 2016 PQRS payment adjustment. We are combining these 
estimates because we believe that, at least for this initial year, many 
of the registries that become qualified clinical data registries will 
also be existing qualified registries. As such, we anticipate there 
will be little to no additional registries that will submit quality 
measures data to the PQRS for purposes of the 2014 PQRS incentive and 
2016 PQRS payment adjustment.
    In 2011, approximately 50,215 (or 16 percent) of the 320,422 
eligible professionals participating in PQRS used the registry-based 
reporting mechanism. We believe the number of eligible professionals 
and group practices using a qualified registry or qualified clinical 
data registry would remain the same, as eligible professionals use 
registries for functions other than PQRS and therefore would obtain a 
qualified registry or qualified clinical data registry solely for PQRS 
reporting by CY 2014. Please note that this estimate would include 
participants choosing the newly proposed qualified clinical data 
registry reporting mechanism. At least in its initial stage, we believe 
most of the vendors that would be approved to be a qualified clinical 
data registry would be existing qualified registries.
    In 2011, 560 (or less than 1%) of the 320,422 eligible 
professionals participating in PQRS used the EHR-based reporting 
mechanism. We believe the number of eligible professionals and group 
practices using the EHR-based reporting mechanism would increase as 
eligible professionals become more familiar with EHR products and more 
eligible professionals participate in programs encouraging use of an 
EHR, such as the EHR Incentive Program. In particular, we believe 
eligible professionals and group practices would transition from using 
the claims-based to the EHR-based reporting mechanisms. We estimate 
that approximately 50,000 eligible professionals (which is the same 
estimate as we are providing for eligible professionals who use the 
qualified registry or qualified clinical data registry-based reporting 
mechanisms), whether participating as an individual or part of a group 
practice, would use the EHR-based reporting mechanism in CY 2014.
    With respect to an eligible professional or group practice who 
participated in PQRS via a qualified registry, qualified clinical data 
registry, direct EHR product, or EHR data submission vendor's product, 
we believe there would be little to no burden associated for an 
eligible professional to report PQRS quality measures data to CMS, 
because the selected reporting mechanism submitted the quality measures 
data for the eligible professional. While we noted that there may be 
start-up costs associated with purchasing a qualified registry, direct 
EHR product, or EHR data submission vendor, we believe that an eligible 
professional or group practice would not purchase a qualified registry, 
qualified clinical data registry, direct EHR product, or EHR data 
submission vendor product solely for the purpose of reporting PQRS 
quality measures. Therefore, we have not included the cost of 
purchasing a qualified registry, direct EHR, or EHR data submission 
vendor product in our burden estimates.
e. Burden Estimate on PQRS Participation in CY 2014--Group Practices
    Please note that with the exception of the estimates associated 
with a group self-nominating to participate in the PQRS under the GPRO, 
this section only contains our estimates for group

[[Page 43509]]

practices who participate in the PQRS under the GPRO via the GPRO web 
interface reporting mechanism. We note that the burden associated with 
reporting quality measures for group practices using the qualified 
registry or EHR-based reporting mechanisms are included in the 
estimates we provided for the qualified registry or EHR-based reporting 
mechanisms above. According to the PQRS and eRx Experience report, of 
the 101 practices participating in the GPRO, 54 of these practices 
participated using the GPRO web interface (formerly the GPRO tool). We 
estimate that because we are proposing to apply the value-based payment 
modifier to all group practices of 10 or more eligible professionals, 
we estimate that approximately 30% of such group practices, or about 
5,100 group practices, will participate in the PQRS under the GPRO for 
purposes of the 2014 PQRS incentive and the 2016 payment adjustment. In 
addition, we estimate that of the 5,100 group practices that are 
expected to self-nominate to participate in the PQRS under the GPRO, 
approximately 70,000 eligible professionals (i.e. the remainder of the 
eligible professionals not participating in PQRS using the claims, 
qualified registry, qualified clinical data registry, or EHR-based 
reporting mechanisms), representing about 30% of the groups with 100 or 
more eligible professionals (or about 340 groups), will choose to 
participate in PQRS using the GPRO web interface for purposes of the 
2014 PQRS incentive and the 2016 PQRS payment adjustment.
    Unlike eligible professionals who choose to report individually, we 
noted that we proposed that eligible professionals choosing to 
participate as part of a group practice under the GPRO would need to 
indicate their intent to participate in PQRS as a GPRO. The total 
burden for group practices who submit PQRS quality measures data via 
the GPRO web-interface would be the time and effort associated with 
submitting this data. To submit quality measures data for PQRS, a group 
practice would need to (1) be selected to participate in the PQRS GPRO 
and (2) report quality measures data. With respect to the 
administrative duties for being selected to participate in PQRS as a 
GPRO, we believe it would take approximately 6 hours--including 2 hours 
to decide to participate in PQRS as a GPRO; 2 hours to self-nominate, 
and 2 hours to undergo the vetting process with CMS officials--for a 
group practice to be selected to participate in PQRS GPRO for the 
applicable year. Therefore, we estimate that the cost of undergoing the 
GPRO selection process would be ($16/hour x 6 hours) $96.
    With respect to reporting PQRS quality measures using the GPRO web-
interface, the total reporting burden is the time and effort associated 
with the group practice submitting the quality measures data (that is, 
completed the data collection interface). Based on burden estimates for 
the PGP demonstration, which uses the same data submission methods, we 
estimate the burden associated with a group practice completing the 
data collection interface would be approximately 79 hours. Therefore, 
we estimate that the report cost for a group practice to submit PQRS 
quality measures data for an applicable year would be ($40/hour x 79 
hours) $3,160.
    In addition to the GPRO web interface, please note that we have 
proposed a new reporting mechanism that would be available to group 
practices comprised of 25+ eligible professionals: the certified survey 
vendor. With respect to using a certified survey vendor, we believe 
there would be little to no burden associated for a group practice to 
report the CG CAHPS survey data to CMS, because the selected reporting 
mechanism submitted the quality measures data for the group practice. 
While there may be start-up costs associated with purchasing a 
certified survey vendor, we believe that a group practice would not 
purchase a certified survey vendor solely for the purpose of reporting 
the CG CAHPS survey for the PQRS. Therefore, we have not included the 
cost of purchasing a certified survey vendor in our burden estimates.
f. Burden Estimate on PQRS Vendor Participation in CY 2014
    Aside from the burden of eligible professionals and group practices 
participating in PQRS, we believe that entities that wish to become 
qualified clinical data registries would incur costs associated with 
participating in PQRS. However, we believe that the burden associated 
with participating in PQRS for these entities would be very similar to 
the burden associated with existing qualified registries participating 
in PQRS.
    Based on the number of registries that have self-nominated to 
become a qualified PQRS registry in prior program years, we estimated 
that approximately 50 additional registries would self-nominate to be 
considered a qualified registry for PQRS. With respect to qualified 
registries and qualified clinical data registries, the total burden for 
qualified registries and qualified clinical data registries who 
submitted PQRS quality measures data would be the time and effort 
associated with submitting this data. To submit quality measures data 
for the proposed PQRS program years, a registry would need to (1) 
become qualified for the applicable year and (2) report quality 
measures data on behalf of its eligible professionals. With respect to 
administrative duties related to the qualification process, we 
estimated that it would take a total of 10 hours--including 1 hour to 
complete the self-nomination statement, 2 hours to interview with CMS, 
2 hours to calculate numerators, denominators, and measure results for 
each measure the registry wished to report using a CMS-provided measure 
flow, and 5 hours to complete an XML submission--to become qualified to 
report PQRS quality measures data. Therefore, we estimate that it would 
cost a registry approximately ($16.00/hour x 10 hours) $160 to become 
qualified to submit PQRS quality measures data on behalf of its 
eligible professionals.
    With respect to the reporting of quality measures data, the burden 
associated with reporting is the time and effort associated with the 
registry calculating quality measures results from the data submitted 
to the registry by its eligible professionals, submitting numerator and 
denominator data on quality measures, and calculating these measure 
results. We believe, however, that registries already perform these 
functions for its eligible professionals irrespective of participating 
in PQRS. Therefore, we believe there is little to no additional burden 
associated with reporting PQRS quality measures data. Whether there is 
any additional reporting burden would vary with each registry, 
depending on the registry's level of savvy with submitting quality 
measures data for PQRS.
    For CY 2014, we are proposing a new PQRS option that includes a new 
reporting mechanism--the qualified clinical data registry. In this 
proposed rule, we set forth the requirements for a vendor to become 
qualified to become a qualified clinical data registry. Under the 
proposed requirements, we note that a vendor can be both a traditional 
qualified registry and qualified clinical data registry under the PQRS. 
Indeed, as we noted previously, we believe that many of the entities 
that will seek to become qualified clinical data registries will be 
similar to the existing qualified registries. In addition, at least 
initially, we propose that the process for becoming a qualified 
clinical data registry would be similar to the process for becoming a 
qualified registry. Therefore, we do not believe this new

[[Page 43510]]

reporting mechanism will impact our registry estimates.
h. Summary of Burden Estimates on Participation in the 2013 and 2014 
PQRS--Eligible Professionals and Vendors

                              Table 69--Estimated Costs for Reporting PQRS Quality Measures Data for Eligible Professionals
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Number of                  Cost per    Number of
                                                                  Hours        Cases       measures   Hourly rate   respondent  respondents   Total cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Individual Eligible Professional (EP): Preparation...........          5.0            1          N/A          $16          $80      320,422  $32,000,000
Individual EP: Claims........................................          0.2            6            3          $40         $144      230,000  $33,120,000
Individual EP: Registry......................................          N/A            1          N/A          N/A      Minimal       40,422      \1\ N/A
Individual EP: EHR...........................................          N/A            1          N/A          N/A      Minimal       50,000      \1\ N/A
Group Practice: Self-Nomination..............................          6.0            1          N/A          $16          $96        5,100     $489,600
Group Practice: Reporting....................................           79            1          N/A          $40       $3,160          340   $1,074,400
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ We believe that eligible professionals who choose to report quality measures data to PQRS using a registry, an EHR, or an EHR data submission vendor
  are already doing so for other purposes. Therefore, there would be little to no burden associated with reporting the quality data to CMS under PQRS.


                         Table 70--Estimated Costs to Registries to Participate in PQRS
----------------------------------------------------------------------------------------------------------------
                                                                                      Number of
                                             Hours      Hourly rate      Cost        respondents     Total cost
----------------------------------------------------------------------------------------------------------------
Registry: Self-Nomination..............           10           $16          $160               50        $8,000
----------------------------------------------------------------------------------------------------------------

3. The Medicare EHR Incentive Program

    The Medicare EHR Incentive Program provides incentive payments to 
eligible professionals, eligible hospitals, and CAHs that demonstrate 
meaningful use of certified EHR technology. We believe any burden or 
impact associated with our proposals regarding the EHR Incentive 
Program is already absorbed by the currently approved (OCN 0938-1158) 
burden and impact estimates provided the EHR Incentive Program. 
Consequently, the proposed requirements (and burden) are not subject to 
additional OMB review under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).

4. Submission of PRA-Related Comments

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-1590-FC]
    Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We considered all comments we received by 
the date and time specified in the DATES section of this preamble, and, 
when we proceeded with a subsequent document, we responded to the 
comments in the preamble to that document.

VI. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule is necessary to make payment and policy changes 
under the Medicare PFS and to make required statutory changes under the 
Affordable Care Act (Pub. L. 111-148), the Middle Class Tax Relief and 
Job Creation Act of 2012 (Pub. L. 112-96), the American Taxpayer Relief 
Act (ATRA) of 2013 (Pub. L. 112-240), and other statutory changes. This 
proposed rule also is necessary to make changes to other Part B related 
policies.

B. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(February 2, 2013), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We estimate, as discussed below in this section, that the PFS 
provisions included in this proposed rule will redistribute more than 
$100 million in 1 year. Therefore, we estimate that this rulemaking is 
``economically significant'' as measured by the $100 million threshold, 
and hence also a major rule under the Congressional Review Act. 
Accordingly, we have prepared a RIA that, to the best of our ability, 
presents the costs and benefits of the rulemaking. The RFA requires 
agencies to analyze options for regulatory relief of small entities. 
For purposes of the RFA, small entities include small businesses, 
nonprofit organizations, and small governmental jurisdictions. Most 
hospitals and most other providers and suppliers are small entities, 
either by nonprofit status or by having revenues of less than $7.0 
million in any 1 year (for details see the SBA's Web site at http://www.sba.gov/content/small-business-size-standards# (refer to the 620000 
series)). Individuals and states are not included in the definition of 
a small entity.

[[Page 43511]]

    The RFA requires that we analyze regulatory options for small 
businesses and other entities. We prepare a regulatory flexibility 
analysis unless we certify that a rule would not have a significant 
economic impact on a substantial number of small entities. The analysis 
must include a justification concerning the reason action is being 
taken, the kinds and number of small entities the rule affects, and an 
explanation of any meaningful options that achieve the objectives with 
less significant adverse economic impact on the small entities.
    For purposes of the RFA, physicians, NPPs, and suppliers are 
considered small businesses if they generate revenues of $10 million or 
less based on SBA size standards. Approximately 95 percent of providers 
and suppliers are considered to be small entities. There are over 1 
million physicians, other practitioners, and medical suppliers that 
receive Medicare payment under the PFS. Because many of the affected 
entities are small entities, the analysis and discussion provided in 
this section as well as elsewhere in this proposed rule is intended to 
comply with the RFA requirements.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 603 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this proposed rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits on state, 
local, or tribal governments or on the private sector before issuing 
any rule whose mandates require spending in any 1 year of $100 million 
in 1995 dollars, updated annually for inflation. In 2013, that 
threshold is approximately $141 million. This proposed rule will impose 
no mandates on state, local, or tribal governments or on the private 
sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    We have prepared the following analysis, which together with the 
information provided in the rest of this preamble, meets all assessment 
requirements. The analysis explains the rationale for and purposes of 
this proposed rule; details the costs and benefits of the rule; 
analyzes alternatives; and presents the measures we would use to 
minimize the burden on small entities. As indicated elsewhere in this 
proposed rule, we are proposing to implement a variety of changes to 
our regulations, payments, or payment policies to ensure that our 
payment systems reflect changes in medical practice and the relative 
value of services, and to implement statutory provisions. We provide 
information for each of the policy changes in the relevant sections of 
this proposed rule. We are unaware of any relevant Federal rules that 
duplicate, overlap, or conflict with this proposed rule. The relevant 
sections of this proposed rule contain a description of significant 
alternatives if applicable.

C. Relative Value Unit (RVU) Impacts

1. Resource-Based Work, PE, and Malpractice RVUs
    Section 1848(c)(2)(B)(ii)(II) of the Act requires that increases or 
decreases in RVUs may not cause the amount of expenditures for the year 
to differ by more than $20 million from what expenditures would have 
been in the absence of these changes. If this threshold is exceeded, we 
make adjustments to preserve budget neutrality.
    Our estimates of changes in Medicare revenues for PFS services 
compare payment rates for CY 2013 with proposed payment rates for CY 
2014 using CY 2012 Medicare utilization as the basis for the 
comparison. The payment impacts reflect averages for each specialty 
based on Medicare utilization. The payment impact for an individual 
physician could vary from the average and would depend on the mix of 
services the physician furnishes. The average change in total revenues 
would be less than the impact displayed here because physicians furnish 
services to both Medicare and non-Medicare patients and specialties may 
receive substantial Medicare revenues for services that are not paid 
under the PFS. For instance, independent laboratories receive 
approximately 83 percent of their Medicare revenues from clinical 
laboratory services that are not paid under the PFS.
    We note that these impacts do not include the effect of the January 
2014 conversion factor changes under current law. The annual update to 
the PFS conversion factor is calculated based on a statutory formula 
that measures actual versus allowed or ``target'' expenditures, and 
applies a sustainable growth rate (SGR) calculation intended to control 
growth in aggregate Medicare expenditures for physicians' services. 
This update methodology is typically referred to as the ``SGR'' 
methodology, although the SGR is only one component of the formula. 
Medicare PFS payments for services are not withheld if the percentage 
increase in actual expenditures exceeds the SGR. Rather, the PFS 
update, as specified in section 1848(d)(4) of the Act, is adjusted to 
eventually bring actual expenditures back in line with targets. If 
actual expenditures exceed allowed expenditures, the update is reduced. 
If actual expenditures are less than allowed expenditures, the update 
is increased. By law, we are required to apply these updates in 
accordance with sections 1848(d) and (f) of the Act, and any negative 
updates can only be averted by an Act of the Congress. While the 
Congress has provided temporary relief from negative updates for every 
year since 2003, a long-term solution is critical. We are committed to 
working with the Congress to reform Medicare physician payments to 
provide predictable payments that incentivize quality and efficiency in 
a fiscally responsible way. We provide our most recent estimate of the 
SGR and physician update for CY 2014 on our Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SustainableGRatesConFact/index.html?redirect=/SustainableGRatesConFact/
.
    Tables 71 and 72 show the payment impact on PFS services. To the 
extent that there are year-to-year changes in the volume and mix of 
services provided by physicians, the actual impact on total Medicare 
revenues will be different from those shown in Tables 71 (CY 2014 PFS 
Proposed Rule Estimated Impact on Total Allowed Charges by Specialty) 
and 72 (CY 2014 PFS Proposed Rule Estimated Impact on Total Allowed 
Charges by Specialty by Selected Proposal).
    The following is an explanation of the information represented in 
Table 71:
     Column A (Specialty): The Medicare specialty code as 
reflected in our physician/supplier enrollment files.

[[Page 43512]]

     Column B (Allowed Charges): The aggregate estimated PFS 
allowed charges for the specialty based on CY 2012 utilization and CY 
2013 rates. That is, allowed charges are the PFS amounts for covered 
services and include coinsurance and deductibles (which are the 
financial responsibility of the beneficiary). These amounts have been 
summed across all services furnished by physicians, practitioners, and 
suppliers within a specialty to arrive at the total allowed charges for 
the specialty.
     Column C (Impact of Work and Malpractice (MP) RVU 
Changes): This column shows the estimated CY 2014 impact on total 
allowed charges of the changes in the work and malpractice RVUs, 
including the impact of changes due to potentially misvalued codes.
     Column D (Impact of PE RVU Changes): This column shows the 
estimated CY 2014 impact on total allowed charges of the changes in the 
PE RVUs.
     Column E (Combined Impact): This column shows the 
estimated CY 2014 combined impact on total allowed charges of all the 
changes in the previous columns.

          Table 71--CY 2014 PFS Proposed Rule Estimated Impact on Total Allowed Charges by Specialty *
----------------------------------------------------------------------------------------------------------------
                                                                  Impact of work
                                                      Allowed       and MP RVU     Impact of PE      Combined
                    Specialty                     charges  (mil)      changes       RVU changes       impact
                                                                     (percent)       (percent)       (percent)
(A)                                                          (B)             (C)             (D)             (E)
----------------------------------------------------------------------------------------------------------------
TOTAL...........................................         $86,995               2              -2               0
01--ALLERGY/IMMUNOLOGY..........................             213               1              -4              -3
02--ANESTHESIOLOGY..............................           1,862               4              -1               3
03--CARDIAC SURGERY.............................             355               3              -1               2
04--CARDIOLOGY..................................           6,425               2               0               2
05--COLON AND RECTAL SURGERY....................             158               2              -2               0
06--CRITICAL CARE...............................             273               3              -1               2
07--DERMATOLOGY.................................           3,113               2              -4              -2
08--EMERGENCY MEDICINE..........................           2,929               3               0               3
09--ENDOCRINOLOGY...............................             447               2              -2               0
10--FAMILY PRACTICE.............................           6,358               2              -1               1
11--GASTROENTEROLOGY............................           1,901               3              -2               1
12--GENERAL PRACTICE............................             528               2              -2               0
13--GENERAL SURGERY.............................           2,236               3              -2               1
14--GERIATRICS..................................             231               3              -1               2
15--HAND SURGERY................................             151               2              -2               0
16--HEMATOLOGY/ONCOLOGY.........................           1,890               2              -3              -1
17--INFECTIOUS DISEASE..........................             635               3              -1               2
18--INTERNAL MEDICINE...........................          11,416               3              -2               1
19--INTERVENTIONAL PAIN MGMT....................             640               2              -3              -1
20--INTERVENTIONAL RADIOLOGY....................             219               2              -6              -4
21--MULTISPECIALTY CLINIC/OTHER PHY.............              79               2              -2               0
22--NEPHROLOGY..................................           2,123               3              -2               1
23--NEUROLOGY...................................           1,498               2              -4              -2
24--NEUROSURGERY................................             712               2              -1               1
25--NUCLEAR MEDICINE............................              51               2              -1               1
27--OBSTETRICS/GYNECOLOGY.......................             688               2              -2               0
28--OPHTHALMOLOGY...............................           5,592               2              -2               0
29--ORTHOPEDIC SURGERY..........................           3,683               2              -2               0
30--OTOLARNGOLOGY...............................           1,128               2              -4              -2
31--PATHOLOGY...................................           1,134               3              -8              -5
32--PEDIATRICS..................................              63               3              -3               0
33--PHYSICAL MEDICINE...........................             999               3              -3               0
34--PLASTIC SURGERY.............................             367               2              -2               0
35--PSYCHIATRY..................................           1,165               3              -1               2
36--PULMONARY DISEASE...........................           1,775               3              -2               1
37--RADIATION ONCOLOGY..........................           1,783               1              -6              -5
38--RADIOLOGY...................................           4,635               2              -3              -1
39--RHEUMATOLOGY................................             551               2              -5              -3
40--THORACIC SURGERY............................             332               3              -1               2
41--UROLOGY.....................................           1,858               2              -4              -2
42--VASCULAR SURGERY............................             925               2              -4              -2
43--AUDIOLOGIST.................................              56               2              -1               1
44--CHIROPRACTOR................................             722               3              -1               2
45--CLINICAL PSYCHOLOGIST.......................             579               4              -1               3
46--CLINICAL SOCIAL WORKER......................             408               4              -1               3
47--DIAGNOSTIC TESTING FACILITY.................             779               0              -7              -7
48--INDEPENDENT LABORATORY **...................             812               1             -27             -26
49--NURSE ANES/ANES ASST........................           1,055               4               0               4
50--NURSE PRACTITIONER..........................           1,937               3              -2               1
51--OPTOMETRY...................................           1,106               2              -2               0
52--ORAL/MAXILLOFACIAL SURGERY..................              44               2              -4              -2
53--PHYSICAL/OCCUPATIONAL THERAPY...............           2,797               2              -1               1
54--PHYSICIAN ASSISTANT.........................           1,405               3              -2               1
55--PODIATRY....................................           1,975               2              -2               0
56--PORTABLE X-RAY SUPPLIER.....................             110               1              -2              -1

[[Page 43513]]

 
57--RADIATION THERAPY CENTERS...................              62               0             -13             -13
98--OTHER.......................................              25               3              -2               1
----------------------------------------------------------------------------------------------------------------
* Table 71 shows only the payment impact on PFS services. These impacts use a constant conversion factor and
  thus do not include the effects of the January 2014 conversion factor change required under current law.
** PFS Payments only, which account for ~17% of Independent Laboratory payments from Medicare.

    Table 72 shows the estimated impact of selected policy proposals on 
total allowed charges, by specialty. The following is an explanation of 
the information represented in Table 72:
     Column A (Specialty): The Medicare specialty code as 
reflected in our physician/supplier enrollment files.
     Column B (Allowed Charges): The aggregate estimated PFS 
allowed charges for the specialty based on CY 2012 utilization and CY 
2013 rates. That is, allowed charges are the PFS amounts for covered 
services and include coinsurance and deductibles (which are the 
financial responsibility of the beneficiary). These amounts have been 
summed across all services furnished by physicians, practitioners, and 
suppliers within a specialty to arrive at the total allowed charges for 
the specialty.
     Column C (Impact of 2012 Claims data, 90 Percent Equipment 
Utilization Assumption, Ultrasound Changes, and Other Minor Changes): 
This column shows the estimated CY 2014 impact on total allowed charges 
of the changes in the RVUs due to the 90 percent equipment utilization 
assumption discussed in section II.A.2.f. of this proposed rule, 
ultrasound changes discussed in section II.A.5, the use of CY 2012 
claims data to model payment rates, and all other proposals that result 
in minimal redistribution of payments under the PFS.
     Column D (Impact of OPPS/ASC cap): This column shows the 
estimated CY 2014 impact on total allowed charges of the changes in the 
RVUs resulting from our proposed policy discussed in section II.A.4. of 
this proposed rule.
     Column E (Impact of MEI Revision): This column shows the 
estimated CY 2014 combined impact on total allowed charges of the 
changes in the RVUs resulting from our proposed policy to adjust the 
RVUs to match the proposed revised MEI weights.
     Column F (Cumulative Impact): This column shows the 
estimated CY 2014 combined impact on total allowed charges of all the 
proposed changes in the previous columns.

Table 72--CY 2014 PFS Proposed Rule Estimated Impact on Total Allowed Charges by Specialty by Selected Proposal*
----------------------------------------------------------------------------------------------------------------
                                                  Impact of 2012
                                                   claims data,
                                                        90%
                                                    utilization                                        Total
                                      Allowed       assumption,   Impact of OPD/   Impact of MEI   (cumulative)
            Specialty              charges (mil)    ultrasound        ASC cap        revision         impact
                                                   changes, and      (percent)       (percent)       (percent)
                                                    other minor
                                                      changes
                                                     (percent)
(A)                                          (B)             (C)             (D)             (E)             (F)
----------------------------------------------------------------------------------------------------------------
TOTAL...........................         $86,995              0%              0%              0%              0%
01--ALLERGY/IMMUNOLOGY..........             213              -1               0              -2              -3
02--ANESTHESIOLOGY..............           1,862               0               0               3               3
03--CARDIAC SURGERY.............             355               0               0               2               2
04--CARDIOLOGY..................           6,425               2               0               0               2
05--COLON AND RECTAL SURGERY....             158               0               0               0               0
06--CRITICAL CARE...............             273               0               0               2               2
07--DERMATOLOGY.................           3,113               0               0              -2              -2
08--EMERGENCY MEDICINE..........           2,929               0               0               3               3
09--ENDOCRINOLOGY...............             447              -1               1               0               0
10--FAMILY PRACTICE.............           6,358               0               1               0               1
11--GASTROENTEROLOGY............           1,901               0               0               1               1
12--GENERAL PRACTICE............             528               0               0               0               0
13--GENERAL SURGERY.............           2,236               0               0               1               1
14--GERIATRICS..................             231               0               1               1               2
15--HAND SURGERY................             151              -1               1               0               0
16--HEMATOLOGY/ONCOLOGY.........           1,890              -1               1              -1              -1
17--INFECTIOUS DISEASE..........             635               0               0               2               2
18--INTERNAL MEDICINE...........          11,416               0               1               0               1
19--INTERVENTIONAL PAIN MGMT....             640              -1               0               0              -1
20--INTERVENTIONAL RADIOLOGY....             219              -1              -2              -1              -4
21--MULTISPECIALTY CLINIC/OTHER               79              -1               0               1               0
 PHY............................

[[Page 43514]]

 
22--NEPHROLOGY..................           2,123               0               0               1               1
23--NEUROLOGY...................           1,498               0              -1              -1              -2
24--NEUROSURGERY................             712               0               0               1               1
25--NUCLEAR MEDICINE............              51               0               1               0               1
27--OBSTETRICS/GYNECOLOGY.......             688               0               0               0               0
28--OPHTHALMOLOGY...............           5,592               0               1              -1               0
29--ORTHOPEDIC SURGERY..........           3,683              -1               1               0               0
30--OTOLARNGOLOGY...............           1,128              -1               0              -1              -2
31--PATHOLOGY...................           1,134               1              -6               0              -5
32--PEDIATRICS..................              63               0               0               0               0
33--PHYSICAL MEDICINE...........             999              -1               1               0               0
34--PLASTIC SURGERY.............             367               0               1              -1               0
35--PSYCHIATRY..................           1,165               0               0               2               2
36--PULMONARY DISEASE...........           1,775               0               1               0               1
37--RADIATION ONCOLOGY..........           1,783               1              -4              -2              -5
38--RADIOLOGY...................           4,635              -1               0               0              -1
39--RHEUMATOLOGY................             551              -3               1              -1              -3
40--THORACIC SURGERY............             332               0               0               2               2
41--UROLOGY.....................           1,858              -1               0              -1              -2
42--VASCULAR SURGERY............             925               1              -3               0              -2
43--AUDIOLOGIST.................              56               0               1               0               1
44--CHIROPRACTOR................             722               1               1               0               2
45--CLINICAL PSYCHOLOGIST.......             579               0               0               3               3
46--CLINICAL SOCIAL WORKER......             408               0               0               3               3
47--DIAGNOSTIC TESTING FACILITY.             779              -4               0              -3              -7
48--INDEPENDENT LABORATORY**....             812               1             -25              -2             -26
49--NURSE ANES/ANES ASST........           1,055               0               0               4               4
50--NURSE PRACTITIONER..........           1,937               0               1               0               1
51--OPTOMETRY...................           1,106               0               1              -1               0
52--ORAL/MAXILLOFACIAL SURGERY..              44               0              -1              -1              -2
53--PHYSICAL/OCCUPATIONAL                  2,797               0               1               0               1
 THERAPY........................
54--PHYSICIAN ASSISTANT.........           1,405               0               1               0               1
55--PODIATRY....................           1,975              -1               1               0               0
56--PORTABLE X-RAY SUPPLIER.....             110               1               1              -3              -1
57--RADIATION THERAPY CENTERS...              62               0              -8              -5             -13
98--OTHER.......................              25               0               1               0               1
----------------------------------------------------------------------------------------------------------------
* Table 72 shows only the payment impact on PFS services. These impacts use a constant conversion factor and
  thus do not include the effects of the January 2014 conversion factor change required under current law.
** PFS Payments only, which account for ~17% of Independent Laboratory payments.

2. CY 2014 PFS Impact Discussion
a. Changes in RVUs
    The most widespread specialty impacts of the RVU changes are 
generally related to two major factors. The first factor, as discussed 
in section II.A.4. of this proposed rule, is our proposal to cap the 
payments for certain nonfacility services at the facility rate plus the 
lower of the OPPS or ASC payment. The second factor, as discussed in 
section II.D., is our proposal to revise the Medicare Economic Index 
(MEI) and adjust the RVUs to match the new weights for work, PE, and 
MP.
    In addition, a number of other changes contribute to the impacts 
shown in Table 71. These include a statutory change that requires us to 
use a 90 percent equipment utilization rate rather than the previously 
used 75 percent for expensive diagnostic imaging equipment as discussed 
in section II.A.2.f of this proposed rule, proposals to update direct 
practice expense inputs, as discussed in section II.A.5. of this 
proposed rule and proposals to adjust time for some services, as 
discussed in section II.B.3.c. of this proposed rule.
    Table 72 shows the same information as provided in Table 71, but 
rather than isolating the policy impact on physician work, practice 
expense, and malpractice separately, Table 72 shows the impact of 
varied proposed policies on total RVUs.
b. Combined Impact
    Column E of Table 71 and column F of Table 72 display the estimated 
CY 2014 combined impact on total allowed charges by specialty of all 
the proposed RVU changes. These impacts range from an increase of 3 
percent for clinical social workers, clinical psychologists, nurse 
anesthetists, and emergency medicine, to a decrease of 26 percent for 
independent laboratories. Again, these impacts are estimated prior to 
the application of the negative CY 2014

[[Page 43515]]

conversion factor (CF) update applicable under the current statute.
    Table 73 (Impact of Proposed Rule on CY 2014 Payment for Selected 
Procedures (Based on the March 2013 Preliminary Physician Update)) 
shows the estimated impact on total payments for selected high volume 
procedures of all of the changes discussed previously. We have included 
CY 2014 payment rates with and without the effect of the CY 2014 
negative PFS CF update for comparison purposes. We selected these 
procedures from among the most commonly furnished by a broad spectrum 
of physician specialties. The change in both facility rates and the 
nonfacility rates are shown. For an explanation of facility and 
nonfacility PE, we refer readers to Addendum A of this proposed rule.
BILLING CODE 4120-01-P

[[Page 43516]]

[GRAPHIC] [TIFF OMITTED] TP19JY13.105


[[Page 43517]]


[GRAPHIC] [TIFF OMITTED] TP19JY13.104


[[Page 43518]]


[GRAPHIC] [TIFF OMITTED] TP19JY13.106

BILLING CODE 4120-01-C

[[Page 43519]]

D. Effect of Proposed Changes to Medicare Telehealth Services Under the 
PFS

    As discussed in section II.E.3 of this proposed rule, we are 
proposing to refine our definition of rural as it applies to HPSAs 
eligible for telehealth services as well as add transitional care 
management services to the list of Medicare telehealth services. While 
we expect these changes to increase access to care in rural areas, 
based on recent utilization of current Medicare telehealth services, 
including services similar to transitional care management, we estimate 
no significant impact on PFS expenditures from the proposed additions.

E. Geographic Practice Cost Indices (GPCIs)

    Based upon statutory requirements we are proposing to update the 
GPCIs for each Medicare payment locality. The proposed GPCIs 
incorporate the use of updated data and cost share weights as discussed 
in II.E. The Act requires that updated GPCIs be phased in over two 
years. Addendum D shows the estimated effects of the revised GPCIs on 
area GAFs for the transition year (CY 2014) and the fully implemented 
year (CY 2015). The GAFs reflect the use of the updated underlying GPCI 
data, and the proposed revised cost share weights. The GAFs are a 
weighted composite of each area's work, PE and malpractice expense 
GPCIs using the national GPCI cost share weights. While we do not 
actually use the GAFs in computing the fee schedule payment for a 
specific service, they are useful in comparing overall areas costs and 
payments. The actual geographic adjustment to payment for any actual 
service will be different from the GAF to the extent that the 
proportions of work, PE and malpractice expense RVUs for the service 
differ from those of the GAF.
    The most significant changes occur in 22 payment localities where 
the fully implemented (CY 2015) GAF moves up by more than 1 percent (11 
payment localities) or down by more than 2 percent (11 payment 
localities). The impacts on the proposed GPCIs are primarily attributed 
to the expiration of the 1.000 work GPCI floor. The use of updated 
underlying GPCI data and cost share weights has a minimal impact on 
locality GAFs. The total impact of the GPCI revisions is shown in the 
2015 GPCI values of Addendum E.
    We note that the proposed CY 2014 physician work GPCIs and 
summarized geographic adjustment factors (GAFs) published in Addenda D 
and E reflect the elimination of the 1.0 work GPCI floor provided in 
section 1848 (e)(1)(E) of the Act, which is set to expire prior to the 
implementation of the CY 2014 PFS.

F. Other Provisions of the Proposed Regulation

1. Rebasing and Revising Medicare Economic Index
    The preliminary estimate of the proposed changes to the MEI for CY 
2014 is a 0.1 percent decrease. This is based on an estimated 0.8 
percent increase for CY 2014 under the current MEI compared to a 0.7 
percent increase for CY 2014 under the proposed revised MEI.''
2. Coverage of Items and Services Furnished in FDA-Approved 
Investigational Device Exemption (IDE) Clinical Trials
    We are proposing a transparent centralized review process that 
would be more efficient by reducing the burden for stakeholders. Once 
the IDE coverage process is centralized, there will be a single entity 
making the IDE coverage decision. This also eliminates duplicative 
reviews by Medicare local contractors and the numerous applications 
sent to contractors by stakeholders requesting IDE coverage. We believe 
that a centralized review process will not significantly reduce the 
number of IDE devices currently covered. Therefore, this rule will not 
result in an extra burden to the public.
3. Ultrasound Screening for Abdominal Aortic Aneurysms
    As discussed in section III.B. of this proposed rule, section 
1861(s)(2)(AA) of the Act, with implementing regulations at Sec.  
410.19, authorizes Medicare coverage of ultrasound screening for 
abdominal aortic aneurysms (``AAA screening''). We are proposing to 
modify Sec.  410.19 to allow coverage of one-time AAA screening without 
receiving a referral as part of the IPPE, for beneficiaries that meet 
certain other eligibility criteria (a family history of AAA or, for men 
aged 65-75, a history of smoking). Approximately 45 percent of men aged 
65-75 have a history of smoking. It is unknown how many individuals 
have a family history of AAA or how many beneficiaries will avail 
themselves of this benefit. Therefore, the impact of this change is 
unknown for CY 2014.
4. Modification to Medicare Coverage of Colorectal Cancer Screening
    As discussed in section III.C. of this proposed rule, sections 
1861(s)(2)(R) and 1861(pp)(1) of the Act, and implementing regulations 
at 42 CFR 410.37 authorize Medicare coverage of screening FOBT. We are 
proposing to modify Sec.  410.37(b) to allow attending physicians, 
physician assistants, nurse practitioners, and clinical nurse 
specialists to furnish orders for screening FOBTs. While there may be 
an increase in utilization, particularly in rural areas, it is unknown 
how many individuals will avail themselves of this benefit. Therefore, 
the impact of this change is unknown for CY 2014.
5. Ambulance Fee Schedule
    As discussed in section III.D. of this proposed rule, section 
604(a) through (c) of the ATRA require the extension of certain add-on 
payments for ground ambulance services and the extension of certain 
rural area designations for purposes of air ambulance payment. In 
addition, as discussed in section III.D. of this proposed rule, section 
637 of the ATRA (which added section 1834(l)(15) of the Act) specifies 
that the fee schedule amount otherwise applicable under the preceding 
provisions of section 1834(l) of the Act shall be reduced by 10 percent 
for ambulance services furnished on or after October 1, 2013, 
consisting of non-emergency basic life support (BLS) services involving 
transport of an individual with end-stage renal disease for renal 
dialysis services (as described in section 1881(b)(14)(B) of the Act) 
furnished other than on an emergency basis by a provider of services or 
a renal dialysis facility. The ambulance extender provisions and the 
mandated 10 percent rate decrease discussed above are enacted through 
legislation that is self-implementing. We are proposing to amend the 
regulation text at Sec.  414.610 only to conform the regulations to 
these self-implementing statutory requirements. As a result, we are not 
making any policy proposals associated with these legislative 
provisions and there is no associated regulatory impact.
6. Clinical Laboratory Fee Schedule
    We are proposing to add language to the Code of Federal Regulations 
to codify authority provided by statute and to establish a process 
under which we will systematically reexamine the payment amounts 
established under the CLFS to determine if changes in technology for 
the delivery of that service warrant an adjustment to the payment 
amount. We are also proposing a definition for the term technological 
changes. Adjustments made under the new process could both increase fee 
schedule amounts and provide for reductions in existing amounts. We 
cannot estimate a net impact at this time.

[[Page 43520]]

7. Liability for Overpayments to or on Behalf of Individuals Including 
Payments to Providers or Other Persons
    As discussed in section III.M. of this proposed rule, we are 
proposing to change the timing of the triggering event for the 
``without fault'' and ``against equity and good conscience'' 
presumptions. As a result, there would be an estimated savings of $0.5 
billion over 10 years.
8. Physician Compare Web Site
    There will be no impact for the Physician Compare Web site because 
we are not collecting any information for the Physician Compare Web 
site.
9. Physician Payment, Efficiency, and Quality Improvements--Physician 
Quality Reporting System (PQRS)
    In the CY 2013 PFS final rule with comment period, we provided 
estimates related to the impact of the requirements we finalized for 
the PQRS for 2014. Since we are making additional proposals for 2014, 
this section modifies the impact statement provided for 2014 in the CY 
2013 PFS final rule with comment period. Please note that we will base 
our estimates on information found in the 2011 Physician Quality 
Reporting System and eRx Reporting Experience and Trends (hereinafter 
``the PQRS Reporting Experience''). This report contains the latest 
data we have gathered on PQRS participation. The PQRS Reporting 
Experience is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html?redirect=/
PQRS/. According to the 2011 Reporting Experience Report, over 1 
million professionals were eligible to participate in the PQRS. A total 
of $261,733,236 in PQRS incentives was paid by CMS for the 2011 program 
year, which encompassed 26,515 practices that included 266,521 eligible 
professionals (or approximately 27 percent of the professionals 
eligible to participate). The average incentive earned for PQRS in 2011 
per each individually-participating eligible professional was $1,059.
    As we noted in our impact statement last year, we expect that, due 
to the implementation of payment adjustments beginning in 2015, 
participation in the PQRS would rise incrementally to approximately 
300,000 eligible professionals and 400,000 eligible professionals in 
2013 and 2014, respectively. We believe our estimate of 400,000 
eligible professionals participating in PQRS in 2014 is accurate.
    With respect to the estimate amount of incentives earned, for 2014, 
eligible professionals can earn a 0.5 percent incentive (that is, a 
bonus payment equal to 0.5 percent of the total allowed Part B charges 
for covered professional services under the PFS furnished by the 
eligible professional during the reporting period) for satisfactory 
reporting, a reduction of 1.0 percent from 2011. Based on information 
drawn from the 2011 Reporting Experience and our participation 
estimate, we believe that, out of the 400,000 eligible professionals we 
expect to participate in the PQRS in 2014, the PQRS will distribute 
2014 incentives to approximately (27 percent of 1 million eligible 
professionals) 270,000 eligible professionals. At $1,059 per eligible 
professional, the PQRS would distribute approximately $286 million in 
incentive payments in 2014. We believe these incentive payments will 
help offset the cost eligible professionals may undertake for 
participating in the PQRS for the applicable year.
    We note that the total burden associated with participating in the 
PQRS is the time and effort associated with indicating intent to 
participate in the PQRS, if applicable, and submitting PQRS quality 
measures data. When establishing these burden estimates, we assume the 
following:
     The proposals for reporting for the PQRS for the 2014 
incentive and 2016 payment adjustment would be established as proposed 
in this CY 2014 Medicare PFS proposed rule.
     For an eligible professional or group practice using the 
claims, registry, or EHR-based reporting mechanisms, we assume that the 
eligible professional or group practice would attempt to report PQRS 
quality measures data with the intention of earning the 2014 PQRS 
incentive. Therefore, an eligible professionals or group practice would 
report on 9 measures.
     With respect to labor costs, we believe that a billing 
clerk will handle the administrative duties associated with 
participating, while a computer analyst will handle duties related to 
reporting PQRS quality measures. According to the Bureau of Labor 
Statistics, the mean hourly wage for a billing clerk is approximately 
$16/hour whereas the mean hourly wage for a computer analyst is 
approximately $40/hour.
    For an eligible professional who wishes to participate in the PQRS 
as an individual, the eligible professional need not indicate his/her 
intent to participate. The eligible professional may simply begin 
reporting quality measures data. Therefore, these burden estimates for 
individual eligible professionals participating in the PQRS are based 
on the reporting mechanism the individual eligible professional 
chooses. However, we believe a new eligible professional or group 
practice would spend 5 hours--which includes 2 hours to review the PQRS 
measures list, review the various reporting options, and select a 
reporting option and measures on which to report and 3 hours to review 
the measure specifications and develop a mechanism for incorporating 
reporting of the selected measures into their office work flows. 
Therefore, we believe that the initial administrative costs associated 
with participating in the PQRS would be approximately $80 ($16/hour x 5 
hours).
    With respect to an eligible professional who participates in the 
PQRS via claims, the eligible professional must gather the required 
information, select the appropriate quality data codes (QDCs), and 
include the appropriate QDCs on the claims they submit for payment. The 
PQRS collects QDCs as additional (optional) line items on the existing 
HIPAA transaction 837-P and/or CMS Form 1500 (OCN: 0938-0999). Based on 
our experience with Physician Voluntary Reporting Program (PVRP), we 
continue to estimate that the time needed to perform all the steps 
necessary to report each measure via claims will range from 0.25 
minutes to 12 minutes, depending on the complexity of the measure. 
Therefore, the time spent reporting 9 measures would range from 2.25 
minutes to 108 minutes. Using an average labor cost of $40/hour, we 
estimate that time cost of reporting for an eligible professional via 
claims would range from $1.50 (2.25 minutes or 0.0375 hours x $40/hour) 
to $72.00 (108 minutes or 1.8 hours x $40/hour) per reported case. With 
respect to how many cases an eligible professional would report when 
using the claims-based reporting mechanism, we proposed that an 
eligible professional would need to report on 50 percent of the 
eligible professional's applicable cases. The actual number of cases on 
which an eligible professional would report would vary depending on the 
number of the eligible professional's applicable cases. However, in 
prior years, when the reporting threshold was 80 percent, we found that 
the median number of reporting cases for each measure was 9. Since we 
are proposing to reduce the reporting threshold to 50 percent, we 
estimate that the average number of reporting cases for each measure 
would be reduced to 6. Based on these estimates, we estimate that the

[[Page 43521]]

total cost of reporting for an eligible professional choosing the 
claims-based reporting mechanism would range from ($1.50/per reported 
case x 6 reported cases) $9.00 to ($72.00/reported case x 6 reported 
cases) $432.
    With respect to an eligible professional or group practice who 
participates in the PQRS via a qualified registry, direct EHR product, 
EHR data submission vendor product, or qualified clinical data 
registry, we believe there would be little to no burden associated for 
an eligible professional or group practice to report PQRS quality 
measures data to CMS, because the selected reporting mechanism submits 
the quality measures data for the eligible professional. While we note 
that there may be start-up costs associated with purchasing a qualified 
registry, direct EHR product, EHR data submission vendor, or qualified 
clinical data registry, we believe that an eligible professional or 
group practice would not purchase a qualified registry, direct EHR 
product, EHR data submission vendor product, or qualified clinical data 
registry solely for the purpose of reporting PQRS quality measures. 
Therefore, we have not included the cost of purchasing a qualified 
registry, direct EHR, EHR data submission vendor product, or qualified 
clinical data registry in our burden estimates.
    Unlike eligible professionals who choose to report individually, we 
note that eligible professionals choosing to participate as part of a 
group practice under the GPRO must indicate their intent to participate 
in the PQRS as a group practice. The total burden for group practices 
who submit PQRS quality measures data via the proposed GPRO web-
interface would be the time and effort associated with submitting this 
data. To submit quality measures data for the PQRS, a group practice 
would need to (1) be selected to participate in the PQRS GPRO and (2) 
report quality measures data. With respect to the administrative duties 
for being selected to participate in the PQRS as a GPRO, we believe it 
would take approximately 6 hours--including 2 hours to decide to 
participate in the PQRS as a GPRO, 2 hours to self-nominate, and 2 
hours to undergo the vetting process with CMS officials--for a group 
practice to be selected to participate in the PQRS GPRO for the 
applicable year. Therefore, we estimate that the cost of undergoing the 
GPRO selection process would be ($16/hour x 6 hours) $96. With respect 
to reporting, the total reporting burden is the time and effort 
associated with the group practice submitting the quality measures data 
(that is, completed the data collection interface). Based on burden 
estimates for the PGP demonstration, which uses the same data 
submission methods, we estimate the burden associated with a group 
practice completing the data collection interface would be 
approximately 79 hours. Therefore, we estimate that the report cost for 
a group practice to submit PQRS quality measures data for the proposed 
reporting options in an applicable year would be ($40/hour x 79 hours) 
$3,160.
    Aside from the burden of eligible professionals and group practices 
participating in the PQRS, we believe that vendors of registries, 
qualified clinical data registries, direct EHR products, and EHR data 
submission vendor products incur costs associated with participating in 
the PQRS. Please note that we have proposed requirements for a new 
reporting mechanism in this CY 2014 PFS proposed rule--the qualified 
clinical data registry. For purpose of these burden estimates, we 
believe that, at least in its initial stage, vendors of a qualified 
clinical data registry would have burden estimates similar to 
traditional registries, as we believe many of the vendors seeking to 
become qualified as a clinical data registry in the PQRS will be 
existing qualified registries.
    With respect to qualified registries and qualified clinical data 
registries, the total burden for qualified registries who submit PQRS 
Quality Measures Data would be the time and effort associated with 
submitting this data. To submit quality measures data for the proposed 
program years for PQRS, a registry would need to (1) become qualified 
for the applicable year and (2) report quality measures data on behalf 
of its eligible professionals. With respect to administrative duties 
related to the qualification process for both traditional registries 
and clinical data registries, we estimate that it will take a total of 
10 hours--including 1 hour to complete the self-nomination statement, 2 
hours to interview with CMS, 2 hours to calculate numerators, 
denominators, and measure results for each measure the registry wishes 
to report using a CMS-provided measure flow, and 5 hours to complete an 
XML submission--to become qualified to report PQRS quality measures 
data. Therefore, we estimate that it would cost a traditional registry 
and clinical data registry ($16.00/hour x 10 hours) $160 to become 
qualified to submit PQRS quality measures data on behalf of its 
eligible professionals.
    With respect to the reporting of quality measures data, we believe 
the burden associated with reporting is the time and effort associated 
with the registry calculating quality measures results from the data 
submitted to the registry by its eligible professionals, submitting 
numerator and denominator data on quality measures, and calculating 
these measure results. We believe, however, that registries already 
perform these functions for its eligible professionals irrespective of 
participating in the PQRS. Therefore, we believe there would be little 
to no additional burden associated with reporting PQRS quality measures 
data. Whether there is any additional reporting burden will vary with 
each registry, depending on the registry's level of savvy with 
submitting quality measures data for the PQRS.
    With respect to EHR products, the total burden for direct EHR 
products and EHR data submission vendors who submit PQRS Quality 
Measures Data would be the time and effort associated with submitting 
this data. To submit quality measures data for the proposed program 
years under the PQRS, a direct EHR product or EHR data submission 
vendor would need to report quality measures data on behalf of its 
eligible professionals. Please note that we are not proposing to 
continue to require direct EHR products and EHR data submission vendors 
to become qualified to submit PQRS quality measures data.
    In addition to the GPRO web interface, please note that we have 
proposed a new reporting mechanism that would be available to group 
practices comprised of 25+ eligible professionals: the certified survey 
vendor. With respect to using a certified survey vendor, we believe 
there would be little to no burden associated for a group practice to 
report the CG CAHPS survey data to CMS, because the selected reporting 
mechanism submitted the quality measures data for the group practice. 
While there may be start-up costs associated with purchasing a 
certified survey vendor, we believe that a group practice would not 
purchase a certified survey vendor solely for the purpose of reporting 
the CG CAHPS survey for the PQRS. Therefore, we have not included the 
cost of purchasing a certified survey vendor in our burden estimates.

[[Page 43522]]



          Table 74--Estimated Costs for Reporting PQRS Quality Measures Data per Eligible Professional
----------------------------------------------------------------------------------------------------------------
                                     Estimated       Estimated       Number of
                                       hours           cases         measures       Hourly rate     Total cost
----------------------------------------------------------------------------------------------------------------
Individual Eligible Professional             5.0               1             N/A             $16             $80
 (EP): Preparation..............
Individual EP: Claims...........             1.8               6               9              40           3,888
Individual EP: Registry.........             N/A               1             N/A             N/A         Minimal
Individual EP: EHR..............             N/A               1             N/A             N/A         Minimal
Group Practice: Self-Nomination.             6.0               1             N/A              16              96
Group Practice: Reporting.......              79               1             N/A              40           3,160
----------------------------------------------------------------------------------------------------------------


                         Table 75--Estimated Costs per Vendor To Participate in the PQRS
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated
                                                                       hours        Hourly rate     Total cost
----------------------------------------------------------------------------------------------------------------
Registry: Self-Nomination.......................................              10             $16            $160
----------------------------------------------------------------------------------------------------------------

10. Medicare EHR Incentive Program
    Please note that the requirements for meeting the clinical quality 
measures (CQM) component of achieving meaningful use for the EHR 
Incentive Program in 2014 were established in a standalone final rule 
published on September 4, 2012 (77 FR 53968). The proposals contained 
in this CY 2014 PFS proposed rule merely propose alternative methods to 
report CQMs to meet the CQM component of achieving meaningful use for 
the EHR Incentive Program in 2014. We believe any impacts these 
proposals would have are absorbed in the impacts discussion published 
in the EHR Incentive Program final rule published on September 4, 2012.
11. Medicare Shared Savings Program
    Please note that the requirements for participating in the Medicare 
Shared Saving Program and the impacts of these requirements were 
established in the final rule for the Medicare Shared Savings Program 
that appeared in the Federal Register on November 2, 2011 (76 FR 
67962). The proposals for the Medicare Shared Savings Program set forth 
in the CY 2014 MPFS proposed rule expand the incorporation of reporting 
requirements and incentive payments related to PQRS under section 1848 
to include reporting requirements related to the payment adjustment. 
Since ACO participants and ACO provider/suppliers will not have to 
report PQRS separately to avoid the payment adjustment, this reduces 
the quality reporting burden for ACO participants participating in the 
Shared Savings Program. There is no impact for the additional proposals 
related to requirements for setting benchmarks or for scoring the CAHPS 
measure modules.
12. Physician Value-Based Payment Modifier and the Physician Feedback 
Reporting Program
    The changes to the Physician Feedback Program in section III.K. of 
this proposed rule would not impact CY 2014 physician payments under 
the Physician Fee Schedule. We anticipate that as we approach 
implementation of the value modifier, physicians will increasingly 
participate in the Physician Quality Reporting System to determine and 
understand how the value modifier could affect their payments.
13. Existing Standards for E-Prescribing Under Medicare Part D and 
Identification
    This section of the proposed rule imposes no new requirements 
because use of the official Part D e-prescreening standards; NCPDP 
SCRIPT 10.6, Formulary and Benefit 3.0 are voluntary, and as such, it 
will not have a significant economic impact on a substantial number of 
small entities, small rural hospitals or state, local, or tribal 
governments or on the private sector.
14. Chiropractic Services Demonstration
    As discussed in section III.M. of this proposed rule, we are 
continuing the recoupment of the $50 million in expenditures from this 
demonstration in order to satisfy the BN requirement in section 
651(f)(1)(B) of the MMA. We initiated this recoupment in CY 2010 and 
this will be the fifth and final year. As discussed in the CY 2010 PFS 
final rule with comment period, we finalized a policy to recoup $10 
million each year through adjustments to payments under the PFS for 
chiropractic CPT codes in CYs 2010 through 2014. For each year of this 
recoupment, we have provided OACT's projected chiropractic expenditures 
based on previous year's data. While OACT's projections have included 
the statutory reductions to physician payments, the statute was amended 
in each year to avoid these reductions. As a result, Medicare 
expenditures for chiropractic services during the recoupment were 
higher than the OACT projections. Chiropractic services expenditures 
during the recoupment period have been as follows: $540 million in 
2010; $520 million in 2011; and $580 million in 2012. In total, CMS 
recouped $32.8 million over the years of 2010, 2011 and 2012. OACT now 
projects chiropractic expenditures to be approximately $580 million in 
2013. A 2 percent recoupment percentage for chiropractic services would 
result in approximately $11.6 million in 2013. For the years 2010 
through 2013, CMS would have recouped approximately $44.4 million of 
the $50 million required for budget neutrality.
    CMS plans to recoup the remaining funds, approximately $5.6 
million, and will reduce chiropractic CPT codes (CPT codes 98940, 
98941, and 98942) by the appropriate percentage, which by our 
preliminary estimates is one percent if the approximately 25 percent 
reduction in physician payments takes effect in 2014. If the statute is 
amended to avoid the physician payment reduction, we will reduce the 
recoupment percentage as appropriate to ensure the recoupment does not 
exceed $50 million. For instance, if the statute is amended to provide 
for a zero percent PFS update, we would reduce the recoupment 
percentage to approximately 0.7 percent.

G. Alternatives Considered

    This proposed rule contains a range of policies, including some 
provisions related to specific statutory provisions. The preceding 
preamble provides descriptions of the statutory provisions that are 
addressed, identifies those

[[Page 43523]]

policies when discretion has been exercised, presents rationale for our 
final policies and, where relevant, alternatives that were considered.

H. Impact on Beneficiaries

    There are a number of changes in this proposed rule that would have 
an effect on beneficiaries. In general, we believe that many of the 
proposed changes, including the refinements of the PQRS with its focus 
on measuring, submitting, and analyzing quality data; establishing the 
basis for the value-based payment modifier to adjust physician payment 
beginning in CY 2015; improved accuracy in payment through revisions to 
the inputs used to calculate payments under the PFS and the capping 
certain nonfacility services at the facility rate plus the lower of the 
OPPS or ASC rate; and revisions to payment for Part B drugs will have a 
positive impact and improve the quality and value of care provided to 
Medicare beneficiaries.
    Most of the aforementioned proposed policy changes could result in 
a change in beneficiary liability as relates to coinsurance (which is 
20 percent of the fee schedule amount if applicable for the particular 
provision after the beneficiary has met the deductible). To illustrate 
this point, as shown in Table 73, the CY 2013 national payment amount 
in the nonfacility setting for CPT code 99203 (Office/outpatient visit, 
new) is $108.05, which means that in CY 2013 a beneficiary would be 
responsible for 20 percent of this amount, or $21.61. Based on this 
proposed rule, using the current (CY 2013) CF of 34.0376, adjusted to 
35.6652 to include budget neutrality, the CY 2014 national payment 
amount in the nonfacility setting for CPT code 99203, as shown in Table 
73, is $113.15, which means that, in CY 2014, the proposed beneficiary 
coinsurance for this service would be $22.63.

I. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 76 (Accounting 
Statement), we have prepared an accounting statement showing the 
estimated expenditures associated with this proposed rule. This 
estimate includes the CY 2014 incurred benefit impact associated with 
the estimated CY 2014 PFS conversion factor update based on the FY 2014 
President's Budget baseline.

Table 76--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
           Category                            Transfers
------------------------------------------------------------------------
CY 2014 Annualized Monetized   Estimated decrease in expenditures of
 Transfers.                     $19.6 billion for PFS conversion factor
                                update.
From Whom To Whom?...........  Federal Government to physicians, other
                                practitioners and providers and
                                suppliers who receive payment under
                                Medicare.
CY 2014 Annualized Monetized   Estimated increase in payment of $286
 Transfers.                     million.
From Whom To Whom?...........  Federal Government to eligible
                                professionals who satisfactorily
                                participate in the Physician Quality
                                Reporting System (PQRS).
CY 2014 Annualized Monetized   Estimated decrease in expenditures of $50
 Transfers.                     million for liability for overpayments
                                to or on behalf of individuals including
                                payments to providers or other persons.
From Whom To Whom?...........  Federal Government to physicians, other
                                practitioners and providers and
                                suppliers who receive payment under
                                Medicare.
------------------------------------------------------------------------


   Table 77--Accounting Statement: Classification of Estimated Costs,
                          Transfer, and Savings
------------------------------------------------------------------------
                 Category                             Transfer
------------------------------------------------------------------------
CY 2014 Annualized Monetized Transfers of   $29 million.
 beneficiary cost coinsurance.
From Whom to Whom?                          Beneficiaries to Federal
                                             Government.
------------------------------------------------------------------------
Category                                    Cost
------------------------------------------------------------------------
  CY 2014 Annualized Monetized Cost to      $66.6 million.
eligible professionals of Participating in
the PQRS Program
------------------------------------------------------------------------

J. Conclusion

    The analysis in the previous sections, together with the remainder 
of this preamble, provides an initial ``Regulatory Flexibility 
Analysis.'' The previous analysis, together with the preceding portion 
of this preamble, provides a Regulatory Impact Analysis.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 410

    Health facilities, Health professions, Kidney diseases, 
Laboratories, Medicare, Reporting and recordkeeping requirements, Rural 
areas, X-rays.

42 CFR Part 411

    Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 423

    Administrative practice and procedure, Emergency medical services, 
Health facilities, Health maintenance organizations (HMO), Health 
professionals, Medicare, Penalties, Privacy, Reporting and 
recordkeeping requirements.

42 CFR Part 425

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare, Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services propose to amend 42 CFR chapters IV as set forth 
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority:  Secs. 205(a), 1102, 1861, 1862(a), 1862(m), 1869, 
1871, 1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 
405(a), 1302, 1395x, 1395y(a), 1395y(m), 1395ff, 1395hh, 1395kk, 
1395rr and 1395ww(k)), and sec. 353 of the Public Health Service Act 
(42 U.S.C. 263a).

0
2. Section 405.201 is amended by adding paragraph (a)(3) and revising 
paragraph (b) to read as follows:

[[Page 43524]]

Sec.  405.201  Scope of subpart and definitions.

    (a) * * *
    (3) CMS identifies criteria for coverage of items and services 
furnished in IDE studies.
    (b) Definitions. As used in this subpart--
    Category A (Experimental) device refers to a device for which 
``absolute risk'' of the device type has not been established (that is, 
initial questions of safety and effectiveness have not been resolved) 
and the FDA is unsure whether the device type can be safe and 
effective.
    Category B (Nonexperimental/investigational) device refers to a 
device for which the incremental risk is the primary risk in question 
(that is, initial questions of safety and effectiveness of that device 
type have been resolved), or it is known that the device type can be 
safe and effective because, for example, other manufacturers have 
obtained FDA approval for that device type.
    ClinicalTrials.gov refers to the National Institutes of Health's 
National Library of Medicine's online registry and results database of 
publicly and privately supported clinical studies of human participants 
conducted around the world.
    Contractors refers to Medicare Administrative Contractors and other 
entities that contract with CMS to review and adjudicate claims for 
Medicare items and services.
    IDE stands for investigational device exemption. An FDA-approved 
IDE application permits a device, which would otherwise be subject to 
marketing approval or clearance, to be shipped lawfully for the purpose 
of conducting a clinical study in accordance with 21 U.S.C. 360j(g) and 
21 CFR parts 812 and 813.
    Pivotal studies or trials refer to clinical investigations designed 
to collect definitive evidence of the safety and effectiveness of a 
device for a specified intended use, typically in a statistically 
justified number of subjects. It may or may not be preceded by an early 
and/or a traditional feasibility study.
    Routine care items and services refer to items and services that 
are otherwise generally available to Medicare beneficiaries (that is, 
there exists a benefit category, it is not statutorily excluded, and 
there is not a national noncoverage decision) that are furnished in 
either the experimental or the control arms of a clinical trial and 
that would be otherwise furnished even if the beneficiary were not 
enrolled in a clinical trial.
    Superiority studies or trials refers to studies or trials that are 
intended to demonstrate at some prespecified level of confidence that 
the effect of an investigational treatment is superior to that of an 
active control by more than a prespecified margin.
0
3. Section 405.207 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  405.207  Services related to a non-covered device.

* * * * *
    (b) * * *
    (2) Routine care items and services related to experimental/
investigational (Category A) devices as defined in Sec.  405.201(b); 
and furnished in conjunction with an FDA-approved clinical trial that 
meet the IDE study standards in Sec.  405.212.
* * * * *
0
4. Section 405.211 is revised to read as follows:


Sec.  405.211  Coverage of items and services in FDA approved IDE 
studies.

    (a) Requirements. CMS review includes the following items and 
supporting materials as needed:
    (1) The FDA approval letter.
    (2) IDE study protocol.
    (3) IRB approval letter.
    (4) ClinicalTrial.gov identifier.
    (b) Coverage of routine care items and services for Category A 
devices. Medicare may cover routine care items and services furnished 
in any FDA-approved Category A IDE study if the criteria in Sec.  
405.212(a)(1) through (13) are met. Medicare covers routine care items 
and services furnished in any FDA-approved Category A IDE study if the 
criteria in Sec.  405.212(a) and (b) are met.
    (c) Coverage of Category B IDE devices and routine care. Medicare 
may cover a Category B IDE device and routine care items and services 
furnished in any FDA-approved Category B IDE study if the criteria in 
Sec.  405.212(a)(1) through (13) are met. Medicare covers a Category B 
IDE device and routine care items and services furnished in any FDA-
approved Category B IDE study if the criteria in Sec.  405.212(a) and 
(c) are met.
    (d) Coverage of Category A routine services and Category B IDE 
devices and routine care that do not wholly fall under Sec.  405.212 
(b) or (c). If an IDE device is furnished in an FDA-approved IDE study 
that does not wholly fall under Sec.  405.212(b) or (c), CMS considers 
whether the study's attainment of the criteria in Sec.  405.212 (a) are 
sufficient to mitigate the failure to meet Sec.  405.212(b) or (c).
    (e) Notification. All CMS-approved IDE studies will be posted on 
the CMS coverage Web site and published in the Federal Register.
0
5. Section 405.212 is added to read as follows:


Sec.  405.212  IDE study criteria.

    (a) All category A and B IDE studies must conform to the following 
criteria for Medicare coverage under Sec.  405.211:
    (1) The principal purpose of the study is to test whether the item 
or service meaningfully improves health outcomes of patients who are 
represented by the Medicare-enrolled subjects.
    (2) The rationale for the study is well supported by available 
scientific and medical information, or it is intended to clarify or 
establish the health outcomes of interventions already in common 
clinical use.
    (3) The study results are not anticipated to unjustifiably 
duplicate existing knowledge.
    (4) The study design is methodologically appropriate and the 
anticipated number of enrolled subjects is adequate to answer the 
research question(s) being asked in the study.
    (5) The study is sponsored by an organization or individual capable 
of completing it successfully.
    (6) The study is in compliance with all applicable Federal 
regulations concerning the protection of human subjects found at 45 CFR 
part 46.
    (7) All aspects of the study are conducted according to appropriate 
standards of scientific integrity set by the International Committee of 
Medical Journal Editors.
    (8) The study has a written protocol that clearly demonstrates 
adherence to the standards listed here as Medicare requirements.
    (9) Where appropriate, the clinical research study is not designed 
to exclusively test toxicity or disease pathophysiology in healthy 
individuals. Trials of all medical technologies measuring therapeutic 
outcomes as one of the objectives may be exempt from this standard only 
if the disease or condition being studied is life threatening as 
defined in 21 CFR 312.81(a) and the patient has no other viable 
treatment options.
    (10) The study is registered on the ClinicalTrials.gov Web site 
and/or the Registry of Patient Registries (RoPR) by the principal 
sponsor/investigator prior to the enrollment of the first study 
subject.
    (11) The study protocol specifies the method and timing of public 
release of results on all pre-specified outcomes, including release of 
negative outcomes. The release should be hastened if the study is 
terminated early. The results must be made public within 24 months

[[Page 43525]]

of the end of data collection. If a report is planned to be published 
in a peer reviewed journal, then that initial release may be an 
abstract that meets the requirements of the International Committee of 
Medical Journal Editors. However a full report of the outcomes must be 
made public no later than three (3) years after the end of data 
collection.
    (12) The study protocol explicitly discusses subpopulations 
affected by the item or service under investigation, particularly 
traditionally underrepresented groups in clinical studies, how the 
inclusion and exclusion criteria effect enrollment of these 
populations, and a plan for the retention and reporting of said 
populations in the study. If the inclusion and exclusion criteria are 
expected to have a negative effect on the recruitment or retention of 
underrepresented populations, the protocol must discuss why these 
criteria are necessary.
    (13) The study protocol explicitly discusses how the results are or 
are not expected to be generalizable to subsections of the Medicare 
population to infer whether Medicare patients may benefit from the 
intervention. Separate discussions in the protocol may be necessary for 
populations eligible for Medicare due to age, disability or Medicaid 
eligibility.
    (b) Medicare covers routine care items and services in an FDA-
approved Category A IDE study that meets the requirements in paragraph 
(a) of this section and the study is the following:
    (1) A pivotal study.
    (2) A superiority study design.
    (c) Medicare covers the IDE device and routine care items and 
services in an FDA-approved Category B IDE study that meets the 
requirements in paragraph (a) of this section and the study is the 
following:
    (1) A pivotal study.
    (2) A superiority study design.
0
6. Section 405.350 is amended by revising paragraph (c) to read as 
follows:


Sec.  405.350  Individual's liability for payments made to providers 
and other persons for items and services furnished the individual.

* * * * *
    (c) For purposes of paragraph (a)(2) of this section, a provider of 
services or other person shall, in the absence of evidence to the 
contrary, be deemed to be without fault if the determination of the 
carrier, the intermediary, or the Centers for Medicare & Medicaid 
Services that more than the correct amount was paid was made subsequent 
to the fifth year following the year in which notice was sent to such 
individual that such amount had been paid.
0
7. Section 405.355 is amended by revising paragraph (b) to read as 
follows:


Sec.  405.355  Waiver of adjustment or recovery.

* * * * *
    (b) Adjustment or recovery of an incorrect payment (or only such 
part of an incorrect payment as may be determined to be inconsistent 
with the purposes of Title XVIII of the Act) against an individual who 
is without fault shall be deemed to be against equity and good 
conscience if the incorrect payment was made for items and services 
that are not payable under section 1862(a)(1) or (a)(9) of the Act and 
if the determination that such payment was incorrect was made 
subsequent to the fifth year following the year in which notice of such 
payment was sent to such individual.
0
8. Section 405.2413 is amended by--
0
A. Redesignating paragraphs (a)(4) and (5) as paragraphs (a)(5) and 
(6), respectively.
0
B. Adding new paragraph (a)(4).
0
C. Revising newly redesignated paragraph (a)(5).
    The revision and addition reads as follows:


Sec.  405.2413  Services and supplies incident to a physician's 
services.

    (a) * * *
    (4) Services and supplies must be furnished in accordance with 
applicable State law;
    (5) Furnished under the direct supervision of a physician; and
* * * * *
0
9. Section 405.2415 is amended by--
0
A. Redesignating paragraphs (a)(4) and (5) as paragraphs (a)(5) and 
(6), respectively.
0
B. Adding new paragraph (a)(4).
0
C. Revising newly redesignated paragraph (a)(5).
0
D. Revising paragraph (b).
    The revision and addition reads as follows:


Sec.  405.2415  Services and supplies incident to nurse practitioner 
and physician assistant services.

    (a) * * *
    (4) Services and supplies must be furnished in accordance with 
applicable State law;
    (5) Furnished under the direct supervision of a nurse practitioner, 
physician assistant, nurse midwife, specialized nurse practitioner or a 
physician; and
* * * * *
    (b) The direct supervision requirement is met in the case of a 
nurse practitioner, physician assistant, nurse midwife, or specialized 
nurse practitioner only if such a person is permitted to supervise such 
services under the written policies governing the rural health clinic.
* * * * *
0
10. Section 405.2452 is amended by--
0
A. Redesignating paragraphs (a)(4) and (5) as paragraphs (a)(5) and 
(6), respectively.
0
B. Adding new paragraph (a)(4).
0
C. Revising newly redesignated paragraph (a)(5).
0
D. Revising paragraph (b).
    The revision and addition reads as follows:


Sec.  405.2452  Services and supplies incident to clinical psychologist 
and clinical social worker services.

    (a) * * *
    (4) Services and supplies must be furnished in accordance with 
applicable State law;
    (5) Furnished under the direct supervision of a clinical 
psychologist, clinical social worker or physician; and
* * * * *
    (b) The direct supervision requirement in paragraph (a)(5) of this 
section is met only if the clinical psychologist or clinical social 
worker is permitted to supervise such services under the written 
policies governing the Federally qualified health center.

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
11. The authority citation for part 410 continues to read as follows:

    Authority:  Secs. 1102, 1834, 1871, 1881, and 1893 of the Social 
Security Act (42 U.S.C. 1302. 1395m, 1395hh, and 1395ddd).


Sec.  410.19  [Amended]

0
12. In Sec.  410.19(a) amend the definition of ``eligible beneficiary'' 
by removing paragraph (1) and redesignating paragraphs (2) and (3) as 
paragraphs (1) and (2), respectively.
0
13. Section 410.26 is amended by--
0
A. Revising paragraph (a)(1).
0
B. Redesignating paragraph (b)(7) and (8) as paragraph (b)(8) and (9), 
respectively.
0
C. Adding new paragraph (b)(7).
    The revision and addition reads as follows:


Sec.  410.26  Services and supplies incident to a physician's 
professional services: Conditions.

    (a) * * *
    (1)Auxiliary personnel means any individual who is acting under the 
supervision of a physician (or other practitioner), regardless of 
whether the

[[Page 43526]]

individual is an employee, leased employee, or independent contractor 
of the physician (or other practitioner) or of the same entity that 
employs or contracts with the physician (or other practitioner) and 
meets any applicable requirements to provide the services, including 
licensure, imposed by the State in which the services are being 
furnished.
* * * * *
    (b) * * *
    (7) Services and supplies must be furnished in accordance with 
applicable State law.
* * * * *
0
14. Section 410.37 is amended by revising paragraph (b) to read as 
follows:


Sec.  410.37  Colorectal cancer screening tests: Conditions for and 
limitations on coverage.

* * * * *
    (b) Condition for coverage of screening fecal-occult blood tests. 
Medicare Part B pays for a screening fecal-occult blood test if it is 
ordered in writing by the beneficiary's attending physician, physician 
assistant, nurse practitioner, or clinical nurse specialist.
* * * * *
0
15. Section 410.59 is amended by--
0
A. Adding paragraph (e)(1)(iv).
0
B. Revising paragraph (e)(2)(iv).
0
C. Adding paragraph (e)(2)(v).
    The revision and additions reads as follows:


Sec.  410.59  Outpatient occupational therapy services: Conditions.

* * * * *
    (e) * * *
    (1) * * *
    (iv) Outpatient occupational therapy services furnished by a CAH 
directly or under arrangements shall be counted towards the annual 
limitation on incurred expenses as if such services were paid under 
section 1834(k)(1)(b) of the Act.
    (2)* * *
    (iv) Outpatient occupational therapy services furnished by a nurse 
practitioner, clinical nurse specialist, or physician assistant or 
incident to their services; and
    (v) Outpatient occupational therapy services furnished by a CAH 
directly or under arrangements.
* * * * *
0
16. Section 410.60 is amended by--
0
A. Adding paragraph (e)(1)(iv).
0
B. Revising paragraph (e)(2)(v).
0
C. Adding paragraph (e)(2)(vi).
0
D. In paragraph (e)(3), removing the phrase ``or CAH'' .
    The additions and revision read as follows:


Sec.  410.60  Outpatient physical therapy services: Conditions.

* * * * *
    (e) * * *
    (1) * * *
    (iv) Outpatient physical therapy services furnished by a CAH 
directly or under arrangements shall be cou